Kathmandu Holdings Limited

KMD Details

Business Update: Kathmandu Holdings Limited (ASX: KMD) is a global outdoor, lifestyle and sports company. KMD markets its products under three brands – Kathmandu, Rip Curl and Oboz. The market capitalisation of the company as on 10 December 2020 stood at ~$886.25 million. As per a recent update, Xavier Simonet - Group CEO of KMD, has resigned from his post and decided to pursue his career in Australian Public Service.

FY20 Financial Update: The Group reported an increase in revenues by 48.7% to NZ$801.5 million in FY20, from NZ$538.9 million in FY19. The FY20 results are inclusive of 9 months of Rip Curl. It reported a growth in retail same store sales post-lockdown, for both Rip Curl and Kathmandu brands, when adjusted for COVID-19 store closures. It delivered gross profit of NZ$467 million in FY20, an increase of 40.5% from NZ$332.5 million in FY19. Owing to COVID-19 pandemic, KMD witnessed an increase in online sales to $106.4 million, up by 63% when compared with pcp.  Underlying EBITDA decreased by 15.3% to NZ$83.4 million in FY20, from NZ$98.4 million in FY19. NPAT decreased by 44.5% to NZ$31.5 million, during the same period, owing to COVID-19 impact on the business.

FY20 Financials (Source: Company Reports)

Outlook: Rip Curl benefitted from increased opportunity in surfing, while customers worked from home, while Kathmandu had successful sales in the winter season. Going forward, the company will continue to focus to develop its brand and product, implement its online digital acceleration and get further customer insights and preferences through data analytics implementation.

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

EV/EBITDA 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: With an increase in economic activity, KMD expects its sales to increase with time and deliver better profitability. As per ASX, the stock of KMD gave a return of 10.81% in the past three months and a return of 0.82% in the past one month. As per ASX, the stock of KMD is trading below its average 52 weeks’ trading range of $0.450-$2.506. On a technical front, the stock of KMD has a support level of $1.144 and a resistance level of $1.333. We have valued the stock using an EV/EBITDA multiple based illustrative relative valuation method and have arrived at a target price with an upside of lower double-digit (in % terms). For the purpose, we have taken peers such as City Chic Collective Limited (ASX: CCX), Super Retail Group Limited (ASX: SUL), Briscoe Group Australasia Limited (ASX: BGP), to name a few. Considering the current trading levels, increased traction in online sales and delivering profitability, we give a ‘Hold’ rating on the stock at the current market price of $1.225, down by 2% as on December 10, 2020.

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

Liquefied Natural Gas Limited

LNG Details

Company Update: Liquefied Natural Gas Limited (ASX: LNG) is an Australian public company with a business strategy to bring a concept of mid-scale LNG projects to the international energy market. The company consists of 100% ownership of the following companies- Magnolia LNG, Bear Head LNG, Bear Paw, LNG Technology LLC.

1HFY20 Update: During 1HFY20, the company reported a reduction in interest revenue to $0.07 million, from $0.44 million in the pcp. Net loss reduced to $13.89 million as compared to a loss of $16.90 million, in the same period. Cash cycle increased to 615.7 days in 1HFY20 as compared to 63.4 days in 1HFY19.  Project development expenditure stood at $4.875 million, down from the year-ago quarter’s figure of $9.122million.

1HFY20 Financial Results (Source: Company Reports)

Outlook: There is a good opportunity for growth for the company, given the favourable industry fundamentals. Global LNG demand and supply sources are expected to increase, along with Government actions inclined towards the facilitation of natural gas.

Stock Details: On 30 April 2020, the securities of LNG were placed on suspension from quotation as the company is seeking to release an announcement in relation to a change in officeholders. The company further informed that the securities of the company will be in a trading halt until the earlier of the commencement of normal trading on 4 May 2020 or when the announcement is released to the market. The stock last traded at $0.043.

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