A Look at Three Diversified Stocks “Under 20 Cents” with Decent Long-term Growth Outlook - ICT, EVE, ACU

1. iCollege Ltd (Recommendation: Speculative Buy, Market Cap: ~$72.69 Mn)

Decent Revenue Growth in Q3FY21: iCollege Ltd (ASX: ICT) is a leading vocational training provider that delivers accredited and non-accredited vocational education and training solutions throughout Australia and internationally. The company currently operates 8 training campuses across 5 states and territories in Australia.

• During Q3FY21, the company generated revenue of $4.55 million, up by 52% as compared to the previous corresponding period (pcp), driven by the decent performance of domestic student business. Enrolments of international students generated over $1.5 million of enrolment value in the quarter. During the quarter, the company announced an off-market (all scrip) takeover offer for Redhill Education Limited. As per the offer, the company is offering 6 fully paid ordinary shares for every 1 fully paid ordinary share in Redhill valuing Redhill at $50,300,000.
• Cash and Debt Scenario: As at 31 December 2020, the company had cash and cash equivalent of $5.53 million. Further, the company had borrowings and leases of $3.29 million. Current ratio for H1FY21 stood at 1.13x, up from 0.26x in H1FY20.
• Outlook: Looking ahead, the company is focused on expanding its geographical footprint into new and lucrative training markets. Its future growth is underpinned by the expansion of domestic course delivery in more locations throughout Australia including Perth, Brisbane and Sydney. Moreover, the company is actively pursuing expansion opportunities in New South Wales and Victoria through potential acquisition.

 Pictorial Presentation of Key Financials

SWOT Analysis:

Stock Recommendation:

• In the last three months, the stock of ICT has provided a return of 28.86%. The stock is trading higher than the average 52-week price level band of $0.029 - $0.170.
• In FY21, the company expects to deliver highest full year revenue and earnings since the listing of ICT.
• Key Risks: Foreign Currency Risk, COVID-19 Uncertainties, Regulatory Risk, Integration Risk, etc.
• On a TTM basis, the stock is trading at EV/Sales multiple of 4.7x, lower than the industry average of 8.1x.
• Considering the company’s decent performance in Q3FY21, modest outlook, ongoing takeover of Redhill Education, rising cash balance, valuation on TTM basis, and the key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.125 as on 23 April 2021.

2. EVE Investments Limited (Recommendation: Speculative Buy, Market Cap: ~$24.98Mn)

Decent Revenue Growth in H1FY21: EVE Investments Limited (ASX: EVE) is an Australian health and wellness company that harvests and creates innovative products to improve the wellbeing of consumers globally.

• For H1FY21, the company reported revenue from ordinary activities of $1.73 million, up 164.94% on pcp. During the period, Australian online sales performed well with the bio-fermented drink range the leading sales product in Australia. Over the period, the company advanced its China distribution strategy with shipments of Meluka Australia’s raw honey product being pre-sold into the Yandi Biotech (Yandi) distribution network of wholesalers across Mainland China. Net loss for H1FY21 stood at $1.37 million, down from the loss of $1.7 million in H1FY20.
• Cash and Debt Scenario: As at 31 December 2020, the company had cash and cash equivalents of $4.98 million. Borrowing and lease liabilities stood at $1.03 million. Current ratio for H1FY21 stood at 10.95x, up from 1.36x in H1FY20. Debt to equity multiple for H1FY21 stood 0.08x.
• Outlook: Looking ahead, the company is focused on product development and IP creation. By leveraging its top US reviews and rankings in new Amazon marketplaces, the company is able to rapidly establish the validity of its products. The company is currently well funded to undertake its strategic growth plans. By the end of April 2021, the company expects to launch its products on Amazon Japan. Recently, two of the company’s products were accepted into Whole Foods in Northern California.

Pictorial Presentation of Key Financials:

SWOT Analysis:

Stock Recommendation:

• Over the last three months, the stock has corrected by 33.33% and is currently inclined towards its 52-weeks low price of $0.005, offering a decent opportunity for accumulation.
• The company is focused on expanding into new regions – UK, Germany, Japan and Singapore.
• Key Risks: Supply Chain Disruption, Inventory Risk, COVID-19 Uncertainties, Stiff Competition, etc.
• Considering the company’s decent performance in H1FY21, expected product launches in the near future, modest outlook, current trading level and the key risks associated with the business, we give a “Speculative Buy” rating on the stock at the current market price of $0.006, down 7.693% as on 23 April 2021.

3. Acumentis Group Limited (Recommendation: Speculative Buy, Market Cap: $19.87mn)

Expanding Geographical Footprint through Acquisition:  Acumentis Group Limited (ASX: ACU) is a property valuation and advisory firm. It has 45 offices spread across metropolitan, regional and rural Australia. The company offers specialist services across all property sectors including a range of property valuation, insurance valuation, advisory and buyers advocacy services.

• For March 2021 quarter, the company reported total revenue of $10.5 million, taking the total year to date revenue to $33.7 million, up 21% on the corresponding 9-month period. Cash utilised by operations for the quarter was $312K. The company recently completed the acquisition of the business and assets of Saunders & Pitt. This acquisition further expands the company’s geographical footprint enabling the provision of a full suite of services to existing and new clients throughout Tasmania.
• Cash and Debt Scenario: As at 31 December 2020, the company has cash and cash equivalent of $3.19 million. Borrowing and lease liabilities stood at $7.19 million. Current ratio for H1FY21 stood at 0.91x, up from 0.68x in H1FY20. Debt to equity ratio for H1FY21 stood at 0.26x.
• Outlook: Looking ahead, the company expects growth in mortgage valuations, particularly in regional Australia. With ongoing support from its Government clients and expansion of the regional and rural capabilities, the company seems well-positioned to continue its new growth trajectory through FY2021 and beyond.

Pictorial Presentation of Key Financials:

SWOT Analysis:

Stock Recommendation:

• Over the last three months, the stock has corrected by 7.39%.
• The stock is trading slightly higher than the average 52-week price level band of $0.061 - $0.160.
• On a TTM basis, the stock is trading at a Price to Book multiple of 0.7x, lower than the industry median of 1.8x.
• The addition of mortgage valuation panels in metropolitan centres in NSW and VIC is expected to improve the company’s earnings in the future.
• Key Risks: Change in Technology, COVID-19 Uncertainties, Fluctuations in Property Rates, etc.
• Considering the company’s decent performance in H1FY21 and Q3FY21, growth in mortgage valuations, anticipated benefit from the acquisition of Saunders & Pitt, modest outlook, valuation on TTM basis, and the key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the closing price of $0.120, down by 4.001% as on 23 April 2021.

Note: 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.

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