National Australia Bank Limited

NAB Details

Q1FY21 Cash Earnings Improved by 47%: National Australia Bank Limited (ASX: NAB) is involved in providing services such as Business & Private Banking, Personal Banking, Corporate & Institutional Banking and New Zealand Banking. In a recent trading update, NAB highlighted that its cash earnings for Q1FY21 were 47% higher than the quarterly average of second half year of the financial year 2020, mainly due to improving economic trends. Due to the non-repetition of Mark-to-market loss reversals in H2FY20, revenue declined by 3% reflecting lower markets & treasury income, while after exclusion of markets & treasury, revenue grew by 1% with higher fees and commissions income benefitting from increased levels of business activity. With productivity benefits and lower restructuring related costs, partly offset by provisions for higher performance-based compensation, expense fell by 1%. As at 31 December 2020, NAB’s CET1 ratio stood at 11.7%. In a recent update, the bank announced that it has inked a scheme implementation agreement to acquire 100% of the shares in 86 400 holdings ltd, the holding company of Australian neobank, 86 400.

CET1 Ratio (Source: Company Reports)

FY20 Result Highlights: Under its full year performance for FY20 (Year ended September 2020), revenue from ordinary activities for the period stood at $17,261 million, a decline of 1.6% on previous year. Its Net profit after tax from ordinary activities attributable to owners of NAB, stood at $2,559 million, a decline of 46.7% on the previous year.

Income Statement (Source: Company Reports)

Outlook: Looking at the economic disruptions caused by COVID-19, the bank has added an additional $1,856 million in forward looking collective provisions in FY20, with an anticipation of further deterioration. For FY21, the balance sheet of the bank is expected to allow it to include extra resourcing for its consumer and business hardship areas. Moreover, the addition of 550 new roles in its Business & Private Banking division is expected to serve customers, combined with further investment in technology resilience and financial crime/anti money laundering systems and capabilities to keep its customers and bank safe.

Valuation Methodology: Price to Book Value Multiple Based Relative Valuation (illustrative)

Price to Book Value Multiple Based Relative Valuation (Source: Refinitiv (Thomson Reuters))

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: NAB’s share performed well in the six months period with the return of 44.74%, while in the one-year period return was negative 6.56%. The company deposit growth (10.9%) for FY20 was well above the industry median (8.1%), while its loan growth (-0.7%) showed a subdued performance. On the technical analysis front, the stock has a support level of $24.20 and resistance of $30.09. We have valued the stock using price to book value multiple based relative valuation method and have arrived at a target price of low double-digit upside (in % terms). For the purpose, we have taken peers like Commonwealth Bank of Australia (ASX: CBA), Australia and New Zealand Banking Group Ltd (ASX: ANZ), Westpac Banking Corp (ASX: WBC) etc. Considering the current trading levels, decent performance in Q2FY21, outlook and valuation, we give a ‘Hold’ recommendation on the stock at the current market price of $25.560, up by 1.067% on 16 February 2021.

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

Fatfish Group Limited

FFG Details

FFG Reported Positive Net Cashflow Since Listing: Public traded tech venture firm, Fatfish Group Limited (ASX: FFG) has investments in the Southeast Asia and Nordic European region. Under co-entrepreneurship model, the company partners with entrepreneurs to build tech businesses. It has been investing strategically across various sectors such as video games, esports, fintech and consumer internet technologies. Its market capitalisation as on February 16, 2021, stood at ~$85.43 million. In the quarter ended December 31, 2020, the company reported net cash inflow of A$43,000 from operations, which is a first time positive cashflow from operations since its listing on the ASX. During the three months period, the company successfully completed a A$1.5 million capital raising (before costs) via a placement of 100,000,000 new ordinary shares to sophisticated investors. The period also witnessed the acquisition of an additional direct 19.9% shareholding in Smartfunding, a Singapore incorporated company that is licensed by the central bank of Singapore, Monetary Authority of Singapore. Earlier, FFG held 58.8% stake in Smartfunding through its Swedish subsidiary, Abelco Investment Group AB.

Operating Cash Flow (Source: Company Reports)

H1FY20 Result Highlights: In the H1FY20 (half-year ended June 30, 2020), revenue from ordinary activities stood at $344,916, a decline of 77% over the previous corresponding period (pcp). Total comprehensive income for the period attributable to members of the parent stood at -$6,444,847, a decline of 15% on pcp.

Key Financial Results (Source: Company Reports)

Sale of iCandy Digital Pte Ltd: In a recent update, the company acknowledged that the iCandy is selling iCandy Digital Pte Ltd to Sweden-based RightBridge Ventures AB for A$4.8 million. iCandy holds 26 mobile game titles and 23% stake in iCandy’s esports venture ESPL. RightBridge is a subsidiary of Abelco, which is a subsidiary of Fatfish Group Limited, and it focuses on investing in esports and gaming companies, and is planning for an IPO in 2021. In another update, FFG’s investee company Smartfunding Pte. Ltd announced that it is planning to launch of a Buy-Now-Pay-Later Financing Programme (BNPL) for corporates in Southeast Asia via Smartfunding.

Fatberry Reported Sales Growth: In a previous update, Fatberry (FFG holds a stake of 53.4% via a Swedish listed subsidiary Abelco Investment Group AB) reported decent monthly sales growth of over 100% over the past 6 six months. This can be attributed to the accelerated digital consumer behaviour amidst global pandemic lockdown situation. Fatberry is a Malaysian incorporated company that operates Fatberry.com, a leading consumer insurance digital marketplace that allows consumers to easily compare, customise and purchase insurance products online.

Outlook: The pandemic has increased dependence on technologies underpinned by stats which shows dramatic improvement in digital transactions and online attendance of a consumer/user. As the economic activities across the world is recovering, it can be expected that reliance over technology to further increase, benefitting all the tech-companies.

Stock Recommendation: FFG’s share performed extremely well in the past six months and one year period showing a return of 1,525% and ~2,066%, respectively. It is presently trading close to the high levels it achieved in the year 2015. Its profitability margins for H1FY20 are lower than the industry median, while its current ratio for H1FY20 (1.31x) is better than the H1FY19 result of (0.72x). Considering the aforesaid facts, it would be advisable for investors to wait for the price to break the important resistance level at around $0.223 and let it sustain this level for a while, later-on which a long position can be initiated. Hence, we give an “Avoid” rating on the stock at the current market price of $0.270, up by 193.478% as on February 16, 2021.

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

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