Seek Limited
SEK Details
This report is the updated version of the report released on 29 April at 3:55 PM GMT.
1HFY22 (Ended 31 December 2021) Results: Seek Limited (ASX: SEK) operates an online employment marketplace and has SEEK Asia Pacific & Americas (AP&A), SEEK Portfolio Investments and Corporate Costs as its core operating segments.
- SEK witnessed revenue growth (~59% Y-o-Y) and margin expansion (up ~6% Y-o-Y) in 1HFY22 due to recovery in Australian and Asian markets, and higher candidate activity witnessed on the websites. This growth has resulted in increased business investment.
- The company declared an interim dividend of ~23 cents per share (cps) in 1HFY22 versus ~20 cps final dividend paid (in May 2021) for FY21.
Comparative Earnings from 1HFY21 Vs. 1HFY22; (Analysis by Kalkine Group)
Key Risks: The company faces cyber security risks, technological shifts, COVID-19 uncertainty, new market expansion, and regulatory changes.
Outlook:
FY22 revenue guidance (excluding significant items and the SEEK Growth Fund) has been confirmed at ~$1.05 - $1.10 billion. SEK expects to generate an EBITDA of ~$490 - $515 million with NPAT between ~$230 - $250 million for FY22.
Valuation Methodology: P/E 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 SEK gave a positive return of ~1.28% in the past three months and a negative return of ~13.21% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $25.840 - $36.090. The stock has been valued using the P/E-multiple-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’ average P/E multiple, considering its high debt-to-equity-ratio, increased growth investments (in marketing and business development), and continuing risk of cyber security attacks. For this purpose of valuation, a few peers like REA Group Ltd (ASX: REA), Domain Holdings Australia Ltd (ASX: DHG), Hipages Group Holdings Ltd (ASX: HPG), and others have been considered. Considering the current trading levels, growth in top line and bottom-line, increase in the investment value of SEEK Growth Fund, accelerated business investment, positive outlook for FY22, and an indicative upside in valuation, we give a ‘Buy’ rating on the stock at the current market price of $28.060, as of 29 April 2022, 10:46 AM (GMT+10), Sydney, Eastern Australia. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
SEK Daily Technical Chart, Data Source: REFINITIV
Pilbara Minerals Limited
PLS Details
Q3FY22 (Ended 31 March 2022) Results: Pilbara Minerals Limited (ASX: PLS) is a metals producer and operator of the Pilgangoora Lithium- Tantalite project in the Pilbara region of Western Australia.
- PLS undertook work programs to boost the spodumene concentrate production at the Pilgangoora (Pilgan) project in Q3FY22 to cater to the rising demand for lithium raw materials.
- PLS reported ~$113.9 million cashflows from operations at the Pilgan project due to strengthened pricing of battery grade chemicals in Q3FY22.
- Customer sales proceeds from the production at the Pilgan Plant accounted for ~$169.2 million during the quarter.
Comparative Production & Shipping Summary; (Analysis by Kalkine Group)
Key Risks: The company faces the risk of change in commodity prices and demand, adverse weather conditions, regulatory hurdles, and higher capex on project improvements.
Outlook: PLS maintains its production guidance of ~340,000 - ~380,000 dmt for FY22. Production levels may fall to the lower half of the guidance range, due to the continuing COVID-19 impacts. Momentum in the prices of spodumene concentrate and lithium raw materials is expected to increase further in Q4FY22, driven by robust demand from the EV market.
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 PLS gave a negative return of ~11.49% in the past three months. The stock has a 52-weeks low level of $1.050 and a high level of ~$3.890. 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’ average EV/Sales multiple, considering its high debt-to-equity ratio, decline in production, and expectation of a continued tight labour market. For this purpose of valuation, a few peers like Allkem Ltd (ASX: ALK), Mineral Resources Ltd (ASX: MIN), IGO Ltd (ASX: IGO) have been considered. Considering the current trading levels, Pilgan plant improvements project and capacity expansion, robust lithium price and demand outlook, and an indicative upside in valuation, we give a ‘Buy’ rating on the stock at the current market price of $2.770, as of 29 April 2022, 11:27 AM (GMT+10), Sydney, Eastern Australia. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
PLS Daily Technical Chart, Data Source: REFINITIV
Insignia Financial Limited
IFL Details
Q3FY22 (Ended 31 March 2022) Results: Insignia Financial Limited (ASX: IFL) provides financial services (stockbroking, financial planning advisory, etc.) as well as portfolio and estate administration services.
- Funds Under Management (FUM) dipped to ~$96.9 billion, down by ~1.9% from 31 December 2021, due to adverse market movements of ~$2.3 billion. Net inflows of ~$332 million in Q3FY22 were mainly led by retail inflows of ~$378 million versus institutional outflows of ~$46 million.
- IFL reported ~1,682 active financial advisers driving advice services relationships in its network and a reduction of ~83 advisers as of 31 March 2022, due to smaller practices in its self-employed and self-licensed channel.
