An Uptick in Online Sales and Record Crop Exports to Spur Retail Expansion– 2 Stocks to Watch Out

Food Retailing Unfolding the Positive Momentum:

Key Risks and Challenges:

Outlook:

Considering the surge in retail turnover in August 2022, 2 ASX stocks are identified to showcase the momentum.

(1) Costa Group Holdings Limited (Recommendation: 'Buy' at AUD 2.170, Potential Upside: Low Double-Digit)

(M-cap: AUD 1.04bn, Annual Dividend Yield: 4.01%)

Company Overview: Costa Group Holdings Limited (ASX: CGC) is a horticulture company that is engaged in growing, packing, and marketing fresh fruits and vegetables. The company also offers wholesale and logistics services through the Costa Farms business. 

Financial Highlights of 1HCY22: The company recorded a 15.7% growth in total revenue in 1HCY22 relative to 1HCY21 during the same period. The transacted sales also increased from AUD 823.5mn in 1HCY21 to AUD 946.3mn in 1HCY22. The revenue growth was driven by traction brought by the blueberry Variety Improvement Program (VIP).

Outlook: The CY22 examines normal crop cycles in Australia for the remainder of the calendar year, and the company expects no extreme weather events while anticipating the crop quality and yield in line with the historical average. 

(2) United Malt Group Limited (Recommendation: 'Buy' at AUD 3.080, Potential Upside: Low Double-Digit)

(M-cap: AUD 936.43mn, Annual Dividend Yield: 1.62%)

Company Overview: United Malt Group Limited (ASX: UMG) is in the production and distribution of malt, hops, and related products through the processing and warehousing segment.

1HFY22 Result Summary: The revenue increased by 11% from AUD 589.6mn in 1HFY21 to AUD 651.6mn in 1HFY22, which was driven by growth in volumes in domestic markets however, the EBITDA declined by 3% on a PCP basis due to input cost increase and volatility in barley price.

Outlook: The company expects the underlying EBITDA (before SaaS costs) is expected to be in the range of AUD 115mn to AUD 140mn. UMG focused on its transformation program that aims to target AUD 30mn annualised net benefit by FY24.

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.

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 03 October 2022. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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