Stocks’ Details

MaxiTRANS Industries Limited

Decline in FY20 Top-Line and Bottom-Line Results: MaxiTRANS Industries Limited (ASX: MXI) operates trailer solutions business (MaxiTrans) in Australia and New Zealand, and trailer and truck parts business (MaxiParts) in Australia. As on 2^nd November 2020, the market capitalisation of the company stood at ~$50.89 million. The total revenue of the Group declined by 9.9% from $352.88 million in FY19 to $317.6 million in FY20, owing to decline in external revenue of the MaxiTrans (trailer) business by 15% and 1.5% increase in the MaxiParts business. The loss after tax for FY20 stood at $35.49 million versus $27.04 million in FY19. The Group has reduced net debt by 62.2% to $12.1 million and net debt to equity ratio to 16% in FY20. The company experienced a 20% growth in key fleet, 13% growth in engine growth program and a 7% increase in its euro truck and bus program on a YoY basis.

FY20 Financial Highlights (Source: Company Reports)

Availed Government Support During FY20 and Shifting MaxiTrans to a New Facility: In 2H FY20, some parts of the business received government support under Jobkeeper in Australia and Wage Subsidy Scheme in New Zealand to a total grant package of $5.2 million. Trailer sales volume in May and June were also treated under Instant Asset write off program. MaxiTrans business will shift Queensland manufacturing operations to Carole Park at Brisbane in Q2FY21.

Outlook: For FY21, the Group believes that it has a robust trailer order book and has an improved stance in the grocery/fresh food segment, owing to higher demand from the agriculture sector. Further, the company’s cost reduction program implemented is expected to realise savings of $1.6 million in FY21.

Stock Recommendation: The Group reported cash inflow from operating activities amounting to $31.4 million and a cash and cash equivalents balance of $25.52 million in FY20. The stock of MXI gave a positive return of 27.90% in the past one month and a positive return of 83.33% in the last six months. The stock is trading near to its 52-weeks’ high level of $0.29. On a TTM basis, the stock of MXI is trading at an EV/EBITDA multiple of 17x, higher than the industry median (Industrials) of 6.6x. On a technical front, the stock of MXI has a support level of ~$0.239 and a resistance level of ~$0.333. Considering the company’s last 5-year results, revenue impact on trailer business, slight growth in parts business in FY20, current trading levels, and  past six months’ price performance, we suggest investors to wait for a better entry level and give an ‘Expensive’ rating on the stock at the current market price of $0.23, down by 16.364% on 2^nd November 2020.

Openlearning Limited

Strong Growth in 1H2020 Results: Strong Growth in 1H2020 Results: Openlearning Limited (ASX: OLL) offers education providers a cloud online learning platform to design and deliver accredited/non-accredited courses, degrees, and micro-credentials. As on 2^nd November 2020, the market capitalisation of the company stood at ~$51.61 million. The company reported gross sales of $1.51 million for 1H2020, an increase of 52.3% as compared to 1H2019. The gross sales are comprised of platform SaaS fees, marketplace sales and service income, all of which were higher for 1H2020. This increase is due to stay at home measures during the pandemic which resulted in shift towards online delivery of courses. The loss after tax during the period amounted to $2.216 million as compared to $2.3 million in 1HFY19. This was due to a restructuring done in FY2019, which enabled the firm to invest in sales and marketing as given in its IPO prospectus.

1H FY20 Financial Highlights (Source: Company Reports)

Q3FY20 Performance Updated: The company released its Q3FY20 results, with the cash receipts balance amounting to $781k. The annualized recurring revenue (ARR) rose by 7% on QoQ basis to $1.225 million in Q3 FY20. The company gained 27 new clients post Q2FY20. In Sept’20, the company signed a new 5-year contract with UNSW Global for a new program online for overseas students via its portal. It has also raised $6 million through an institutional placement to sponsor partnerships and growth measures ahead.

Outlook: The Group is well poised to cater to its target customers (education providers) and enable them to expand their portfolio offering through its platform and proven capabilities of staff. It has gained new clients, entered new multi-year agreements with institutions, improved plans, and more courses per learner in different geographies. 

