Funtastic Ltd (ASX: FUN)

FUN Details

Down 3.7% on January 10, 2018, Funtastic Ltd seems to be the target of profit booking by investors. The stock has otherwise risen 174% in last six months (as at January 09, 2018). Post approval from the shareholders, FUN completed the consolidation of its ordinary share capital by converting every twenty-five (25) existing fully paid ordinary shares into one (1) share, and normal trading in the post-Consolidation Shares commenced from 22 December 2017.

In terms of financial performance, loss of agency brands and lower international sales resulted in group’s FY17 revenue slipping to $55.7M from FY16 figure of $88.9M, while NPAT (Post Impairment) widened to ($33.5M) from ($23.9M) reported in FY16. Revenue was also impacted by reduction in fixed costs lagging revenue decline and write-down of goodwill.

On the other hand, the group has reduced its debt level by circa $35.3m and has raised capital of $8.2m. FUN has also sold a part of the International Business for $2.1m in order to reduce non-profitable assets. With factors including introduction of new products and better gross margins at the back of sales mix, the group has upgraded its FY18 EBITDA from the range of $2.1m and $3.5m (provided at the time of capital raising) to be in the range of $3m and $3.5m with EBITDA for H1 to be circa $2.5m. The group’s debt restructuring at the start of FY18 will have a $35m profit on the NPAT.
 

Earnings Guidance (Source: Company Reports)
 
The group has now undertaken few initiatives relating to growing and building brands, expanding international footprint and performance, building long-term supply partnerships, introducing new Product Development disciplines and managing cost base.

Looking at the recent developments and value post consolidation of shares, it might be better to wait for further upside, while certain risks owing to volatility do prevail. We give a “Hold” recommendation at the current price of $0.26


FUN Daily Chart (Source: Thomson Reuters)

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