Advance Network Limited

ANO Details

Business Update: Advance Network Limited (ASX: ANO) is a producer of zinc oxide dispersions, zinc oxide powder (together ZinClear), and aluminium oxide powder (Alusion) for the personal care industry. In a recent business update, the company confirmed that it expects a profit before tax of $265,000 in FY21, subject to final tax and audit clearance. The company also confirmed that its sales revenue for July 2021 month has exceeded $1.1 million, the highest sales since March 2020.

Substantial Shareholder Notified: On 5 July 2021, ANO notified that Brian Maurice Kearney now holds 11.07% voting power compared to 12.11% held previously.

Right Issue Placement: ANO completed a Rights Issue on 28 June 2021, raising $2.40 million and received applications for issue of 609,255 new shares at $3.94 per share. There was a shortfall of 591,083 shares under the issue which will be met in full by the Underwriter. ANO expected to issue the new shares on 2 July 2021.

Profit Before Tax from FY16-FY20; (Analysis by Kalkine Group)

Key Risks:

• COVID-19 Impact: ANO faces the impact of COVID-19 on its revenue due to lockdowns and travel restrictions in its operating markets.
• Regulatory Delays: The company faces regulatory hurdles such as delayed approvals for its new manufacturing facilities, capacity expansions, and new product launches.

Outlook: ANO awaits VegeCert and Australian Certified Organic (ACO) certification to commence manufacturing of the vegan zinc-based products at its Brisbane facility. The Board has decided to dual list the shares on ASX and NASDAQ for capital access. Given the COVID-19 impact, ANO has decided to undertake NASDAQ listing in early CY23 and with further updates during the AGM later this year.

Stock Recommendation: The stock of ANO gave a negative return of 8.99% in the past three months and a negative return of 6.66% in the past six months. The stock is currently trading below the 52-weeks’ average price level band of $2.920 - $4.970. On a TTM basis, the stock of ANO is trading at a price-to-book value multiple of 7.6x, lower than the industry (Personal & Household Products & Services) average of 9.5x, thus seems undervalued. Considering the current trading levels, decent sales performance in July 2021 month, expected listing on NASDAQ, valuation on a TTM basis, and associated risks of COVID-19 and regulatory delays, we give a ‘Speculative Buy’ rating on the stock at the current market price of $3.510, as on 10 August 2021, 10.40 AM (GMT+10), Sydney, Eastern Australia.

ANO Daily Technical Chart, Data Source: REFINITIV  

Aeris Environmental Ltd.

AEI Details

Business Highlights of Q4FY21& FY21: Aeris Environmental Limited (ASX: AEI) manufactures and commercialises its proprietary, environmentally friendly technology, which drives measurable improvements in asset performance and sustainability.

• Increase in Revenue: AEI posted $1.127 million revenue in Q4FY21 versus $1.04 million in Q3FY21. However, AEI notified material impact of the locked-down business environment in most global markets affecting revenue growth.
• YTD21 Revenue: AEI reported $7.37 million of unaudited revenue on a year-to-date basis and gross margin of 40%. AEI expects margins to trend above 50% in FY22.
• Cash Receipts: AEI collected $1.37 million of cash receipts in Q4FY21, taking the YTD21 cash receipts to $11.36 million.
• Launch of Aeris Defence: AEI has introduced a hospital-grade hard surface disinfectant, Aeris Defence, in Q4FY21 and has sought regulatory approvals for its distribution in volume markets, including Australia. AEI has added a sales and marketing fleet for its overseas launch.
• US Launch: AEI has started the commercial sales for its in-house developed AerisGuard Bioactive Filter Treatment and Surface Treatment.
• New Distribution Alliance: AEI has inked a distribution alliance with RapidClean, a cleaning supplies Group, for its portfolio of environmental hygiene products.

Total Revenue & Net Income from 2HFY19-1HFY21; (Analysis by Kalkine Group)

Key Risks:

• COVID-19 Impact: AEI experienced challenges in accessing market, supply chain disruptions, and lower revenue and margin for its NSW Health business due to COVID-19.
• Regulatory Risks: The company faces regulatory delays in rolling out new products and distribution to new markets.

Outlook:

• The company focuses on extending its environmental hygiene range and HVAC (heating, ventilation, and air-conditioning) in North America.
• AEI plans to increase the distribution of AerisGuard Bioactive Filter Treatment and Surface Treatment after its launch in the US in Q4FY21.
• AEI is also progressing with establishing a 100% owned Chinese subsidiary to develop strategic JVs in the country and seek business opportunities at Federal and State local for the firm and its partners.
• AEI has obtained an initial order from the Australian market for its environment hygiene products under the RapidClean distribution partnership and expects more orders in Q1FY22.

Stock Recommendation: The stock of AEI gave a negative return of 17.49% in the past three months and a negative return of 48.43% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $0.140 - $0.690. On a TTM basis, the stock of AEI is trading at a price to book value multiple of 1.8x lower than the industry (Professional & Commercial Services) median of 3.0x, thus seems undervalued. Considering the current trading levels, increase in Q4FY21 revenue, expected increase in margins, expansion of AerisGuard Bioactive Filter Treatment and Surface Treatment distribution, expected orders for its environment hygiene products in Q1FY22, repositioning of the Mould Remediation product range, valuation on a TTM basis, and associated risks of COVID-19 and regulatory changes, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.165, up by ~3.125% as on 10 August 2021.

AEI 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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