Eagers Automotive Limited

APE Details

Change in Director’s Interest: Eagers Automotive Limited (ASX: APE) is involved in the selling of new and used motor vehicles, the distribution of parts, accessories, car care products, and the repair and servicing of motor vehicles, along with the facilitation of finance, insurance, leasing and extended warranties for motor vehicles; property ownership. The market capitalisation of the company stood at $ million as on 12 March 2021. As per the recent update, the company’s director Sophie Alexandra Moore, acquired 144,927 options and 54,130 performance rights, taking the final holdings to 121,789 ordinary shares, 262,497 options and 54,130 performance rights, effective from 24 February 2021.

FY20 Result Highlights: Under the result for FY20 (ended 31 December 2020), the company stated that its Statutory Profit After Tax for the period stood at $156.2 million, including discontinued operations, as compared to a loss of $139.6 million in the previous year. Statutory Profit Before Tax from continuing operations for the period stood at $280.1 million, as compared to the loss of $63.3 million in the previous year. Statutory revenue from continuing operations increased from $5,817.0 million (FY19) to $8,749.7 million, reflecting the first full year of trading for the enlarged company following the merger with AHG. Earnings before interest, tax, depreciation, amortisation and impairment (EBITDAI) from continuing operations increased from $342.4 million (FY19) to $625.5 million.

Its available cash and undrawn commitments at the end of FY20 stood at $683.2 million, with a significantly lower net corporate debt position of $129.3 million. While continuing to balance the prudent approach to managing through the COVID-19 environment, the Board declared a final dividend of 25.0 cps, with Record Date and payment Date on 1 April 2021 and 20 April 2021, respectively.

(Source: Company Reports)

Outlook: The company is well-positioned to withstand short-term and isolated challenges associated with the impacts of COVID-19, allowing the company to focus on core automotive retail operations, both franchised automotive and fixed price pre-owned vehicles, and capitalise on favourable market dynamics.

Valuation Methodology: P/CF Multiple Based Relative Valuation (illustrative)

Data Source: Refinitiv, Thomson Reuters, 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: Over the last six and nine-months periods, the stock of APE has provided a return of 78.41% and 126.49%, respectively. The stock is currently trading close to its 52-week high level of $15.340. On the technical analysis front, the stock has a support level of ~$13.56 and a resistance of ~$15.31. We have valued the stock using the Price to Cashflow based illustrative relative valuation method and have arrived at a target price of high low double-digit downside (in % terms). We believe that the company can trade at a slight premium to its peer median, considering a decent outlook, and improved performance in FY20. We have taken peers like GUD Holdings Ltd (ASX: GUD), Autosports Group Ltd (ASX: ASG), ARB Corp Ltd (ASX: ARB), etc. Considering the stock’s decent performance in the last six and nine-months period, current trading level and valuation, we suggest investors to book profit and give a ‘Sell” rating to the stock at the closing price of $15.170 as on 12 March 2021.

APE Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Digital Wine Ventures Limited

DW8 Details

Rise in Shipments: Digital Wine Ventures Limited (ASX: DW8) is involved in identifying and investing in early-stage technology-driven ventures with the potential to disrupt and digitally transform the global beverage market. The market capitalisation of the company stood at $ million as on 12 March 2021. In the company report, Digital Wine highlighted that under its WINEDEPOT business there was a shipment of 20,864 cases in February 2021, an increase of 32% on last month, while it processed over 9,494 orders, an increase of 918% in the same period last year and 28% on January 2021. The company also highlighted that WINEDEPOT has obtained official climate neutral status from Leaders for Climate Action (LFCA), an organization that is leveraging leaders of businesses within the international digital community to achieve their vision of developing a global economy without greenhouse emissions, powered by 100% renewable energies by 2050.

(Source: Company Reports)

H1FY21 Highlights: Under the H1FY21 (ended 31 December 2020) result report, the company stated that its revenues from ordinary activities stood at $991,333, an increase of 1,042% on the previous corresponding period (pcp). Loss from ordinary activities after tax attributable to members stood at $2,362,432, an increase of 186% on pcp. Diluted loss per share stood at negative 0.2 cents per share, as compared to negative 0.1 cents per share in the pcp. Net Tangible Asset for the interim period stood at 0.6 cents, as compared to 0.1 cents in the pcp. No dividends were paid or declared during the period.

(Source: Company Reports)

Outlook: The company’s WINEDEPOT business has accelerated its sign ups in preparation for marketplace launch, where it welcomed a total of 26 new suppliers, with a high proportion of the sign-ups coming from New Zealand. In November 2020, WINEDEPOT had signed up additional 12 new customers to the platform and shipped over 10,000 cases, setting another record. There is an expectation that surplus inventory from the slowdown in exports to China would provide strong support to the launch of the Direct-to-Trade Marketplace.

Stock Recommendation: The company’s gross margin, EBITDA margin and net margin for H1FY21 were negative, implying pressure over profitability margins. However, its current ratio for H1FY21 stood at 5.98x, better than the industry median of 1.70x, implying a decent liquidity position of the company as compared to peers. DW8’s share is trading close to its life-time high price of $0.110. Over the last three months, the stock has provided a return of 144.18%. On the technical analysis front, the stock has a support level of ~$0.097 and a resistance of ~$0.11. On TTM basis, the stock is trading at a Price to Book multiple of 17.8x, lower than the industry median of 4.4x, thus seems overvalued.  Considering the stock’s decent performance in the last three months, current trading level and valuation on TTM basis, we suggest investors to book profit and give a ‘Sell’ recommendation on the stock at the current market price of $0.105, up by 4.999% as on 12 March 2021.

 DW8 Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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