Stocks’ Details

OneVue Holdings Limited

Signing of Agreement: OneVue Holdings Limited (ASX: OVH) is a wholesale service provider to the wealth management industry. The market capitalisation of the company stood at ~$100.47 million as on 6^th July 2020. OVH has recently entered into a five-year outsourced managed fund administration agreement with Australian Unity Wealth & Capital Markets (AUWCM). Post AUWCM transitioning, OneVue Holdings Limited will witness a 25% rise in the total number of items processed across the business. The transition is likely to commence in the last quarter of 2020 and is anticipated to finish in 2021. The agreement will witness AUWCM’s range of investment and property funds and investment bonds move onto OVH’s managed fund administration service. 

Previously, the company has also announced an equity raising of $170 million for further strengthening its balance sheet and provide flexibility. This equity raising consists of the placement of $150 million for sophisticated and institutional investors and the Share Purchase Plan of $20 million.


Key Dates for SPP (Source: Company Reports)

Acquisition offer from Iress: Previously, the company entered a scheme implementation agreement with Iress, wherein, Iress would be acquiring 100% of the outstanding shares of OVH. As per the terms of the scheme, the shareholders of OVH will be entitled to receive consideration of $0.40 per share for their OneVue shares. The combination of OVH’s strength and position in the administration of managed funds, superannuation, and investments, with Iress’ strength in software and data, would drive innovation through technology. However, this transaction is subject to various approvals, including receipt of ACCC and other regulatory approvals.
Outlook: With respect to Managed Fund Administration, the company would continue to transition the outstanding clients currently representing over $3 million in recurring revenues per annum. In Platform services, the company will continue to win new clients in Platform Services to lower costs and deliver greater efficiencies.

Key Risks: The company’s business is exposed to numerous financial risks such as market risk (including price risk and interest rate risk), credit risk and liquidity risk. To minimize this risk, the company is focused on the unpredictability of financial markets. OVH’s business is also sensitive to price risk in relation to equity securities, influenced by the investments held by the company.

Stock Update: The company has created a diversified revenue base, which is capable to navigate through the adverse market conditions. During March 2020 quarter, the company has experienced growth in all business lines despite the negative market conditions. The stock was closed at $0.380 per share, up by 1.333% on 6^th July 2020.

Aeris Environmental Ltd

FY20 Revenue Surpassed Guidance: Aeris Environmental Ltd (ASX: AEI) is involved in the research, development, commercialisation of proprietary technologies and global distribution of the AerisGuard range of products. In a recent market update, the company stated that its unaudited revenue for FY20 stood at $14.4 million, higher than its revenue guidance of $13 million. Moreover, the unaudited pre-tax half-year result from January to June 2020 was profitable. With respect to Aeris’ global roll-out, AEI has its Aeris Active product listed for sale by the Guardian (Pharmacy division of the Singapore-listed Dairy Farm International Holdings Limited).

In the month of May 2020, AEI announced a strategic alliance with a consortium of Chinese businesses, being Shanghai Taitrust Industrial Group Co., Ltd and Shanxi Tond Chemical Stock Limited Company. The company expects to ship initial stock orders of over $1 million in the current quarter. During the quarter ended March 2020, the company has successfully completed a capital raising of $12 million, with strong demand from leading institutional and sophisticated investors. The company reported record sales revenue of $4,020,000 during the quarter.


Cash Flows (Source: Company Reports)

Outlook: AEI is currently accelerating its activities in all its local and international business units. AEI’s forward order book continues to grow strongly.  The company’s outlook is supported by its stronger financial position, growing demand and increased production capacity in multiple sites across the globe.

Key Risks: The company is exposed to credit risk, which arises from the inabilities of counterparties to meet their obligations under the respective contracts at maturity. The company is also exposed to risks related to liquidity related crisis.

Stock Recommendation: Gross margin of the company stood at 49.0% in 1H FY20 as compared to the industry median of 30.6%. The company is currently debt-free, cash flow positive and profitable. The stock of AEI has EV/Sales multiple of 15.7x as compared to the industry average (Professional & Commercial Services) of 39.5x on TTM basis. Thus, considering the decent financial performance, strategic alliance with a consortium of Chinese businesses and debt free, cash flow positive and profitable position, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.600 per share, down by 0.826% on 6^th July 2020.

THC Global Group Limited

Robust Performance in Canadian Operations: THC Global Group Limited (ASX: THC) is a farm to pharma diversified vertically integrated cannabis company with a market capitalisation of $48.73 million as on 6^th July 2020. Recently, the company stated that it experienced continuous strong performance in its Canadian operations despite the COVID-19 and the launch of new service offerings targeted at the micro-cultivator and home-cultivator sectors. CMP Wholesale (Hydroponics equipment and cultivations solution provider of THC) has continued to perform strongly on the back of its focus on the micro-cultivator and home-cultivator markets. During Q2 FY20, CMP Wholesale reported unaudited trading revenue amounting to $3 million, reflecting a rise of 50% over Q2 FY19. 

The company stated that its Share Purchase Plan would close on 10^th July 2020. The SPP offers the eligible shareholder with the opportunity to apply for up to $30,000 of new shares at $0.30 without brokerage or other transaction costs. Previously, the company has wrapped up $6.6 million placement with significant demand received from new institutional investors with positive long-term views on THC. The below picture gives an overview of recent financials of the company:


Recent Financials (Source: Company Reports)

Export to Canada: As of now, THC is preparing to begin the export of medicinal cannabis medicines from Australia to Canada for supply into the Canadian market under the Canndeo Canada brand. The company would produce and export an initial 3,000 bottles of medicinal cannabis medicines to Canada during 2H FY20, which is subject to the grant of an export authority and matching Canadian import authority.

Key Risks: As the company has a decent business exposure in Canada and most of the Group’s transactions occur in Canada and are predominantly denominated in CAD and USD. Hence, this leads to foreign currency risk, which arises from the fluctuations in the foreign currency. Moreover, the company is also exposed to credit and liquidity risk.

Stock Recommendation: Current ratio of the company stood at 6.85x in FY19 as compared to the industry median of 2.13x. This reflects that the company is in a decent position to address its short-term obligations against the broader industry. The stock of THC has EV/Sales multiple of 9.9x as compared to the industry median (Pharmaceuticals) of 10.2x on TTM basis. The stock of THC is trading at a price to book multiple of 2.2x against the industry average of 4.4x on TTM basis. Thus, considering the strong performance in Canadian operations, export plan under the Canndeo Canada brand, decent liquidity position and key risks, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.300 per share, up by 3.448% on 6^th July 2020.

 
Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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