Just Life Group Limited

Company Overview: Just Life Group Limited (NZX: JLG) is a New Zealand-based company that provides filtered water solutions to both business and residential customers. It also provides light and ventilation systems for living spaces. It offers a range of water cooler products and filtration systems, including brands such as Just Water, About Health, Solatube, Unovent, The Cylinder Guy and Hometech.

JLG Details

Just Life Group Limited (NZX: JLG) is focused on providing products and services, including filtered water solutions, to improve the lives of New Zealanders. The market capitalisation of the company stood at ~$68.158 million as on 14^th February 2022.

Looking at the past performance over FY17 to FY21, JLG’s top-line and bottom-line grew with a compounded annual growth rate (CAGR) of 18.31% and 12.72%, respectively. Total Revenue of the company improved from $16.45 million in FY17 to $32.23 million in FY21. Net Income increased to $3.31 million in FY21 from $2.05 million in FY17.

Exhibit 1: Financial Statistics

Source: Analysis by Kalkine Group

Result Performance (FY21 Ended 30 June 2021)

• Net Earnings up 13%: Just Life delivered a 13% increase in net earnings to $3.3 million, rising from $2.93 million in FY20. The Cylinder Guy contributed $0.35 million to earnings for the nine months and About Health $0.19 million for the two months, being the part-periods of operation since acquisition.
• Revenue up 7%: Earlier, the company advised about the significant downturn in the revenue, but due to foreshadowed acquisitions, it was able to increase the operating revenue by 7%. The directors declared the final dividend of 1.4 cps for the year ended 30^th June 2021.

Top 10 Shareholders: The top 10 shareholders have been highlighted in the table, which together form around 93.25% of the total shareholding. Harvard Group Ltd. and Falkenstein (Anthony Edwin) are holding maximum stake in the company at 71.4449% and 10.2753%, respectively, as provided in the table below:

Exhibit 2: Top 10 Shareholders

Source: Analysis by Kalkine Group

A Quick Look at Key Metrics: 

The company has posted gross margin of 51.3% as compared to the industry median figure of 24.5%. Its net margin for FY 2021 stood at 10.2% as compared to the industry median of 5.7%. This reflects that JLG is possessing decent capabilities to convert its top line into bottom line.

Exhibit 3: Key Metrics

Analysis by Kalkine Group

Recent Updates:

• On 1 December 2021, the company announced that, due to the recent acquisitions of About Health and Intenza as well as the ongoing Group strategy to pursue further opportunities, Lynne Jacobs would be transitioning from her role as Group General Manager to General Manager – Healthy Living. Notably, a parallel role of General Manager – Healthy Homes is created and the directors have announced that Luan Howitt accepted this role effective 28^th February 2022.

Outlook:

Moving forward into FY22, Just Life Group plans to continue to find further potential acquisitions within its strategy of targeting businesses in the Healthy Living or Healthy Home sectors, which will require a further capital raise.

Earlier, the company's strong balance sheet supported the plans for the acquisitions and the company was able to complete 3 debt-funded acquisitions during the year. It subsequently garnered just over $4 Mn from shareholders during May 2021 in order to reduce that debt.

Risks:

The company is exposed to credit, market, and liquidity risk that arises in the normal course of the business. The company is prone to foreign exchange risk and it arises from future commercial transactions which are not domiciled in NZD.

Technical Overview:

Chart:

Source: REFINITIV

Note: Purple Color Line Reflects RSI (14-Period)

Stock Performance:

JLG continues to follow an acquisition strategy to deliver growth and sustainable future earnings. The company has been resilient.

The debt-to-equity ratio, as at 30^th June 2021, stood at 51:49 (2020: 46:54) due to the three acquisitions which were funded mainly by the bank debt. Free cash flow for the year amounted to $5.3 Mn as compared to $3.9 Mn in 2020.

JLG’s stock has witnessed a decline of ~15.66% in the time span of 3 months.

Considering the aforementioned facts and its current trading levels, we give a “Speculative Buy” recommendation on the stock at the closing market price of NZ$0.700 per share on 14^th February 2022.

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.

Disclaimer

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