DGL provides chemical supply chain management solutions such as warehousing and distribution, waste management, and environmental solutions. It caters to customers worldwide.

H1FY22 Financial and Operational Summary:

• The company posted six months results exceeding expectations.
• Sales revenue increased by 182% to reach $143 million in H1FY22 over the prior year.
• Its EBITDA surged 139% to $23 million. And NPAT posted an astonishing growth of 187% to reach $9 million.
• Management is expecting FY22 revenue to reach $343 million and EBITDA at $54 million.
• On Feb 7, 2022, DGL acquired an industrial property located at 57 Ashover Road, Rocklea, Queensland for a total consideration of $11 million.

Key Risks: DGL is exposed to regulatory risk in waste management. Increasing competition and lack of supply contracts are some of the operational challenges.

Outlook:  Due to diversified operations, the company is expected to perform strongly over the remainder of FY22. The company is to continue to look for opportunities to invest in capital-intensive infrastructure for safe production and management of chemicals.

Stock Recommendation: The company is trading higher than the average of the 52-week low of $0.935 and the 52-week high of $3.280. It had delivered returns of ~58.09% over the past six months. On a TTM basis, DGL is trading at a higher on Price/Book Value multiple of 3.6x as compared to the industry median of 2.6x (Basic Materials). This signifies that the stock is overvalued at current trading levels. Considering the rally in the stock price in the recent period, higher than expected H1FY22 results, valuation on a TTM basis, and key risks associated with the business, we suggest investors to book profit and give a ‘Sell’ rating on the stock at the current market price of $3.010 as of 9 February 2022, 11:34 AM (GMT+10), Sydney, Eastern Australia.

DGL Daily Technical Chart, Data Source: REFINITIV  

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decisions should be made depending on the investors’ appetite for upside potential, risks, holding duration, and previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and is subject to the factors discussed above.

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