Propel Funeral Partners Limited

PFP Details

Decent Financial Performance: Propel Funeral Partners Limited (ASX: PFP) provides death care services with a market capitalisation of $274.48 Mn as on 8^th October 2020. Despite the challenges posed by COVID-19, the company surpassed revenue and Operating EBITDA guidance in FY20.  Revenue for the year amounted to $110.8 million, reflecting a rise of 16.5%, mainly due to acquisition of Seven in FY19 and FY20 and comparable average revenue per funeral (ARPF) growth of 2.1%. Operating EBITDA for the period amounted to $32.4 million as compared to $23.8 million in FY19. However, the company experienced a fall of 13.9% in statutory NPAT to $10.6 million, primarily because of AASB 16 and the performance fee of $4.1 million earned by the manager.  PFP declared a final dividend of 6 cents per share, which took the total dividend for FY20 to 10.0 cents per share. The company managed to close FY20 with a cash balance of $53.9 million and possesses $40.2 million of funds from its $150 million debt facilities with Westpac.

Key Financials (Source: Company Reports)

Growth Aspects: For FY21, the growth drivers of the company include the growing and ageing population, strong funding position and potential future acquisitions in a fragmented industry.

Valuation Methodology: Price to Cash Flow Multiple Based Relative Valuation (Illustrative)

Price to Cash Flow Multiple Based Valuation (Source: Refinitiv, Thomson Reuters)

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

Stock Recommendation: Since its IPO, the share price of PFP has outperformed the ASX300 and its listed domestic peer with a return of 11.5%. The stock of PFP has provided a positive return of 2.96% in the past one month. The 52-week low-high range for the stock stands at $2.150-$3.800, respectively. On the technical analysis front, the stock price of PFP has a support level of ~$2.760 and a resistance level of ~$2.893. We have valued the stock using the P/CF multiple based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in percentage terms). Hence, considering the strong funding position, growth in top-line, outlook and valuation, we give a “Buy” recommendation on the stock at the current market price of $2.830 per share, up by 1.799% on 8^th October 2020.

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

Viva Leisure Limited

VVA Details

Growth in Topline Despite COVID-19 Impacts: Viva Leisure Limited (ASX: VVA) is in the operation of health clubs (gymnasiums) within the health and leisure industry with a market capitalisation of $174.49 Mn as on 8^th October 2020. The health club industry has experienced a major impact from the shutdown of facilities occurred on 23 March 2020 due to COVID-19. Despite these circumstances, the company reported revenue of $40.9 million, reflecting a rise of 23.6%. The company recorded a net loss for the year amounting to $1.43 million, reflecting a fall of 54.6% over pcp. As on 30^th June 2020, the membership of the company stood at 94,196 as compared to 54,039 at the close of FY19. In addition, the company increased its operating locations from 40 to 79 in FY20.

Revenue Growth (Source: Company Reports)

Outlook: Going forward, the company is seeking to expand its business with 22 new locations. The company would also continue to grow its brands into new markets. VVA believes that business is well-positioned to continue future development.  The company has scheduled to conduct its 2020 Annual General Meeting on 6^th November 2020.

Valuation Methodology: Price to Cash Flow Multiple Based Relative Valuation (Illustrative)

Price to Cash Flow Multiple Based Valuation (Source: Refinitiv, Thomson Reuters)

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

Stock Recommendation: During FY20, the company finished two capital raising of $20 million and $25 million, respectively. The company used these proceeds to cement its balance sheet for future growth. On the technical analysis front, the stock price of VVA has a support level of ~$2.220 and a resistance level of ~$2.570. We have valued the stock using the P/CF multiple based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in percentage terms). For the purpose, we have taken peers such as Village Roadshow Ltd (ASX: VRL), Experience Co Ltd (ASX: EXP), and Crown Resorts Ltd (ASX: CWN). Thus, in light of the growth in topline and earnings, intention to open new location, key risks and valuation, we give a “Speculative Buy” recommendation on the stock at the current market price of $2.470 per share, up by 1.23% on 8^th October 2020.

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

Ainsworth Game Technology Limited

AGI Details

Growth in Online Sales: Ainsworth Game Technology Limited (ASX: AGI) is part of the gaming industry and designs, develops, and manufactures gaming machines, software and related equipment supplies. The market capitalisation of the company stood at $107.77 Mn as on 8^th October 2020. For FY20, the company reported revenue amounting to $149.4 million as compared to $234.3 million in FY19 because of negative impact on outright and gaming operation due to closure of customers’ venues in 2H FY20.  However, the company reported a rise of 10% in online revenue. During the same period, statutory loss after tax amounted to $43.4 million, which includes an impairment charge of $12.0 million. In the North America segment, the company maintained profit margin of 35% despite the significant impact of casino closures in Q4 FY20.

Key Financials (Source: Company Reports)

Outlook: With respect to the North America Segment, the company is well-placed to roll out A-Star^TM Curve cabinet in FY21. In addition, AGI is in a decent position with the strengthening of portfolio content in Class III, Class II, and online segments.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation (Illustrative)

EV/EBITDA Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: As on 30^th June 2020, the cash and a debt balance of the company stood at $26.5 million and $17.5 million, respectively. The stock of AGI has corrected 13.51% and 25.58% in the past one and three months, respectively. As a result, the stock is inclined towards its 52-week low of $0.315, offering decent opportunities for accumulation. On the technical analysis front, the stock price of AGI has a support level of ~$0.315 and a resistance level of ~$0.567. We have valued the stock using an EV/EBITDA multiple based illustrative relative valuation method and arrived at a target price, which is offering an upside of lower double-digit (in percentage terms). For the purpose, we have taken peers such as Aristocrat Leisure Ltd (ASX: ALL), Star Entertainment Group Ltd (ASX: SGR), Tabcorp Holdings Ltd (ASX: TAH), to name few. Therefore, considering the growth in online sales, decent profit margin in North America, current trading levels and key risks, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.320 per share as on 8^th October 2020.  

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

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