Pact Group Holdings Ltd

PGH Details

Growth in Recycling Potential: Pact Group Holdings Limited (ASX: PGH) is engaged in the manufacturing and packaging of products. The company serves its customers in various sectors, including F&B, personal care, household consumer, industrial and chemical, and materials handling and infrastructure. After the acquisition of Flight Plastics Ltd. in January 2021, PGH has been competitively placed in the fresh food packaging segment in New Zealand. The company is expecting to commence its PET recycling facility in Albury, Australia, in late CY2021 with evaluation of recycling projects in Victoria, Queensland, and Western Australia.

Declaration of Dividend: The company has declared a dividend of $0.0500 per share. The ex-date for the dividend was on 25 February 2021 and the payment date for the dividend is on 7 April 2021.

1HFY21 Financial Highlights: The company has registered a marginal increase in its revenue to $894mn in 1HFY21 as compared with $885mn in 1HFY20. The company has registered a significant improvement in its NPAT to $50mn in 1HFY21 as compared with $35mn in 1HFY20. The company was able to reduce its net debt position to $599mn as on 1HFY21 as compared with $667mn as on 1HFY20.

Key Financials (Source: Company Reports)

Outlook: As per the company reports, the management expects PGH to post better EBIT for the full year of FY21, subject to the duration of uncertainty from COVID-19 situation. The company believes earnings may remain resilient in 2HFY21 though the hygiene segment may witness a weaker performance in 2HFY21. 

Valuation Methodology: EV/Sales based Relative Valuation Method (Illustrative) 

Data Source: Refinitiv, Thomson Reuters, 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: In the last one month, PGH has increased by ~12.57% and by ~35.09% in the last three months. The current market capitalisation of PGH stands at ~$1.20bn as of 7 April 2021. The stock is currently trading above the average 52-week price level range of ~$1.580-~$3.760. On the technical analysis front, the stock has a support level of ~$3.40 and a resistance of ~$3.72. We have valued the stock using an EV/Sales multiple-based illustrative relative valuation method and arrived at a target price with a correction of low double-digit downside (in % terms). We believe that the company can trade at a slight discount as compared to its peer average, considering the company has posted a decline in its ROE and net margins. For this purpose, we have taken peers Shaver Shop Group Ltd (ASX: SSG), Baby Bunting Group Ltd (ASX: BBN), Slater & Gordon Ltd (ASX: SGH) to name a few. Considering the decline in ROE, associated risks with the company, valuation, and current trading levels, we suggest investors to book profits and recommend a “Sell” rating on the stock at the current market price of $3.580, up by 2.285% as on 7 April 2021.

PGH Daily Technical Chart (Source: Refinitiv, Thomson Reuters) 

Roolife Group Ltd 

RLG Details

Launching Online Stores: Roolife Group Ltd (ASX: RLG) is engaged in eCommerce activities and customer acquisition through digital marketing to drive its online sales. It is responsible for driving sales in Australia and China. The company has so far launched 5 online retail stores to reach a greater number of consumers. The company has further planned to launch 3 more stores by 3QFY21. RLG sees potential growth in well-being and food products in China and working on the opportunities in this segment. The Ministry of Commerce has confirmed a 13.3% growth in the imports of healthy food in China, amounting to US$124.4bn.   

Change in Director’s interest: Directors of RLG, Warren Berry, Bryan Carr and Grant Pestell has acquired an additional 250,000 shares, 250,000 shares and 500,000 shares, respectively, at the price of $0.025 per share on 25 February 2021.

H1FY21 Financial Highlights: The company has registered a ~44% increase in its revenues in 1HFY21 to $2.33mn. The company has registered a loss of $1.47mn in 1HFY21 on the back of increased investments in its sales resources locally and globally. The company has registered an increase in its cash and cash equivalents to $5.12mn as on 1HFY21 as compared with $2.72mn as on 1HFY20.

Revenue Growth (Source: Company Reports)

Outlook: As a result of accelerating product sales during the March 2021 quarter, the company is expecting to deliver revenue of $3.5 million for March 2021 quarter. 

Stock Recommendation: In the last one month, RLG has increased by ~20% and by ~2.12% in the last three months. The current market capitalisation of RLG stands at ~$19.71mn as of 7 April 2021. The stock is currently trading near to the average 52-week price level range of ~$0.013-~$0.054. On the technical analysis front, the stock has a support level of ~$0.028 and a resistance of ~$0.037. Considering RLG’s track record of incurring losses, low market capitalisation, associated risks, valuation, and current trading levels, we suggest investors to book profit and recommend a “Sell” rating on the stock at the current market price of $0.034 as on 7 April 2021.

RLG Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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