Carbon Revolution Limited

CBR Details

Upcoming AGM: Carbon Revolution Limited (ASX: CBR) is manufacturing and selling carbon fibre wheels. The company also undertakes R&D activities related to carbon fibre wheel technology. The company will hold its AGM (Annual General Meeting) virtually on 29 October 2021.

FY21 Result Highlights:

• Start of New Programs: During FY21, CBR started two (2) new programs to produce 296 GTB and the 812 Competizione as Ferrari launched two new cars. CBR began new programs for engineering and design as it secured agreements for four (4) new wheel programs in FY21.
• Updated Technology: CBR developed a more strengthened technology platform during the year and launched the Diamond Weave Technology for wheels.
• Phase-1 Mega Line Project Update: In FY21, CBR raised $95 million equity for the Phase 1 Mega-line expansion to increase the production scale and garner more extensive volume programs. The company has booked Phase 1 Mega-line orders for long lead time items and contracted its key construction partner.
• Increase in Net Cash: The company held net cash of $70.9 million as of 30 June 2021, up by $55.7 million.
• Improved Operating Cash Outflows: CBR had $9.31 million net cash outflows from operations during FY21 compared to $30.97 million registered in FY20 due to operational efficiencies coming in from 2HFY21.

Total Revenue & Net Loss Trend from FY18-FY21; (Analysis by Kalkine Group)

Key Risks: The company faces COVID-19 impact on its business, customers’ (OEMs) business, global semi-conductor chip shortage, and supply chain disruptions.

Outlook:

• CBR plans to commence production for the newly secured four-wheel programs in CY23 and CY24.
• The Phase 1 Mega-line project is advancing on track and in sync with the budgeted capex of $47 million. CBR plans to construct the assets off-site during CY21 and commence the installation from early CY2022.
• CBR expects to deliver efficiencies and reduced cost of goods sold (COGS) in FY22 via ongoing operational enhancements in processes and technologies.

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 CBR gave a negative return of ~4.70% in the past three months and a negative return of ~50.61% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $0.960 - $3.048. The stock has been valued using the Enterprise Value to Sales based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at some discount than its peers, considering its impacted financial performance of FY21, COVID-19 impact, impact on semi-conductor chip shortages and dependence on the business from Original Equipment Manufacturers (OEM) customers. For this purpose of valuation, few peers like GUD Holdings Limited (ASX: GUD), PWR Holdings Limited (ASX: PWH), ARB Corp Limited (ASX: ARB), and others have been considered. Considering the current trading levels, COGS improvement in 2HFY21, new design agreements signed, programs in production / development stage in FY21 and planned for FY22, valuation, and key business risks, we give a ‘Speculative Buy’ rating on the stock at the current market price of $1.095, as of 13 October 2021, 10:30 AM, (GMT+10), Sydney, Eastern Australia.

CBR Daily Technical Chart, Data Source: REFINITIV

MyDeal.com.au Limited

MYD Details

Key Takeaways from FY21: MyDeal.com.au Limited (ASX: MYD) operates an online marketplace and offer products across categories such as furniture, tools and equipment, health and beauty, home and garden, electronics, and others. MYD has ~1,151 sellers on the platform. Duke Living Pty Limited and E-Com (Aus) Pty Limited are the subsidiaries of MYD.

• Growth in Active Customers: MYD reported an increase of 83% Y-o-Y in active customers to 894,225 as of 30 June 2021. The average orders per customer grew up to 1.7 times in FY21 from 1.5 times in FY20.
• Increased Site Visitation: The average monthly website visitation increased to 6.4 million in FY21.
• Increased App Usage: With the launch of native iOS and Android mobile apps in May 2021, MYD is experiencing high utilisation, ratings, and stronger conversion rates. The App contributes ~10% of Gross Sales currently, and MYD plans to promote and optimise the App usage as a key strategy measure.
• Reduced Fixed Costs: MYD reduced fixed costs as a percentage of NTV to 4.5% in FY21 versus 5.6% in FY20 due to continued investment in technological innovation and people.
• Higher Marketing Spend: The company increased its marketing investment from 9.1% to 11.3% of NTV during the year as part of its customer acquisition strategy.
• Debt & Cash Position: The company held $42.7 million cash and had no borrowings on 30 June 2021.

