Temple & Webster Group Ltd

TPW Details

Trading Update: Temple & Webster Group Ltd (ASX: TPW) is engaged in the online retailing of furniture and homewares. The company’s business in 2HFY22 is progressing well and is in line with the expectation of management. The fact is evident by the revenue growth of 23% between 1 January to the 30 April. TPW’s diversified supply chain continues to rise and is supporting business growth.

Insights of 1HFY22: The below picture provides an overview of the company’s financial performance in 1HFY22.

Financial Summary (Source: Ana lysis by Kalkine Group)

Key Risks: TPW’s operational and financial performance could be impacted by the rising market share of competitors and changing sentiments of the consumers. The company is exposed to a risk arising from the loss of customers.

Outlook: For FY22, the company expects an EBITDA margin in the range of 2-4%. Looking forward, the company will continue to invest in areas such as data, personalisation, AR/AI, and logistics.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative) 

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks. 

Stock Recommendation:  The stock of TPW is trading below its 52-week low-high average of $4.090 - $15.000, respectively. The stock has been corrected by ~28.71% in the past month. The stock has been valued using an EV/Sales multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company can trade at a slight discount to its peers, considering the COVID-19 disruptions and high debt to equity ratio. For valuation, peers such as Kogan.com Ltd (ASX: KGN), Adore Beauty Group Ltd (ASX: ABY), Mydeal.Com Au Ltd (ASX: MYD) and others have been considered. Considering the expected upside in valuation, growing revenue, a strong start to 2HFY22, decent outlook, current trading levels and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the closing market price of $4.200, down by ~3.448% as on 25 May 2022.

Markets are trading in a highly volatile zone currently due to certain macroeconomic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

TPW Daily Technical Chart, Data Source: REFINITIV

Redbubble Limited

RBL Details

Q3FY22 Summary: Redbubble Limited (ASX: RBL) operates a creative online marketplace for print on demand products. RBL’s performance was in line with the expectations. The company’s YTD Marketplace Revenue has grown at 56% since YTD FY20 and recorded a 5-year CAGR of 28% since YTD FY18.

Financial Summary (Source: Ana lysis by Kalkine Group)

Key Risks: RBL’s business could be impacted by macroeconomic risks, which may affect consumers demand in relevant retail markets. In addition, the company’s performance could be impacted by the rising market share of its peers in the industry in which it operates.

Outlook: The company is on track to achieve its medium-term aspirations to grow Gross Transaction Value (GTV) to over $1.5 billion, Artist Revenue to $250 million, as well as to produce Marketplace Revenue of $1.25 billion per annum.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of RBL is trading at par to its 52-week low level of $0.950, offering a decent opportunity for accumulation.  The stock of RBL has been corrected by ~24.90% in the past month. The stock has been valued using an EV/Sales multiple based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company can trade at a slight discount to its peers, considering the COVID-19 Uncertainties and inefficiency in generating profits. For valuation, a few peers like Marley Spoon AG (ASX: MMM), Kogan.com Ltd (ASX: KGN), and Adore Beauty Group Ltd (ASX: ABY) have been considered. Considering the expected upside in valuation, decent growth in revenue, optimistic outlook, current trading level and key risks associated with the business, we give a ‘Speculative Buy’ rating on the stock at the closing market price of $0.950, down by ~4.999% as on 25 May 2022.

Markets are trading in a highly volatile zone currently due to certain macroeconomic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

RBL Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV

Note 2: Investment decisions should be made depending on the investors’ appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined: -

Support: A level where-in stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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