GUD Holdings Limited

GUD Details

Change in Director Interest: GUD Holdings Limited (ASX: GUD) operates in the manufacturing, commercialisation of automotive products and other service parts in Australia, New Zealand, France, and the US. Director Graeme Whickman has transferred its 25K Direct FPO to Indirect FPO.

Update on Substantial Holder Interest- Aware Super Pty Ltd has increased its holding to 6,206,883 and voting power to 6.54%. In contrast, Marathon Asset Management Limited has decreased its holding to 5381057 and voting power to 5.67%.

Issuance of Share: The company has proposed an issue of 676,010 ordinary shares at a price of $10.2988 per share that is used to invest in inventory to support the robust demand environment.

FY21 Financial Performance:

• The company has recorded revenue growth of 27.2% to $98 million in FY21 against ~$438.0 million in FY20, driven by Automotive revenue growth of 34.1%, which was underpinned by strong organic growth of 18.2%.
• The company has reported an increased underlying EBITDA of 24.8% to $119.4 million in FY21, compared to $95.7 million in FY20, reflecting higher supply chain manufacturing costs and investment in growth.
• GUD has incurred a profit of $61.0 million in FY21, up by 39.6% from $43.7 million in FY20. The increasing demand across the Automotive businesses and acquisitions drive significant profit growth.
• The company is sitting on a cash balance of $42.6 million as of 30 June 2021.

Key Metrics (Source: Analysis by Kalkine Group)

Key Risks:

• Impact of COVID-19 pandemic- The company is exposed to supply change disruption, caused by COVID-19 pandemic.
• Foreign Currency Risk- The company’s operations are exposed to the global market, due to which the company could face the foreign currency risk.

Outlook:

• The company expects to strengthen its market position and leverage on opportunities pertaining to its pipeline for Automotive demand and mobility.
• The company is anticipating that organic automotive growth will moderate and normalise over time and improve water business in FY22.
• The company remains confident in global need for water management and focuses to invest higher in capability, capacity, and innovations to support future growth opportunities.
  

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

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: Due to strong financial performance for FY21, the company declared a final dividend of 32 cents per share and represented a full year payout of 84% of underlying NPAT. The stock of GUD is trading below its average 52-weeks' levels of $10.020-$13.690. The stock of GUD gave a negative return of ~2.43% in the past one month and a negative return of ~16.22% in the past six months. The stock has been valued using an EV/Sales multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight premium to its peers' average, considering the increase of mobility trend and a higher gross margin. For the purpose of valuation, peers such as Bapcor Ltd (ASX: BAP), Sealink Travel Group Ltd (ASX: SLK), Carbon Revolution Ltd (ASX: CBR) have been considered. Considering the current trading levels, indicative upside in valuation, decent balance sheet, strategic acquisitions (Australian Clutch Services, the ACAD businesses), increase in demand across the Automotive businesses, strong financial performance, and optimistic outlook, we recommend a 'Buy' rating on the stock at the current market price of $10.170, up by ~0.394% as on 20 September 2021.

GUD Daily Technical Chart, Data Source: REFINITIV

DataDot Technology Limited

DDT Details

Raised its Capital: DataDot Technology Limited (ASX: DDT) operates in manufacturing, distributing asset identification and digital protection solutions in Asia, the Americas, Africa, Australia, and Europe. To raise its capital, the company has proposed 2,000,000 ordinary shares under an employee incentive scheme.

FY21 Financial Performance:

• Increase in Revenue- The company has recorded a revenue growth from ordinary activities by 3.22% to $3.89 million in FY21, compared to $3.77 million in FY20. This was reflected due to growing interest in the automotive sector for microdot fitment over the past two years and further secured the opportunities from international distributions.
• Strong EBITDA Performance- The company has reported a record in EBITDA of $1.49 million in FY21, up by 13% from $309k in FY20, driven by focused COGS reductions
• Robust Bottom-line Growth- The company has incurred a profit of $1.23 million in FY21, up from ~$29k in FY20. In addition, the extensive restructuring activities of the Board and Executive resulted in robust growth in profit.
• Liquidity Position- The cash position of the company stood at $2.32 million as of 30 June 2021, which will be used to invest in growth opportunities and maintain long term financial stability.

Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks:

• Impact of COVID-19 pandemic- The company is exposed to a material shortage that could impact its operations.
• Cyber Security Risk- The company is exposed to cybersecurity risk, technology risk, fraud, threats. Therefore, the company should invest in technology to keep it updated and secured.

Outlook:

• The company is focused on enhancing its global footprint to drive growth in the international customer base for its microdot and trace product lines.
• The company has anticipated delivering further COGS savings and greater customer satisfaction, leading to a higher gross margin in the near term.
• The board is optimistic regarding the increased revenue streams in FY2022 and continues to investigate other strategic opportunities to provide value for all shareholders.

Stock Recommendation: The stock of DDT is trading at par with its 52-weeks' high levels of $0.013. The stock of DDT gave a positive return of ~57.14% in the past six months and a positive return of ~83.33% in the past three months. On a technical analysis front, the stock of DDT has a support level of ~$0.007 and a resistance level of ~$0.015. Considering the current trading levels, recent rally in the stock price, volatile demand in the international market, negative net margin and the key risks associated with the business, we suggest investors book profit and give a 'Sell' rating on the stock at the current market price of $0.013, up by ~44.44%, as on 20 September 2021, 2:57 PM (GMT+10), Sydney, Eastern Australia.

DDT Daily Technical Chart, Data Source: REFINITIV

Note, the green color line indicates SMA (21-day) and purple color like represent RSI (14-day)

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 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 analysis has been achieved and subject to the factors discussed above alongside support levels provided.

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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