Growth of Active Customers form FY19-FY21; (Analysis by Kalkine Group)

Key Risks: The company faces COVID-19 uncertainties, forex rate changes in transactions denominated in foreign currencies, interest rate sensitivity, credit, and liquidity risks.

Outlook:

• MYD has witnessed growth commencing the first eight weeks into FY22. July 2021 management accounts demonstrate positive Gross Sales growth on pcp.
• In FY22, MYD plans to focus on customer acquisition and private label business expansion.
• The company believes there is a considerable opportunity to translate web and mobile traffic to App visits and enhance the marketing ROI during FY22. It plans to undertake advertising campaigns and launch a multi-channel brand.

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 MYD gave a positive return of ~3.35% in the past month and a positive return of ~12.40% in the past three months. The stock is currently trading lower than the 52-weeks’ average price level band of $0.520 - $2.200. The stock has been valued using the Enterprise Value to Sales based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount than its peers, considering its net loss and net cash outflows from operations in FY21 vs FY20, and associated risks of COVID-19, interest rate risk, and forex changes. For this purpose of valuation, few peers like Kogan.com Limited (ASX: KGN), Temple & Webster Group Limited (ASX: TPW), Redbubble Limited (ASX: RBL), and others have been considered. Considering the low trading levels, increase in top-line, gross sales, active customer base, valuation, plans to launch multi-channel brand & campaigns to grow customers and App usage, and key business risks, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.750, as of 13 October 2021, 11:05 AM (GMT+10), Sydney, Eastern Australia.

MYD Daily Technical Chart, Data Source: REFINITIV 

Wellnex Life Limited

WNX Details

Expanded the Distribution Network: Wellnex Life Limited (ASX: WNX) is a distributor and marketer of health and wellness products. On 1 October 2021, WNX added Chemist Warehouse, a leading pharmacy retailer, to its network for distributing Performance Inspired brand to cater to a large demand for its products in New Zealand and Australia.

Refinanced Convertible Notes:

• WNX recently refinanced $2 million Loan Notes by issuing new Convertible Notes and raised up to $2.5 million on improved terms.
• The new Notes are convertible at $0.20 per share versus $0.15 previously and carry a lower coupon rate of 9% instead of 12%. The new notes will expire in 13 months from the time of issue.
• At the conversion time, the Noteholders will receive one listed option at $0.20 per share for every two (2) shares converted and maturing 10 July 2023. With this refinancing, WNX has adequate capital to implement its current business plans.

Business Update:

• The company has posted ~49% YoY revenue growth in FY22 (the first two months) and launched four new brands - Wakey Wakey, The Iron Company, Wagner Liquigesics, and Performance Inspired.

FY21 Results:

• The company posted total revenues of $1.43 million in FY21 versus $0.93 million in FY20 due to distribution growth in brands -Uganic and Little Innoscents.
• The net cash outflows from operating activities stood at $4.38 million during the year, down by 42.1% YoY due to prudent capital management and continued restructuring exercise.
• WNX improved its net loss after tax position to $24.69 million, down by 46.6% YoY due to Corio Bay Dairy Group (CBDG) disposal and associated expenses.
• Post FY21, WNX lowered the borrowings by $7.1 million via an equity conversion at $0.15 per share and raised $2.1 million further via a rights issue.

Revenue & Net Loss Trend from FY18-FY21; (Analysis by Kalkine Group)

Key Risks: The company faces the risk of integration from the recent acquisition of BSA (Brand Solutions Australia and Pharma Solutions Australia) and the launch of new products.

Outlook:

• WNX expects to generate higher revenue in FY22.
• With the roll-out of the Wagner Liquigesic brand, Wakey Wakey, and The Iron Company Brand in grocery and pharmaceutical retailers such as Coles, Chemist Warehouse, WNX anticipates accelerated revenue growth in FY22.

Stock Recommendation: The stock of WNX gave a positive return of ~1.01% in the past week and a negative return of ~13.04% in the past month. The stock is currently trading lower than the 52-weeks’ average price level band of $0.097 - $0.170. Considering the current trading levels, improved financial results in FY21, new distribution partnerships in FY21, launch of brands, revenue growth expectations in FY22 drive, and key business risks, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.100 as on 13 October 2021.

Investors with a high-risk appetite should evaluate this stock given the technical support and resistance levels and considering associated risks of funding adequate capital, launch of new products, and integration benefits of the newly acquired business.

WNX 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.

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.

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