Clover Corporation Limited

CLV Details

New Product Development Driving Growth: Clover Corporation Limited (ASX: CLV) is engaged in the refining and sale of natural oil. The Company is also engaged in the production of encapsulated powders, and the research and product development of functional food and infant nutrition ingredients. The company’s sales across all key regions have grown during FY20 compared to FY19. CLV has established a growth platform for itself through new baby formula generating demand in China. EU has provided significant growth with new customers and increasing demand to meet the new IF standard. In FY20, the company witnessed a 15% YoY growth in total revenue and 23.6% YoY growth in net profit.

Growth Across Regions (Source: Company Reports)

Substantial Change in Shareholding: Perpetual Limited and its related bodies corporate on 1 Feb 2021 has increased its interest in CLV to 7.64% from 6.63% previously held. Perpetual Limited now holds around 12,708,968 ordinary shares of the company.

Outlook: The company is focusing on potential customers in Europe to meet the new IF standards and establish online audits. CLV is establishing partners in supply and logistics, creating a vertical integration for its supply chain.

Valuation Methodology: EV/Sales based Relative Valuation (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 1 month, CLV has decreased by 4.82% and 28.12% in the last 3 months on ASX. The stock is currently trading below the average 52-week price level range of $1.305-$3.000. On the technical analysis front, the stock has a support level of ~$1.294 and a resistance of ~$1.65. We have valued the stock using EV/Sales multiple based relative valuation method and have arrived at a target price of lower double-digit upside (in % terms). For the purpose, we have taken peers Advance Nanotek Ltd (ASX: ANO), Secos Group Ltd (ASX: SES), First Graphene Ltd (ASX: FGR) and more. We believe the company can trade at a premium to its peer median, EV/Sales (NTM Trading multiple), considering increasing sales growth across regions, and positive outlook. Considering the company’s decent financial performance in FY20, growth in new customers, current trading level, and valuation, we recommend a “Speculative Buy” rating on the stock at the current market price of $1.395, up by 4.887% as on 22 February 2021.

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

Zoono Group Limited

ZNO Details

Higher Inventory to Meet Higher Demand: Zoono Group Limited (ASX: ZNO), formerly Goldsearch Limited, is engaged in the development, manufacture and global distribution of antimicrobial solutions. The Company’s products are applied in areas, including hospitals, medical facilities, laboratories, veterinary, homes, poultry, and food processing. For Q2FY21, ZNO has maintained an inventory of NZ$14.4mn in order to meet higher demand from the consumers. ZNO has regulatory approvals for EU region, initiating sales into new channels such as healthcare, childcare and government.

Positive Results Leading to Supply Agreements: Post positive outcome from the bacteria test done for ZNO Z-71 Microbe Shield Surface Sanitizer and receiving ESMA certificate, ZNO has entered into a supply agreement with Fine Hygienic Paper LLC that will allow ZNO to develop and sell their own label products into their 70-country network around the globe. Fine Hygienic have already placed orders for NZ$1.5mn for the Middle East and NZ$263k for the EU.   

Outlook: ZNO is expecting a revenue of NZ$23.0mn in 2021, NZ$31.0mn in 2022 and NZ$39.95mn in 2023, demonstrating a CAGR of 75.1% during the five-year period ending in FY23. The company is scheduled to release its H1FY21 results on 25 February 2021.

Revenue Growth (Source: Company Reports)

Stock Recommendation: In the last one month, ZNO has decreased by 38.37% and by 41.11% during the last three months on ASX. The stock is currently trading below the average 52-week price level range of A$0.710-A$3.290, offering decent opportunity for accumulation. On the technical analysis front, the stock has a support level of ~A$0.473 and resistance of ~A$1.291. On a TTM basis, the stock is trading at EV/Sales multiple of 3.0x, lower than the industry median of 7.8x. Considering expected growth in the revenue over the next few years, positive ROE, current trading level and valuation on TTM basis, we recommend a “Speculative Buy” rating on the stock at the current market price of $0.800, up by 6.666% as on 22 February 2021.

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

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