Just Life Group Limited

Company Overview: Just Life Group Limited (NZX: JLG) is a New Zealand-based company. The Company is focused on providing products and services to improve lives of people. It provides filtered water solutions to both business and residential customers.

JLG Details

Just Life Group Limited (NZX: JLG) operates in New Zealand and is focused on supplying products and services that improve the lives of New Zealanders.

Looking at the past performance, JLG’s topline and bottomline for FY17-21 grew with a compounded annual growth rate (CAGR) of 18.31% and 12.72%, respectively. Its total revenue for FY21 stood at $32.23 million, as compared to $16.45 million in FY17. Its net income for FY21 stood at $3.31 million, as compared to $2.05 million in FY17.

Exhibit 1: Financial Statistics

Source: Company Reports, Analysis By Kalkine Group

FY21 Results Performance (For the Year Ended 30 June 2021) 

• Notwithstandingthe significant challenges amid the COVID-19 pandemic, JLG has posted a 13% YoY growth in net earnings to $3.3 million after considering the expense associated with the acquisition costs of $0.4 million. 
• The Cylinder Guy contributed $0.35 million to earnings for the duration of nine months and About Health contributed $0.19 million for the two months, being the part-periods of operation since acquisition. 
• The shareholder equity increased substantially to $25.6 million in FY 2021from $17.7 million in FY20. 

Recent Update 

• The directors, on 1 December 2021, declared that Lynne Jacobs will transition from her role as Group General Manager to General Manager – Healthy Living, following the recent acquisitions of About Health and Intenza along with the continuing Group strategy to follow additional opportunities. Further, the directors have appointed Luan Howitt for the position of the parallel role of General Manager – Healthy Homes effective 28th February 2022.
• On 30th November, the company announced the strike price of 82.8 cents ($0.828) per share for shares to be issued under the dividend reinvestment plan (DRP) operating with respect to the dividend payable on 7th December 2021.
• In the press release dated 23 November 2021, the directors announced the transition of Eldon Roberts from his position of Group COO/CFO to COO. Further, Graeme Read will be inducted into the senior management team as CFO effective 1 February 2022.
• The company, on 6 October 2021, declared the acquisition of the business of Intenza New Zealand Ltd. This acquisition is continuation of the acquisition strategy in the ‘Healthy Living’ sector of the Group. The acquisition was unconditional and became effective from the 7th October 2021. The company financed the acquisition from existing banking facilities.

Top 10 Shareholders:

The top 10 shareholders have been highlighted in the table, which together forms around 93.19% of the total shareholding. Harvard Group Ltd. and Falkenstein (Anthony Edwin) are holding maximum stake in the company at 70.34% and 10.28%, respectively, as provided in the table below:

Exhibit 2: Top 10 Shareholders

Source: Company Reports, Analysis By Kalkine Group

A Quick Look at Key Metrics: The company’s gross margin, EBITDA margin and net margin for FY21 stood at 51.3%, 22.4% and 10.2%, better than the industry median of 24.5%, 10.8% and 5.7%, respectively implying decent fundamentals for the company. Its cash cycle for FY21 stood at 5.2 days better than the industry median of 35.5 days.

Exhibit 3: Key Metrics

Source: Company Reports, Analysis by Kalkine Group

Outlook

In the release dated 25^th May 2021, JLG announced that its renounceable rights offer was closed on 21^st May 2021 and it witnessed robust shareholder support. Notably, ~5.9 Mn new shares were taken up under the offer, which represents ~90% of the new shares available under the rights offer. The company would be receiving the gross proceeds of ~$4.1 Mn from the rights offer.

In the press release dated 6 October 2021, the company stated that its business has been affected by the impact of the prevailing COVID-19 lockdowns imposed on various regions across the country. Auckland signifies the largest business-to-business and consumer market and the effect of prolonged level 4 and level 3 lockdowns will adversely hurt the group’s H1FY22 results. However, the group will continue to follow an acquisition strategy to deliver growth and sustainable future earnings. 

The company’s free cash flow for the year amounted to $5.3 million as compared to $3.9 Mn in 2020. This could help JLG moving forward.

The company has developed COVID-19 protocols in order to manage the operations of the Company in an efficient as well as cost effective manner. This depends on the Alert Levels announced by the New Zealand Government.

Key Risks 

The group uses international suppliers and is prone to foreign exchange risk, mainly USD and AUD. The group is also exposed to the interest rate risk that mainly arises from long-term borrowings with variable rates. 

Technical Overview: 

Chart:

Source: REFINITIV

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

Stock Recommendation

The net margin of the company for FY21 stood at 10.2%, significantly better than the industry median of 5.7%. Further, the cash conversion cycle remained significantly better at 5.2 days in FY21 compared to the industry median of 35.5 days. As advised by the company 12 months ago, it felt that the company’s balance sheet supported the plans for acquisitions. Notably, the company was able to complete the three debt funded acquisitions during the year. The company subsequently garnered just over $4 Mn from the shareholders in the month of May 2021 in order to reduce that debt.

Considering the aforementioned factors, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.810 per share, down by 1.22% on 13^th December 2021.

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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