Codan Limited

 CDA Details

FY21 Financial Highlights: Codan Limited (ASX: CDA) is a technology-based company that operates through communication equipment and metal detection segments.

• Robust Revenue Growth- The company has recorded a revenue growth of ~$437 million in FY21, compared to ~$348 million on a pcp basis. In addition, the metal detector delivered a record sale in both recreational and gold mining and accounted for 75% of total revenues in FY21.
• Increase in Total Asset- The company has achieved a total asset of $503.5 million as of 30 June 2021 vs $351.5 million as of 30 June 2020, supported by a rise in inventory to $66.4 million as of 30 June 2021.
• Strong Bottom line Growth- It has delivered a strong net profit after tax of $90.19 million in FY21 against $63.96 million in FY20, driven by the growth in both gold detector, recreational metal detector sales and strategic investment in core business.
• Liquidity Position- The company's cash position stood at $22.3 million as of 30 June 2021 vs $92.8 million as of 30 June 2020.

Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks:

• Impact of Covid-19 Pandemic- The company has a significant effect on its communication business, especially in Tactical Communications and supply chain during the COVID-19 pandemic, and still, the uncertainty prevails.
• Supply Risk- The company has faced challenges in its supply chain, which has impacted meeting the customer's requirements and further disruption might affect its financials.

Outlook:

• The company focuses on core business by investing and newly acquired DTC and Zetron businesses. Further, it continues to develop new products in FY22.
• Moreover, the company strategies to collaborate with new businesses and cost synergies to drive growth in FY22.
• The management expects strong demand for metal detection products in the near-term. Further, it focuses on expanding across the Asia Pacific region, currently having low metal detecting activity penetration, which might positively impact its financials, going forward.
  

Methodology: EV/Sales Multiple Based Relative Valuation (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 CDA is currently trading below its average 52-weeks' levels of $9.200-$19.430. The stock of CDA gave a negative return of ~27.26% in the past one week and a positive return of ~8.91 % in the past nine months. The stock has been valued using an EV/Sales multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount to its peers’ average EV/Sales multiple, considering the supply disruption due to the COVID-19 pandemic, cyber risk, and liquidity risk to support the new acquisition. For the purpose of valuation, peers such as Ikegps Group Ltd (ASX: IKE), Ava Risk Group Ltd (ASX: AVA), Elsight Ltd (ASX: ELS) and others have been considered. Considering the current trading levels, indicative upside in valuation, strong topline and bottom-line growth, expanding its footprint, optimistic outlook, we recommend a ' Buy' rating on the stock at the current market price of $12.950, as on 20 October 2021, 10:50 AM (GMT+10), Sydney, Eastern Australia.

CDA Daily Technical Chart, Data Source: REFINITIV

Laybuy Group Holdings Limited

LBY Details

Issued Unquoted Securities: Laybuy Group Holdings Limited (ASX: LBY) provides consumer financing services through an integrated payment platform of buy now, pay later in New Zealand, Australia, and the United Kingdom. On 14 October 2021, the company has issued 714,000 shares under an employee incentive scheme. Additionally, the company has announced the launch of Affiliate Marketing Network in the UK at the end of August 2021, ahead of its schedule.

• The performance to date was ahead of internal projections, and Gross Merchandise Value (GMV) exceeds five times the company's internal one month forecast.

Q1FY22 Financial Performance:

• Strong GMV Growth- The Group has recorded a strong annualised GMV growth of NZ$738 million in Q1FY22, up 58% from NZ$467 million in Q1FY21, supported by improved new merchant growth, an increase inactive customer.
• Improved Annualised Income- In Q1FY22, the company has reported an improved annualised income of 70% to NZ$41.5 million, compared to NZ$24.4 million on a pcp basis. This is reflected due to continuous reduction in late fees and strong GMV performance.
• Robust NTM Performance- it has delivered an improved net transaction margin (NTM) by 568% to NZ$3.7 million in Q1FY22 against NZ$0.6 million in Q1FY21.

Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks:

• Macro-Economic Risk- The company might have an impact on its financials due to economic conditions such as unemployment, interest rates, the recession, which could increase the fear of Bad debts.
• Liquidity Risk- The company requires sufficient liquidity to meet its financial obligations, lend more customers, and mitigate the working capital risks.

Outlook:

• The company expects continuous growth in GMV due to the increasing no. of new merchants, customers and repeat usage. Further, it is on track to exceed GMV of NZ$1 billion in FY22.
• The company guided the income growth of 90% - 100% from FY21, and NTM remains on track to improve from the previous year, driven by lower defaults and increased repeat customers.
• It continues to expand its merchant offering and further anticipates continued momentum in the UK retail market in the near-term future.
  

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (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 LBY is currently trading below its average 52-weeks' levels of $0.415-$1.810. The stock of LBY gave a positive return of ~4.34% in the past one week and a negative return of ~65.95% in the past nine months. The stock has been valued using an EV/Sales multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount to its peers’ average EV/Sales multiple, considering the COVID-19 pandemic led uncertainties, customer concentration risk, rise in cash outflows and liquidity risk etc. For the purpose of valuation, peers such as Over the Wire Holdings Ltd (ASX: OTW), EML Payments Ltd (ASX: EML), Computershare Ltd (ASX: CPU) and others have been considered. Considering the current trading levels, indicative upside in valuation, strong GMV growth, increasing active customers, optimistic outlook, and the key risks associated with the business, we recommend a 'Speculative Buy' rating on the stock at the current market price of $0.470, as on 20 October 2021, 10:50 AM (GMT+10), Sydney, Eastern Australia.

LBY Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV

Note 2: Investment decisions 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 analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine and its related entities do not hold interests in any of the securities or other financial products covered on the Kalkine website.

Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.