Stock Recommendation: The cash and cash equivalents balance stood at $5.922 million for 1HFY20, while it dropped to $4.7 million in September-Q3FY20. The stock of OLL gave a positive return of 22.41% in the past one month and a positive return of 82.05% in the last six months. The stock is trading towards its 52-weeks’ high level of $0.410. On a TTM basis, the stock of OLL is trading at an EV/Sales multiple of 12.5x, higher than the industry median (Technology) of 5.6x. On a technical front, the stock of OLL has a support level of ~$0.333 and a resistance level of ~$0.374. We presume that most of the positive factors have been discounted at current trading levels. Hence, we suggest investors to wait for better entry levels and give an ‘Expensive’ rating on the stock at the current market price of $0.325, down by 10.959% on 2^nd November 2020.

Cauldron Energy Limited

Exploration Projects Affected and Results Impacted Due to COVID-19: Cauldron Energy Limited (ASX: CXU) is engaged in the exploration of uranium, gold and copper in Australia and Argentina. The company has 8 subsidiaries in Australia, Bermuda, and Sierra Leone. As on 2^nd November 2020, the market capitalisation of the company stood at ~$20.05 million. The company has key projects in Western Australia, Victoria, and Argentina. The revenue from continuing operations fell from $11,231 in FY19 to $1,419 in FY20. The other income for the year stood at $111,424. The loss after tax for the Group amounted to $1,634,616 in FY20 versus $3,197,797 in FY19. The Group has a higher concentration of assets in Australia worth $787,461 as compared to $5,806 in Argentina.

FY20 Financial Highlights (Source: Company Reports)

Raised Finance for Blackwood Gold Project: On 28^th October 2020, the company announced raising of $1.6 million for speeding up work on Blackwood Gold project via placement of 51.61 million fully paid ordinary shares to professional investors at as issue price of $0.031 per share.

Outlook: The company will focus on Blackwood Goldfield Project in Victoria with activity at Yanrey Project, post the approval from Western Australian State Labor government for mining of uranium in the state. The company is also looking to buy one or more high value exploration project, which can be quickly enhanced in value.

Stock Recommendation: The balance of cash and cash equivalents amounted to $396,311 and cashflows from operating activities stood at a negative balance of $790,352 in FY20. The stock of CXU gave a positive return of 44.73% in the past one month and a positive return of 111.53% in the last six months. On a technical front, the stock of CXU has a support level of ~$0.048 and a resistance level of ~$0.067. The stock is currently trading close to 52-weeks’ high level of $0.069. Considering, the company’s last 5 year results, steep fall in revenue and cash outflows from operating activities in FY20, along with the suspension of exploration project in Argentina, we suggest investors to wait for better entry levels and give an ‘Expensive’ rating on the stock at the current market price of $0.058, up by 13.725% on 2^nd November 2020.

Astivita Limited

FY20 Results Impacted, Transformation Strategy in Place: Astivita Limited (ASX: AIR) is engaged in the sales and distribution of household products and consumer goods, photovoltaic panels, and bathroom products. As on 2^nd November 2020, the market capitalization of the company stood at ~$12.93 million. The revenue reported from the sale of different product categories stood at $4.325 million for FY20 as compared to $4.64 million in FY19, owing to decline in sales across product categories, except sale on Amazon and of other products. The company registered a net loss after tax of $7.298 million in FY20, due to derecognition of deferred tax asset, intangible asset in New Zealand requested by ASIC, write down of stock, huge advertising and marketing spend and delays in launch of certain products. The net assets of the company have decreased by $7.298 million and came in at $1.774 million as at 30 June 2020. The company has received government support from Jobkeeper initiatives to the tune of $53,000 in FY20.

FY20 Financial Highlights (Source: Company Reports)

Outlook: The management expects an improvement in FY21 versus FY20 due to a transformation strategy executed over the last six months. The company anticipates a rise in sales due to the launch of 8 new brands and 100 products over the next 1.5 years. It has also planned diversification in the range of cosmetic products and oral hygiene, growing the Dr. ZinX product range and boosting sales of sunscreen Amazon in Europe, US, and Australia.

Stock Recommendation: The balance of cash and cash equivalents amounts to $74,000 at year end. The net cash outflows from operating activities stood at $2.35 million in FY20. The stock of AIR gave a negative return of 17.07% in the past one month and a negative return of 20.93% in the last six months. The stock is trading at 52-weeks’ low level of $0.570. On technical front, the stock of AIR has a support level of ~$0.602 and a resistance level of ~$0.805. However, considering weak fundamentals, low market capitalisation with lower trading volume, and higher total debt, we give an ‘Avoid’ rating on the stock at the current market price of $0.68 on 2^nd November 2020.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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