Wellnex Life Limited

WNX Details

Q1FY22 Financial and Operational Highlights: Wellnex Life Limited (ASX: WNX) is engaged in the sale and distribution of health and wellness products. For the quarter ended 30 September 2021, the company recorded receipts from customers of $4.85 million with additional opening purchase orders received of $1.35 million for the launch of new brands.

• WNX recorded a net cash loss from operations of $319,000, which include one-off expenses of around $200,000 associated with the acquisition of Brand Solutions Australia.
• During the quarter, the company introduced three new, innovative brands ranging in both pharmacy and grocery retailers, which commenced in November 2021.
• The company closed Q1FY21 with a strong balance sheet, backed by net cash of $3.6 million and around $4 million in inventory, with a further $2.5 million raised post-quarter.

FY21 Financial Summary:

• Rising Topline: For the year ended 30 June 2021, the company recorded a growth of 29.6% in revenue and other income from ordinary activities to $1.43 million against $0.93 million in FY20. This growth was supported by the increasing distribution of both Uganic and Little Innoscents.
• Decline in Losses: Backed by the removal of Corio Bay Dairy Group (CBDG) and associated expenses, the company managed to improve its losses to $24.69 million as compared to $46.27 million in FY20.

Revenue & Losses Trend (Source: Analysis by Kalkine Group)

Key Risks:

• COVID-19 Uncertainties: The company’s business is exposed to the uncertainties arising from the global health pandemic
• Consumer Sentiments: WNX’s operational and financial performance could be impacted by the changing sentiments of consumers, which may impact its topline growth.

Outlook:

• WNX expects growth in revenue in the near future, which will be underpinned by the rollout of the Wagner Liquigesic brand in October 2021 and initial purchase order of circa $1 million.
• The company would also enhance its current Little Innoscents offerings with new products and formulations and look at options for its Uganic infant formula range.

Stock Recommendation: WNX has continued to grow its footprints in the fast-growing health and wellness market, with continued revenue growth and expanded product offerings. The stock of WNX is trading near to its 52-week low level of $0.082, offering a decent opportunity for accumulation. The stock has been corrected by ~12.38% and ~23.33% in the past one month and three months, respectively. Considering the growing revenue, improving bottom line in FY21, strong balance sheet, decent outlook, current trading levels, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.090, as on 23 November 2021, 12:10 PM (GMT+10), Sydney, Eastern Australia.

Investors with high-risk appetite should evaluate this stock in view of the technical support and resistance levels as well as taking into consideration associated risks arising from the uncertainties from COVID-19, changing consumer sentiments and regulatory risk.

WNX Daily Technical Chart, Data Source: REFINITIV 

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

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

Technical Indicators Defined:

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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