Northern Star Resources Ltd

NST Details

Initial Substantial Holder: Northern Star Resources Ltd (ASX: NST) is engaged in the production and exploration of gold and other minerals. Recently, State Street Corporation and subsidiaries have become a substantial holder in the company with a voting power of 5.00%.

Key Business Developments:

• As announced on 2 December 2021, the company has finished the acquisition of Newmont Corporation’s Kalgoorlie power business for consideration of US$95 million.
• The company has inked a subscription agreement and debenture with Osisko Mining Inc., which owns the high-grade Windfall gold project in Quebec, Canada. In addition, NST has subscribed for a Convertible Senior Unsecured Debenture in Osisko for C$154 million, which has a maturity date of 1 December 2025.

Q1FY22 Financial and Operational Highlights: During the quarter, the company recorded gold sales of 386,160 oz at an all-in sustaining cost (AISC) of $1,594/oz. The average realized price for the quarter was $2,345/oz for sales revenue of $848 million.

• NST reduced its bank debt to $262 million via using the funds received from the sale of Kundana assets for cash consideration of $400 million.
• As on 30 September 2021, the cash and bullion balance of the company stood at $756 million against $803 million as on 30^th June 2021.

Cash & Bullion (Source: Analysis by Kalkine Group)

Key Risks:

• Price Risk: The company’s operational and financial health could be impacted by any adverse movement in the gold prices, as it derives a major portion of revenue from the sale of gold.
• Environmental Risk: NST is exposed to risk arising from a change in climate, as it may temporarily suspend mining operations.

Outlook: For the upcoming year, the company is expecting gold production in the range of 1,550-1,650koz at an AISC of between $1,475-$1,575/oz. In addition, the company’s key growth projects are currently progressing in line with its strategy to become a 2Mozpa producer by FY26. NST is likely to release 1HFY22 results on 8 Feb 2022.

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 is trading below its 52-week low-high average of $7.955 - $14.080, respectively. The stock has been corrected by ~4.89% in the past six months. The stock has been valued using the P/E 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 premium to its peers’ median P/E multiple, considering the improving debt position and business strategies for future growth. For this purpose of valuation, peers such as Evolution Mining Ltd (ASX: EVN), IGO Ltd (ASX: IGO), and Newcrest Mining Ltd (ASX: NCM) have been considered. Considering the expected upside in valuation, recent acquisition, reduced bank debts, decent long-term outlook, decent liquidity position, and current trading levels, we recommend a ‘Buy’ rating on the stock at the closing price of $9.410, up by ~1.182% as on 31 December 2021.

NST Daily Technical Chart, Data Source: REFINITIV 

Ansell Limited

ANN Details

Change in Directors’ Interest:  Ansell Limited (ASX: ANN) provides superior health and safety protection solutions, and the company possesses leading positions in the personal protective equipment and medical gloves market category. Recently, Christine Yingli Yan has made a change to holdings in the company by acquiring 165 ordinary shares at a consideration of $5,369.10.

FY21 Financial Summary:

• During FY21, ANN recorded sales of US$2,026.9 million, reflecting a growth of 25.6%. This was mainly underpinned by healthcare organic growth of 34.8%.
• Profit for the year rose by 57.5% on a YoY basis to US$246.7 million, and EPS surged by 59.9% to 192.2 cents per share.

Sales & Profit (Source: Analysis by Kalkine Group)

Key Risks:

• Stiff Competition: ANN’s financial and operational health could be impacted by the rising market share of peers and changes in consumer sentiments.
• Regulatory Risk: The company is exposed to a more complex regulatory environment; any failure in compliance could lead the business to fines, penalties etc.

Outlook:

• Looking forward, the company expects continued demand for Mechanical, Surgical, Life Sciences and internally manufactured Single Use gloves.
• ANN expects net interest expense in the ambit of US$20.0 million-US$21.0 million and the effective tax of between 22.0-23.0%.

