Temple & Webster Group Ltd

TPW Details

Topline Growth Supported by Rising Active Customers: Temple & Webster Group Ltd (ASX: TPW) is an online retailer of furniture and homewares with a market capitalisation of $1.68 Bn as on 21^st October 2020. For the year ended 30^th June 2020, the company reported revenue amounting to $176.3 million, reflecting a rise of 74% against FY19. In addition, the company also witnessed a growth of 96% in 2H FY20 revenue. The overall topline growth was largely supported by growth in active customers, which grew by 77% to ~480k in FY20. EBITDA for the period amounted to $8.5 million, reflecting robust growth of 673% over pcp, due to higher gross margin dollars and tight management of fixed costs. During the year, the company recorded NPAT of $13.9 million.

Growth in Active Customers (Source: Company Reports)

Growth in Market Shares. The company commenced FY21 with year over year revenue growth of 161% (Till 27 Aug 2020). In addition, the company experienced consistent growth in July and August. TPW is accelerating its market share as the competitors of the company are more focused on online business. As per the NAB online sales index, TPW grew its market share by 150% as compared to the 57% growth of its category during the month of April to July 2020.

Outlook: The growth strategy of the company revolves around advancing its digital advantage, which includes better utilization of its immense amounts of data via initiatives like personalization. In addition, the company is committed to a high growth strategy for taking benefit of the structural shift towards online, capitalising on organic and inorganic opportunities.

Valuation Methodology: Price to Cash Flow Multiple Based Relative Valuation (Illustrative)

Price to Cash Flow Multiple Based Valuation (Source: Refinitiv, Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months  

Stock Recommendation: The company closed FY20 with strong balance sheet comprising a cash balance of $38.1 million and nil debt. In the past three and six months, the stock has moved up by 49.35% and 283.49%, respectively. In addition, the stock is trading towards its 52-week high level of $14.050. On the technical analysis front, the stock price of TPW has a support level of ~$8.754 and a resistance level of ~$13.993. We have valued the stock using the P/CF multiple based illustrative relative valuation method and arrived at a target price with a correction of low single-digit (in percentage terms). For the purpose, we have taken peers like Redbubble Ltd (ASX: RBL), Adairs Ltd (ASX: ADH), and Kogan.com Ltd (ASX: KGN). Therefore, considering the current trading levels, steep upside movement in the stock and higher valuation, we give an “Expensive” rating on the stock at the current market price of $11.620 per share, down by 17.178% on 21^st October 2020.

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

Opthea Limited

OPT Details

Closing of US IPO: Opthea Limited (ASX: OPT) is involved in the development of innovative, biologics-based therapies for the treatment of eye disease. The market capitalisation of the company stood at $786.75 Mn as on 21^st October 2020. Recently, the company notified the market about the closing of its initial public offering (IPO) in the United States of 8,563,300 American Depositary Shares (ADS), which was announced in the month of August 2020.  This indicates issue of 68,506,400 ordinary shares, at an IPO price of US$13.50 per ADS. This also includes pre-funded warrants to purchase 936,700 ADSs at a price of US$13.49999 per pre-funded warrant. The company has raised gross proceeds of around US$128.2 million from IPO.

FY20 Key Highlights: For the year ended 30^th June 2020, the company reported revenue amounting to $808,405 as compared to $914,840 in FY19. Net loss for the year amounted to $16,529,281 after an income tax benefit of $8,533,123 against $20,910,061 after an income tax benefit of $14,636,973 in FY19. During FY20, the company made significant investments for advancing its OPT-302 ophthalmology program.

Key Financials (Source: Company Reports)

Outlook: Going forward, the company would focus on the expansion of the clinical development of OPT-302 to key commercial milestones via the completion of the Phase 2a clinical trial.

Stock Recommendation: EV/Sales Multiple Based Relative Valuation (Illustrative)

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters) 

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The company closed FY20 with net current asset surplus of $64,397,697 as compared to $30,376,200 in FY19. In addition, the closing cash balance of the company stood at $62,020,382 against $21,534,919 at the end of FY19. The stock of OPT is trading towards its 52-week low level of $1.165. On a technical analysis front, the stock of OPT has a support level of ~$2.191 and a resistance level of ~$3.283. We have valued the stock using EV/sales multiple based illustrative relative valuation method and arrived at a target price of lower double-digit upside (in percentage terms). For the purpose, we have taken peers like Mayne Pharma Group Ltd (ASX: MYX), Probiotec Ltd (ASX: PBP), Australian Pharmaceutical Industries Ltd (ASX: API), to name few. Therefore, considering the recent US IPO, investment in OPT-302 ophthalmology program, decent outlook and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the current market price of $2.390 per share, up by 2.575% on 21^st October 2020.