Comparative Position of Total FUMA; (Analysis by Kalkine Group)
Key Risk: The company faces volatility in equity markets, liquidity risk, adverse macro fundamentals, regulatory changes, and loss of advisers on its network.
Outlook:
- IFL plans to simplify its Advice strategy by integrating the Bridges and MLC Advice businesses under a revamped Bridges advice model to enhance client outcomes. It expects the adviser numbers to normalise from 1 July 2022.
- The company has initiated a structured process for selling the Australian Executor Trustees (AET) business. It receives interest from multiple parties and expects to obtain non-binding indicative offers in May 2022.
- IFL prioritises integrating the MLC business acquired and tracking ahead of plans. It targets an additional ~$218 million in savings from the integration by 31 December 2022.
Valuation Methodology: Price to Book Value 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 IFL gave a negative return of ~2.53% in the past three months and a negative return of ~15.19% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $3.180 - $5.390. The stock has been valued using the Price to Book Value multiple-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’ median P/BV multiple, considering the decline in total FUMA, uptick in the debt-to-equity ratio, and the risk of loss of financial advisers on platforms. For this purpose of valuation, a few peers like Pendal Group Ltd (ASX: PDL), Pacific Current Group Ltd (ASX: PAC), Magellan Financial Group Ltd (ASX: MFG) have been considered. Considering the current trading levels, expected synergies from the integration of MLC business, simplifying Advice business, an indicative upside in valuation, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the current market price of $3.400, as of 29 April 2022, 11:27 AM (GMT+10), Sydney, Eastern Australia. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
IFL Daily Technical Chart, Data Source: REFINITIV
CLINUVEL Pharmaceuticals Limited
CUV Details
Q3FY22 Financial and Operational Highlights: CLINUVEL Pharmaceuticals Limited (ASX: CUV) is a leading, and innovative Australian company focused on the development of SCENESSE. Recently, the company released its March 2022 quarterly report, wherein it recorded positive cash receipts of $11.44 million.
- This was aided by efficiencies in product distribution, an increase in the number of prescribing centres, and rising patient demand for SCENESSE®.
- CUV recorded a net operating cash flow of $4.08 million, and for the first time, the cash and cash equivalents have surpassed $100 million, which is serving as a buffer to respond to unforeseen adverse events and enabling further investments.
Cash & Cash Equivalents (Source: Analysis by Kalkine Group)
Key Risks: The company is exposed to risks arising from the failure in the ongoing trials. In addition, the business is exposed to a more complex regulatory environment; any failure in the compliances could lead to fines, penalties, etc.
Outlook: The company’s growth strategy revolves around organic and inorganic growth, and the company is building a pipeline of melanocortin molecules and new formulations.
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 CUV is trading below its 52-week low-high average of $15.880 - $44.670, respectively. The stock has been corrected by ~15.62% in the past one month. 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 can trade at a slight discount to its peers, considering the COVID-19 uncertainties and declining earnings. For the purpose of valuation, peers such as Mesoblast Ltd (ASX: MSB), Aroa Biosurgery Ltd (ASX: ARX), AVITA Medical Inc (ASX: AVH), and others have been considered. Considering the indicative upside in valuation, positive cash flows, decent fundamentals, and current trading levels, we recommend a ‘Buy’ rating on the stock at the current market price of $16.060, as on 29 April 2022. 11:00 AM (GMT+10), Sydney, Eastern Australia.
Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
CUV Daily Technical Chart, Data Source: REFINITIV
Resimac Group Ltd
RMC Details
Insights of 1HFY22: Resimac Group Ltd (ASX: RMC) is an originator and manufacturer of mortgage management for homeowners. The below picture gives a broader idea of the company’s financial performance in 1HFY22:
Financial Summary (Source: Analysis by Kalkine Group)
Key Risks: The company’s business could be impacted by the failure of counterparties in fulfilling their obligations. In addition, the rising market share of peers could also affect the company's growth.
Outlook: RMC is optimistic about growth opportunities in all segments as the company experienced a rise in fixed-rate home loan pricing and growth in market share in the asset finance segment. RMC has invested in a new loan origination system for its Asset Finance division, which is likely to go live in Q1FY23.
Valuation Methodology: P/BV 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 RMC is trading below its 52-week low-high average of $1.525 - $2.580, respectively. The stock has been corrected by ~4.14% in the past one month. The stock has been valued using a P/BV multiple-based illustrative relative valuation method and arrived at a target price of low double-digit (in percentage terms). The company might trade at a slight premium to its peers, considering the rising AUM and expected growth opportunities etc. For the purpose of valuation, a few peers like Genworth Mortgage Insurance Australia Ltd (ASX: GMA), Australian Finance Group Ltd (ASX: AFG), Pepper Money Ltd (ASX: PPM), and others have been considered. Considering the expected upside in valuation, rising home loan settlements, growing asset finance business, enhanced earnings, current trading levels and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $1.615, as on 29 April 2022, 11:00 AM (GMT+10), Sydney, Eastern Australia.
Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
RMC 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.
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 unless those persons comply with certain safeguards, procedures, and disclosures.
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.