CML Group Limited

CGR Details

Non-Binding Indicative Offer from Scottish Pacific Group Limited: CML Group Limited (ASX: CGR) provides business finance solutions, offering invoice finance, trade finance and equipment finance, under the names, Cashflow Finance and Classic Funding. As on 19^th December 2019, the market capitalisation of the company stood at $103.35 million. Consolidated Operations Group Limited (ASX: COG) noted a conditional non-binding indicative offer received from Scottish Pacific Group Limited to acquire 100% of CML’s ordinary shares at a cash consideration of $0.57 per CML share, while permitting the same fully franked special dividend of $0.03 per share. CML has acknowledged the uncertainty that the Indicative Scotpac Proposal will result in a binding offer.

However, COG is in the view that if the offer becomes binding, it will raise serious competition issues, leading to investigation of the proposed merger by the Australian competition regulator. The CGR Board continues to recommend COG transaction in the absence of a superior proposal.

Significant Rise in NPATA:In the recently held Annual General Meeting of the company, the Management stated that during FY19 EBITDA went up by 16% to $20.4 million.FY19 NPATA witnessed a yoy growth of 46% and stood at $9.5 million. The company witnessed continued growth in its core Invoice Finance Division with an increase of 19% in Invoices Funded, totalling to $1.6 billion. At the end of November 2019, the company had a trade finance loan book funded with the help of corporate bonds of more than $54.3 million, out of which it has supplied actual funding amounting to $24.4 million, representing a Loan to Value ratio of 45%. 


Financial Performance (Source: Company Reports)

Growth Opportunities in the Upcoming Futures: Recently, the company has announced an agreement to merge with Consolidated Operations Group and will operate under a new name and brand. The company expects to generate significant revenue synergies from cross-selling CGR’s established finance products through COG’s extensive broking network. The company expects volume growth on existing and expanded products in the upcoming year. The recent acquisition of Classic Funding Group provides improved funding structure, allowing CGR to improve margins and increase competitiveness for equipment finance transactions. 

Stock Recommendation: As per ASX, the stock gave a return of 10.47% in the past six months and a return of 3.26% in the last one month. The stock is trading towards its 52-week high of $0.595. During the year, EBITDA margin of the company stood at 43.2%. Net margin of the company was broadly in-line with the industry median and stood at 17.6%, while industry median was 17.5%. The conditional non-binding indicative offer, which has been received from Scottish Pacific Group Limited might be scrutinised by the Australian competition regulator. Therefore, we suggest investors to book profit at the current levels and recommend a “Sell” rating on the stock at the current market price of $0.560, up 17.895% on December 19, 2019, owing to non-binding indicative offer from Scottish Pacific Group Limited.
 
 
CGR Daily Technical Chart (Source: Thomson Reuters)

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.