Mydeal.com.au Limited

MYD Details

Business Update for FY21: Mydeal.com.au Limited (ASX: MYD) is an online retailer of lifestyle and household goods, including homewares and furniture. It has more than 6 million products offered on its platform. As of 19 July 2021, the market capitalisation of MYD stood at ~$177.29 million.

• Growth in Gross Sales: On 7 July 2021, MYD reported an increase in gross sales by 111.1% YoY to $218.1 million on a pcp basis, due to an increasing customer base and e-commerce usage.
• Record Increase in Customers: The FY21 gross revenue increased due to a rise (up 83.1% YoY) in active customers to 894,225 as of 30 June 2021.
• Private Label Sales: The private label also contributed $8.8 million to the gross revenue in its first year of sales.

Total Revenue and Net Loss Trend from FY18-FY20; (Analysis by Kalkine Group)

Key Risks:

• The company faces the risk of changes in customers’ preferences, income, and spending.
• The subdued retail environment due to the COVID-19 situation also poses a risk to the company.
• In addition, the constantly evolving technological landscape may necessitate significant investment and upgrade to cope with the advancements.

Outlook:

• With the rollout of the MyDeal App for Android and iOS devices in May 2021, MYD has been witnessing intense usage and customer conversion rate on its platform.
• MYD will continue to invest and grow its exclusive technology platform to scale up the business further. The company is also investing in teams with superior credentials and caliber.

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 8.40% in the past month and a negative return of 52.91% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $0.520 - $2.200. We have valued the stock using the Enterprise Value to Sales based illustrative relative valuation method and have arrived at a target price of low double-digit upside (in % terms). We believe that the company can trade at a slight premium than its peer median, considering its increase in gross sales and active customers in FY21. For this purpose, we have taken peers like Temple & Webster Group Limited (ASX: TPW), Adore Beauty Group Limited (ASX: ABY), Bikeexchange Limited (ASX: BEX) and others. Considering the current trading levels, increase in gross sales, active customers in FY21, and private label contribution in the first year of sales, increased platform usage, valuation, further investment in technology and associated risks of COVID-19 environment, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.645, down by 5.840% on 19 July 2021.

MYD Daily Technical Chart, Data Source: REFINITIV 

Donaco International Limited

DNA Details

 Official Address Change: Donaco International Limited (ASX: DNA) is involved in the operation of leisure and hospitality businesses across northern Vietnam and Cambodia. As of 19 July 2021, the market capitalisation of DNA stood at ~$53.12 million. On 7 July 2021, DNA notified investors regarding the change in the company's registered business address. 

Mega Bank Facility Update:

• Secured a New Repayment Plan: On 1 July 2021, DNA updated US$6.80 million of debt outstanding under the Mega Bank loan facility as of 30 June 2021. The company has now availed of a new plan of repayment for the outstanding loan. Under the new plan, DNA will pay US$1 million of instalment alternatively every month from June-November 2021 and US$1.8 million of final instalment by 31 December 2021. DNA has also obtained a waiver regarding the loan facility’s financial terms and default interest.
• Loan from the CEO: Besides, the Board has also sanctioned US$8.2 million of a shareholder loan from the CEO, Mr. Lee Bug Huy, for three years and expects to repay it from the company’s operational cash flows.

COVID-19 Update:

• The shutdown of Star Vegas Casino: On 28 April 2021, DNA reported that as per the recent Government orders, all casinos in the Banteay Meanchey province had been temporarily shut down, including DNA's Star Vegas, from 27 April 2021. 
• The closure has been necessitated due to the recent spike in the COVID-19 cases in the region. The company will continue to monitor the situation and provide an update as per further development.

Q3FY21 (March Quarter) Financial Highlights:

• A Decline in Revenue: DNA reported a decline in net revenue from $6.0 million in Q2FY21 to $2.77 million in Q3FY21 due to a recent increase in COVID-19 cases in the region.
• Decrease in Net Operating Cash Outflows: DNA recorded lower net operating cash outflows in Q3FY21 due to the repayment of ~$4.46 million of junket deposit (non-recurring).
• Reduced Opex: DNA’s management exercised cost control initiatives to reduce the operating expenses to $1.70 million in Q3FY21 compared to $2.42 million in Q2FY21.
• Settlement of Star Vegas Dispute: DNA reported a gain of $52.6 million of non-cash income in Q3FY21 from the conclusion of the Star Vegas dispute.
• Cash Reserve: As of 31 March 2021, DNA held a cash balance of $7.9 million.

Revenue and Loss After Tax Trend from FY18-FY20; (Analysis by Kalkine Group) 

Key Risks:

• Increasing COVID-19 Cases: The company faces the increasing risk of COVID-19 infection in Cambodia and nearby countries.
• Exchange Rate Changes: The company is also exposed to the risk of foreign exchange rate fluctuations due to operations in the Southeast Asian countries.

Outlook: The company plans to repay the outstanding loan by the close of CY21 under the new Mega Bank facility. The reduced debt levels will enable DNA to explore more alternatives in the gaming sector and a diversified revenue stream for business growth. In addition, DNA expects the vaccination drive in Southeast Asia in 2HFY21

Stock Recommendation: The stock of DNA gave a positive return of 38.70% in the past nine months and a positive return of 16.21% in the past year. The stock is currently trading lower than the 52-weeks’ average price level band of $0.029 - $0.092. On a TTM basis, the stock of DNA is trading at a price to book value multiple of 0.3x, lower than the industry (Consumer Cyclicals) median of 2.2x, thus seems undervalued. Considering the current trading levels, decrease in operating expenditure in Q3FY21, reduced debt levels, valuation on a TTM basis, plans to diversify revenue platform, and associated risks of increasing COVID-19 in the Southeast Asia, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.043 as on 19 July 2021.

DNA 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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