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 ANN is trading below its 52-week low-high average of $30.130 - $44.070. The stock has been corrected by ~4.15% and ~22.87% in the past three and six months, respectively. The stock has been valued using P/E 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’ median P/E multiple, considering the COVID-19 uncertainties and high leverage, etc. For the purpose of valuation, peers such as Healius Ltd (ASX: HLS), Sonic Healthcare Ltd (ASX: SHL), and Estia Health Ltd (ASX: EHE) have been considered. Considering the expected upside in valuation, growing sales, increasing bottom line, optimistic outlook, and current trading levels, we recommend a ‘Buy’ rating on the stock at the closing price of $31.510, down by ~2.477% as on 31 December 2021.

ANN Daily Technical Chart, Data Source: REFINITIV 

Liberty Financial Group

LFG Details

Change of Director’s Interest: Liberty Financial Group (ASX: LFG) is a diversified finance company involved in the businesses of residential and commercial mortgages, motor vehicle finance, personal loans, business loans, broking services, general insurance and investments. On 22 December 2021, one of the company’s Directors, James Boyle, was grated 106,400 Options under the EIP to Hollypark Holdings Pty Ltd ATF The Boyle Family Trust. Further, there was an off-market transfer of 4,037,088 Stapled Securities from James Boyle to Hollypark Holdings Pty Ltd ATF The Boyle Family Trust.

2021 AGM Highlights: On 17 November 2021, the company held its 2021 Annual General Meeting (AGM), wherein, the management highlighted that despite facing challenging conditions, the company’s average assets increased by 4% in FY21 to $12 billion.

• FY21 Results Update: Due to the increase in average assets and net interest margin, the company’s net revenue grew by 18% YoY to $600 million in FY21. For FY21, the company reported underlying net profit after tax and amortisation of $226 million, up 61% on the previous year.
• Distribution Update: For the last 7 months of FY21, the company has paid an inaugural distribution of 24 cents per security, representing 77% of the unaudited net profit after tax of FY21. For the period from 1 July 2021 to 30 November 2021, the company has paid an unfranked trust distribution of 21 cents per Security.
• Q1FY22 Update: During Q1FY22, the company witnessed elevated discharges and amortization due to fiercely competitive developments in the lending markets. Over the quarter, the company originated $1.38 billion of loans.

Net Revenue (Source: Analysis by Kalkine Group)

Key Risks: The company is exposed to the risks related to the rise in borrowing costs as it could impact the company’s net interest margin. Further, the company is also exposed to the risks related to the competitive developments in the lending markets.

Outlook: Looking ahead, the company is planning to launch expanded auto finance solutions, which its strategy of a diversified portfolio mix. The company believes that reducing borrowing cost will support the net interest margin. Further, the company expects to retain the distribution payout of 40%-80% of NPAT.

Valuation Methodology: Price to Book Multiple Based Relative Valuation (Illustrative)

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: Over the last three months, the stock has been corrected by 19.97% and is trading lower than the average 52-week price level band of $5.2-$8.35. The stock has been valued using P/BV 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 risks related to the competitive developments in the lending markets and rise in borrowing costs. For the valuation, peers such as Pepper Money Ltd (ASX: PPM), Resimac Group Ltd (ASX: RMC), Australian Finance Group Ltd (ASX: AFG), etc., have been considered. Considering the rise in in average assets and net interest margin, expected launch of expanded auto finance solutions, modest outlook, current trading level, valuation and key associated risks, we give a “Speculative Buy” rating on the stock at the current market price of $5.47, as on 31 December 2021, 12:10 PM (GMT+10), Sydney, Eastern Australia.

LFG Daily Technical Chart, Data Source: REFINITIV

Monadelphous Group Limited

MND Details

Contract Update: Monadelphous Group Limited (ASX: MND) is in the provisioning of engineering services within Australia. As announced on 17 November 2021, the company has secured new contracts and contract extensions in the resources sector of ~$110 million. This includes a 12-month extension to its existing contract with BHP Iron Ore and numerous new contracts with Rio Tinto.

