MyDeal.com.au Limited

MYD Details

Q4FY21 Update: MyDeal.com.au Limited (ASX: MYD) is an online retail marketplace that is focused on lifestyle goods. The company has recently declared its Q4FY21 results and delivered decent performance during the period.

• Gross sales grew by 12.4% to $46.6 million in Q4FY21. It reported annual FY21 gross sales of $218.1 million, an increase of 111.1% on the pcp.
• The revenue grew by 40.3% to $8.7 million in Q4FY21, and the annual FY21 revenues stood at $38.3 million, reflecting an increase of 149.6% on the pcp.
• The company ended the period with a decent cash balance of $42.7 million as of 30 June 2021.
  

Historical Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks: The company operates a technological platform and is prone to cyber-security breaches and access to confidential client information. This may impact the brand reputation of MYD in the process.  

Outlook: Despite the impact of the COVID-19 pandemic on the economy, the company has continued with its growth momentum and has invested in its brand. It believes that e-commerce remains substantially underpenetrated in its core markets and there is potential to leverage on the same. In FY22, it will focus on shopping enhancement through personalisation and app engagement. MYD also expects its customer base to benefit from its range of private-label brands going forward.

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 company has reported annual private label gross sales of $8.8 million in FY21, contributing 5.2% of total gross sales. As per ASX, the stock of MYD is trading below its average 52-weeks’ levels of $0.520-$2.200. The stock of MYD gave a negative return of ~8.088% in the past three months and a negative return of ~6.71% in the past one month. We have valued the stock using an EV/Sales multiple-based illustrative relative valuation and have arrived at a target price of low double-digit upside (in % terms). We believe that the company can trade at a slight premium to its peer average EV/Sales (NTM trading multiple), considering the robust increase in sales, expected growth in its private label and optimistic outlook. For this purpose, we have taken peers such Cettire Ltd (ASX: CTT), Temple & Webster Group Ltd (ASX: TPW), Adore Beauty Group Ltd (ASX: ABY), to name a few. Considering the expected upside in valuation and current trading levels, robust increase in gross sales & revenue, decent cash position, substantial opportunity in the sector and the key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.625, up by ~0.806% as on 03 August 2021.

MYD Daily Technical Chart, Data Source: REFINITIV

Helloworld Travel Limited

HLO Details

Business Update: Helloworld Travel Limited (ASX: HLO) is a travel distribution firm in Australia and New Zealand, offering corporate travel management services, and retail travel networks. HLO also provides air ticket consolidation, destination management services (inbound), wholesale travel services, and online operations.

Deed Extension: On 19 May 2021, HLO announced a further extension of the Deed contract between the Department of Finance and QBT Pty Limited, a 100% subsidiary of HLO. As per the contract, HLO will provide travel management services to the Australian Government for one year, from 1 July 2021-30 June 2022.

Business Recovery: HLO notified the market that it has witnessed recovery across all the corporate businesses, including TravelEdge, QBT, Show Travel, and APX in New Zealand. The retail and wholesale businesses in New Zealand has also experienced increased bookings after the news to open the Cook Islands bubble.

Key Takeaways from Q3FY21 (March 2021 Quarter):

• Increase in TTV: HLO reported a Total Transaction Value (TTV) of $261.5 million in Q3FY21 versus $256.1 million in Q2FY21. However, it was 79.6% YoY down on a pcp basis. HLO reported the highest TTV of $112.5 million for March on a YTD basis.
• Fall in Revenue: The revenue recorded was $15.0 million, down by 75.8% YoY in the March 2021 quarter.
• Underlying EBITDA Loss: HLO registered an underlying EBITDA loss of $4.4 million, in sync with the estimate provided previously.
• Reduced Borrowings: The company had $81 million of external borrowings as of 31 March 2021 versus $101 million as of 30 June 2020 and headroom of $30.2 million available on its debt facilities.
• Reduced Free Cash Flows: As of 31 March 2021, HLO had $125.9 million cash. The free cash flows stood at $75 million as of 31 March 2021 versus $81 million as of 31 December 2020 due to the payment of redundancies, associated entitlements, and overhead payments.

Revenue & Net Income Trend from FY18-FY20; (Analysis by Kalkine Group)

Key Risks:

• COVID-19 Lockdowns: The company faces the impact of COVID-19 closures on travel and tourism industry impacting air-travel demand, ticketing volumes and revenue.
• Peer Competition: HLO faces stiff competition from its peers in the industry, thereby draining its significant market avenues.

Outlook:

• HLO expects TTV continued improvement in the coming months across its divisions due to the reopening of all Australian state borders and the start of trans-Tasman travel (quarantine free).
• HLO estimates an annualised TTV of ~$1 billion and incur an underlying EBITDA loss of ~$14-$16 million for the full-year FY21.
• Further, HLO expects to achieve an underlying EBITDA loss of $1 - $3 million in Q1FY22 and a positive underlying EBITDA in the Q2FY22, given no change in the status quo.

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 HLO gave a negative return of ~12.29% in the past three months and a positive return of ~2.61% in the past year. The stock is currently trading lower than the 52-weeks’ average price level band of $ 1.495 - $3.360. We have valued the stock using the Enterprise Value to Sales based illustrative relative valuation method and have arrived at a target price of low double-digit upside (in % terms). We believe that the company can trade at a slight discount than its peer average, due to a fall in revenue and an estimated underlying EBITDA loss for FY21, along with impact of COVID-19 closures on travel and tourism industry. For this purpose, we have taken peers like Tabcorp Holdings Limited (ASX: TAB), Sealink Travel Group Limited (ASX: SLK), Flight Centre Travel Group Limited (ASX: FLT), and others. Considering the current trading levels, increase in TTV in Q3FY21, expected TTV for FY21, news of the opening of all state borders and travel to trans-Tasman travel, valuation, and key risks associated with the business, we give a ‘Speculative Buy’ rating on the stock at the current market price of $1.570, down by ~0.633% on 3 August 2021.

HLO 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 on 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 the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and 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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