Pureprofile Ltd

PPL Details

Partnership with Flybuys: Pureprofile Ltd (ASX: PPL) is engaged in conducting market research and providing research technology platforms and Programmatic Media. The company has a presence across Australia, Europe and the United States. The company has recently entered into a partnership with Flybuys. The partnership is expected to aim at the use of PPL’s SaaS technology to create an exclusive research community for Flybuys members.  The members can utilise the app or website to access surveys and collect points to redeem at a later stage. On 25 May 2021, PPL released its updated trading policy that introduced additional closed trading periods during which restricted persons cannot deal in the company’s securities.

3QFY21 Financial Highlights: PPL has registered a robust Q3FY21 with an increase of 25% YoY in its revenue to $7.1mn. Moreover, the company has seen a jump of 150% YoY in its EBITDA to $506k in 3QFY21. The company has registered a growth of 98% YoY in new panelists, providing business growth opportunity. PPL has seen an increase in project volume by 49% YoY in 3QFY21. The cash balance improved to $3.4mn as of 31 March 2021, up by $244k from 2QFY21. The company has reported profitable revenue growth for its new offices in Singapore and Europe in 3QFY21.

Key Metrics (Source: Company Reports)

Key Risks: The company deals in multiple currencies. Thus, any adverse movement in foreign exchange prices may impact the financials of the company. The company holds an interest-bearing liability and may see an impact on its profit margins with a severe movement in Interest rates.

Outlook: The company remains focused on delivering growth across regions for panels and data, increasing SaaS client base and leveraging data insights and media services. By the end of Q4FY21, the company expects to launch important partnerships and initiatives to further expand as a global data insights business. PPL expects to establish new panels in Europe and Asia, expected to drive further revenue and profit growth in FY22.

Valuation Methodology: EV/Sales based Relative Valuation Method (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: The stock of PPL gave a return of ~20.83% in the last one month and a return of ~26.08% in the last six months. The current market capitalisation of PPL stands at ~$32.78mn as of 26 May 2021. The stock is currently trading above the average 52-weeks’ price level range of ~$0.003-$0.054. On the technical analysis front, the stock has a support level of ~$0.022 and a resistance of ~$0.037. We have valued the stock using the EV/Sales multiple-based illustrative relative valuation method and arrived at a target price with a correction of low single-digit (in % terms). We believe that the company can trade at a slight discount as compared to its peer average, considering an increase in finance costs in 1HFY21 and an increase in cost of sales in 1HFY21. For this purpose, we have taken peers like IVE Group Ltd (ASX: IGL), Gtn Ltd (ASX: GTN), HT&E Ltd (ASX: HT1) to name a few. Considering increasing operational costs, associated business risks, current trading levels and valuation, we suggest investors to book profits. Hence, we recommend a “Sell” rating on the stock at the current market price of $0.029, down by 6.452% as on 26 May 2021.

PPL Daily Technical Chart, Data Source: REFINITIV

WA Kaolin Limited

WAK Details

Long-Term LNG Supply Agreement: WA Kaolin Limited (ASX: WAK) is engaged in mineral extraction and processing in Australia. The company owns Wickepin Kaolin Project, which is in the township of Wickepin, Western Australia. The company has announced regarding signing a 15-year contract for the supply of Liquified Natural Gas (LNG) to Mid-West LNG Pty Ltd (MWLNG). The contract is valued at ~$22mn over the 15-year period. The contract will be commenced from 1 January 2022 after commencing the gas supply between 1 September 2021 to the end of 2021.

Progress on Kaolin Project: The company is going through stage 1 work for the development of Wickepin Kaolin project in Western Australia. The project is under development to produce kaolin at a capacity of more than 200ktpa by the end of CY21. The work is likely to progress further till July 2021 with commissioning scheduled to be in Q3FY21. The company is right on schedule to commence production by the end of CY21.

1HFY21 Financial Highlights: The company has registered an increase in other income to $51.42k in 1HFY21 against $41.39k in 1HFY20. The company has incurred a loss of $18.17mn in 1HFY21. WAK has reported an increase in its cash balance to $18.17mn as on 31 December 2020 against $2.02mn as on 30 June 2020.

H1FY21 Results (Source: Company Reports)

Key Risks: The company is engaged in exploration activities. Thus, any adverse climatic conditions may impact the functioning of the business. The company holds interest bearing liabilities. Thus, any significant change in interest rates may impact the profitability of the company.

Outlook: WAK expects to increase the production of LNG from Wickepin project to 400,000 tonnes per annum by 2023. WAK has entered into an agreement with its key customers in May 2020 to supply 338,000 tonnes of Kaolin over six years. The company has other ongoing contracts to meet its production target for Kaolin.

Stock Recommendation: The stock of WAK gave a return of ~14.28% in the last one month and a return of ~5.26% in the last three months. The current market capitalisation of WAK stands at ~$52.32mn as of 26 May 2021. The stock is currently trading below the average 52-weeks’ price level range of ~$0.16 - $0.323. On the technical analysis front, the stock has a support level of ~$0.175 and a resistance of ~$0.22. On a TTM basis, the stock of WAK is trading at a P/BV multiple of 6.9x, higher than the industry median (Construction Materials) of 2.7x. Considering the rising finance cost, loss incurred in H1FY21, associated business risks, and valuation on TTM basis, we suggest investors to book profits and give a “Sell” rating on the stock at the current market price of $0.20, up by ~8.108% as on 26 May 2021, owing to the update regarding 15-year LNG supply agreement.

WAK 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.

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