Finbar Group Limited

FRI Details

Change of Director’s Interest: Finbar Group Limited (ASX: FRI) operates in real estate, where it invests, develops medium to high-density residential buildings and commercial properties, and rents its properties in Western Australia. Recently, the company’s director Mr. John Chan has acquired 40,000 ordinary shares for a total consideration of $31,065.

FY21 Financial Performance Highlights:

• Finbar has reported a decline in its revenue by 33.92% to $101.96 million in FY21, compared to $154.3 million in FY20, due to low demand for investment property.
• The company has recorded an improved net profit of $8.86 million in FY21, up by 25.4% on previous year, driven by the residential market which continues to strengthen from rental demand and continued increasing rents.
• The company's cash position stood at $52.6 million as of 30 June 2021 that will be used to complete its project in Applecross and Rivervale.
• The company has declared a final dividend of $0.02 per share to be paid on 10 September.

Cash and Cash Equivalent (Source: Analysis by Kalkine Group)

Key Risks:

• Impact of COVID-19 pandemic- The company has a significant challenge of delaying projects due to shortage of labour and lockdown restriction that has impacted its operations, and still, the uncertainty prevails.
• Liquidity Risk: To meet the financial obligation, operational activity and lend to its maximum customers, the company requires sufficient liquidity to mitigate uncertainty.

Outlook: The company expects to commence construction at Aurora in Applecross and The Point in Rivervale in FY22. The company is focused on advancing Aurora project, with construction expected to commence in 2022.

Stock Recommendation: FRI stock gave a positive return of ~16.92% in the past one year and a negative return of ~12.64% in the past one month. On a TTM basis, the stock of FRI is trading at an EV/Sales multiple of 2.3x, lower than the industry average 8.4x, thus seems undervalued. Considering the current trading levels and valuation on a TTM basis, strong balance sheet, economic recovery, higher current ratio, and the key risks associated with the business, we recommend a 'Speculative Buy' rating on the stock at the current market price of $0.760 as on 3 September 2021, 11:44 AM (GMT+10), Sydney, Eastern Australia.

FRI Daily Technical Chart, Data Source: REFINITIV

Decmil Group Limited

DCG Details

Decmil Group Limited (ASX: DCG) operates in construction, engineering, accommodation and provides services for government infrastructure projects such as immigration facilities, office buildings, defence facilities and constructs fuel infrastructure facilities.

FY21 Financial Performance:

• The company recorded a decline in its normalised revenue by 31% to $313.4 million in FY21, compared to $451.3 million in FY20, impacted due to a reduced order book at the commencement of the reporting period.
• The company has reported an improved EBITDA to $7.6 million in FY21 against a loss of $42.3 million in FY20.
• During the period, the company was awarded $350 million of new contracts, which led to an increase in the order book to ~$570 million extending into FY24.
• The company has achieved 'Construct Only' road and bridgework worth up to $28.2 million for the Roy Hill-Munjina Road alignment in the East Pilbara region and further, expected to be complete by mid-2022.
• The cash position of the company stood at $9.7 million as of 30 June 2021.

Reported Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks:

• Impact of COVID-19 pandemic- The company’s production could be impacted due to a shortfall in labour availability during the COVID-19, and still, the uncertainty prevails.
• Regulatory Risk- To commercialise its product, the company requires certain approvals, and any delays could impact its financial operations.

Outlook: The company has secured a work of $400 million for FY22, and projects opportunities are in the pipeline. The company has anticipated revenue of more than $500 million in FY22 with a continued strong gross margin of >8%.

Stock Recommendation: As per a recent announcement, the company has received an application of $558,250 for 1,395,625 fully paid ordinary shares and 697,813 unlisted options exercisable at $0.48, expiring 6 September 2023. Further, the company has raised a $30 million funding package comprising the $20 million debt facility and $10 million placement to support its growth strategy in FY22. The stock of DCG is trading below its average 52-weeks' levels of $0.345-$0.780. The stock of DCG gave a positive return of ~2.81% in the past one month and a negative return of ~22.34% in the past one year. On a TTM basis, the stock of DCG is trading at an EV/Sales multiple of 0.3x, lower than the industry average (Construction & Engineering) of 4.3x, thus seems undervalued. Considering the current trading levels and valuation on a TTM basis, economic recovery, award of contracts, projects in the pipeline, and the key risks associated with the business, we recommend a 'Speculative Buy' rating on the stock at the current market price of $0.360 as on 3 September 2021, 2:59 PM (GMT+10), Sydney, Eastern Australia.

DCG 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 for 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 the 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

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