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

Livetiles Limited

LVT Details

Settlement of legal Proceedings: LiveTiles Limited (ASX: LVT) is an Australia based company engaged in the development and selling of digital workforce platforms to the enterprise, education, and small and midsized business markets. As on 21^st October 2020, the market capitalization of the company stood at ~$193.97 million. Recently, the company advised the market that legal proceeding against its few subsidiaries have been settled, which were announced on 2 May 2018 and 1 June 2018. As per the terms of the settlement agreement LVT would pay $8.445 million to plaintiffs. In addition, Co-Founders Karl Redenbach and Peter Nguyen-Brown would transfer 16,290,070 ordinary shares in the company.

Sneak Peek at FY20’s Key Results: During FY20, the company showed strong momentum on its strategy, driving overall growth of 98% in revenues and other income to $44.5 million, despite the onset of COVID-19 pandemic. In the same time span, underlying net loss for the period improved by 38% year over year and came in at $21.3 million. Net cash flow from operating activities was $9.3 million, down 72% year over year.

FY20 Results (Source: Company Reports)

What to Expect: The company has expanded its global footprint and seems well-placed to flourish. Since the global pandemic, the skyrocketing demand of digital workspace has centered its way for growth. The company also remains on track to maintain a strong balance sheet and is prioritizing lower cash burn to establish a firm operating platform for the future.

Stock Recommendation: As on 30^th June 2020, the cash balance of the company stood at $37.8 million, reflecting a rise of 154% over pcp. This was supported by a growth of 114% in customer cash receipts to $41.0 million. LVT has EV/Sales multiple of 3.3x as compared to the industry median (Technology) of 5.7x on TTM basis. In addition, the stock is trading at a price to book value multiple of 2.3x as compared to the industry median (Technology) of 4.5x on TTM basis. In the past one and three months, the stock has corrected 8.51% and 15.68%, respectively. On a technical analysis front, the stock of LVT has a support level of ~$0.181 and a resistance level of ~$0.239. Considering the robust FY20 results, growth in cash position and decent outlook and key risks, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.215 on 21^st October 2020.

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

Decmil Group Limited

DCG Details

A Quick Look at Operational Update: Decmil Group Limited (ASX: DCG) provides engineering construction services for the infrastructure, resources, and renewable energy sectors. The market capitalisation of the company stood at $74.66 Mn as on 21^st October 2020. Recently, the company provided an operational update, wherein, it mentioned that it has inked an in-principle agreement for ongoing bonding facilities, which are likely to be provided by the surety providers as well as for ongoing banking facilities to be provided by NAB. In addition, the company has reached a strategic partnership with Avid Resources for improving its integrated service offerings and provide access to the Water and Power sectors.

Winning of Significant Contract: On 23^rd September 2020, the company announced that it has secured a $55 million phase one works to construct a ring road around Albany from Western Australian Government. Previously, the company also won $41 million contract for non-mining process infrastructure works at the US$2.6 billion Iron Bridge Magnetite Project in the Pilbara region of Western Australia. The contract is likely to be finished by May 2021.

Capital Raising in FY20: During FY20, the company reported revenue amounting to $451 million, reflecting a fall of 18.2% against FY19. DCG recorded a statutory after-tax loss of $140 million against the profit of $14 million in FY19. This was mainly because of $85 million of one-off write downs on disputed contracts and assets. In addition, the company also finished a capital raising of $52 million in Q4 FY20 comprising of a $50.5 million Entitlement Offer and an additional $1.9 million Placement to Cornerstone Sub-underwriter. The funds have placed the company in a decent position to target significant expected infrastructure opportunities in Australia.

Revenue (Source: Company Reports)

Outlook: The company entered FY21 with an improved liquidity position, led by robust capital raising program. DCG believes that FY21 would be a year of consolidation, along with a return to operating profit and positive operating cashflow in FY22.

Valuation Methodology: Price to Cash Flow Multiple Based Relative Valuation (Illustrative)

Price to Cash Flow Multiple Based Valuation (Source: Refinitiv, Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: The company is aiming a $7-8 billion pipeline, which is likely to generate growth beyond FY21. As on 30^th June 2020, the cash and a debt balance of the company stood at $43.9 million and $25.2 million, respectively. On the technical analysis front, the stock price of DCG has a support level of ~$0.046 and a resistance level of ~$0.096. We have valued the stock using the P/CF multiple based illustrative relative valuation method and arrived at a target price of low double-digit upside (in percentage terms). For the purpose, we have taken peers like Imdex Ltd (ASX: IMD), GR Engineering Services Ltd (ASX: GNG), Monadelphous Group Ltd (ASX: MND), to name few. Thus, considering the recent winning of new contracts, improved liquidity position, future pipeline and key risks, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.062 per share, up by 6.896% on 21^st October 2020.

DCG Daily Technical Chart (Source: Refinitiv, 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 personalised advice.