FY21 Financial Summary:

• During FY21, MND posted a rise of 18.3% in revenue to $1.95 billion, backed by the increased demand for its services as the industry recovered from the delays and disruptions faced during the initial phases of COVID-19.
• The company recorded a net profit after tax (NPAT) of $47.1 million, reflecting a rise of 29% over pcp.

Revenue & NPAT Trend (Source: Analysis by Kalkine Group)

Key Risks:

• Contracts Pricing Risk: The company’s business is exposed to risk arising from the change in pricing of contracts, which could impact its financial and operational health.
• Skilled Labour Shortage: The shortage of skilled labour is likely to remain a key challenge. This has been caused by the closure of the international border due to COVID-19 pandemic.

Outlook:

• MND believes that buoyant resources, energy, and infrastructure sectors are expected to provide a solid pipeline of opportunities going forward.
• The company expects revenue for FY22 to be lower because of the timing of new major projects. However, MND anticipates stronger construction activity in FY23.
• The company expects maintenance activity to grow steadily, which would be backed by aging assets and customers deferring discretionary work in prior periods.
• MND is likely to release 1HFY22 results on 22 Feb 2022.

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 MND is trading below its 52-weeks’ low-high average of $8.910 - $14.630, respectively. The stock has been corrected by ~6.08% in the past six months. The stock has been valued using P/E 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 premium to its peers’ average P/E multiple, considering the expected growth in construction activity and winning of significant contracts. For the purpose of valuation, peers such as Downer EDI Ltd (ASX: DOW), MAAS Group Holdings Ltd (ASX: MGH), and Boral Ltd (ASX: BLD) have been considered. Considering the expected upside in valuation, new contracts and extensions, growing topline and bottom line, decent outlook, decent liquidity position, and current trading levels, we recommend a ‘Buy’ rating on the stock at the closing price of $9.650, down by ~0.721% as on 31 December 2021.

MND Daily Technical Chart, Data Source: REFINITIV 

Adore Beauty Group Limited

ABY Details

2021 AGM Highlights: Adore Beauty Group Limited (ASX: ABY) is an e-commerce company involved in the marketing and selling of beauty and personal care products. On 12 November 2021, the company held its 2021 Annual General Meeting (AGM), wherein, the management highlighted that the company is currently focused on capitalizing on its competitive advantages and lay the foundations for long-term, sustainable growth.

• Improved FY21 Results: For FY21, the company reported revenue of $179.3 million, up 48% on the previous year, driven by a 39% increase in active customers to 818 thousand. Further, the company’s EBITDA increased 53% to $7.6 million.
• Q1FY22 Result Update: For Q1FY22, the company reported revenue of $63.8 million, up 25% on pcp. The company’s total customers increased 24% over the same period last year to 874 thousand in Q1FY22.
• Strategic Focus: In line with its goal of increasing brand awareness, the company is implementing its multi-channel marketing strategy designed to build trust, drive traffic and sales conversion.

EBITDA Trend (Source: Analysis by Kalkine Group)

Key Risks:

• COVID-19 Pandemic: The company is exposed to the risks related to COVID-19 pandemic, as it could impact customer growth, customer spending and demand for products.
• Stiff competition: The company operates in a highly competitive environment, exposed it to competition risk.

Outlook: The company is focused on cementing its online market leadership with a clear growth strategy and strategic priorities. The company expects to maintain a 2-4% EBITDA margin in the short to medium term while reinvesting to drive market growth.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

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: Over the last three months, the stock has been corrected by 13.97%. The stock is currently trading lower than the average 52-week price level band of $3.3 -$6.380.  The stock has been valued using 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 peers considering the uncertainties surrounding COVID-19 restrictions. For the valuation, peers such as Kogan.com Ltd (ASX: KGN), Temple & Webster Group Ltd (ASX: TPW), Cettire Ltd (ASX: CTT), etc. have been considered. Considering the company’s decent Q1FY21 results, ongoing focus on increasing brand awareness, modest outlook, current trading level and indicative upside in valuation, we give a “Buy” rating on the stock at the closing price of $4.0, down by 2.677% as on 31 December 2021.

ABY 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 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 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 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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