Three Diversified Stocks Under 20 Cents Report with Decent Long-term Growth Potential -TOY, AAR, ATP

1. Toys"R"Us ANZ Limited (Recommendation: Speculative Buy, Market Cap: ~$101.26 million)

Toys“R”Us ANZ Limited (ASX: TOY) is engaged in the distribution of toys, confectionary, and homeware products.

January 2022 Business Update: The company recently provided an update on the quarter and half-year ended 31 January 2022, wherein it attained robust growth in order volumes as it delivered into seasonally strong trading conditions. TOY witnessed decent growth in Q2 FY22, with a rise of 86% in sales revenue, supported by significant uplifts in average order value and the number of orders received. In addition, monthly revenue ramped up by 136% on a YoY basis in January 2022 for www.toysrus.com.au. The company minimized supply chain disruptions via actions taken during 2021.

FY21 Operational and Financial Highlights: During FY21, the company recorded proforma revenue of $48.2 million against $24.6 million in FY20. In addition, proforma gross profit stood at $11.1 million as compared to $3.5 million in FY20. TOY had a cash balance of $17.3 million at the end of FY21 against $0.36 million as on 30 July 2020. In addition, the company also enjoys a nil debt position on its balance sheet.

Current Ratio Trend (Source: Analysis by Kalkine Group)

Outlook: The company is aiming to complete a new e-commerce distribution centre in the city of Monash, Victoria, in August 2022. In addition, TOY continues to enhance top-line growth to achieve its medium-term goal of 5% market share penetration in the toys, baby, and hobby markets within all licensed regions.

SWOT Analysis:

Stock Recommendation:

• During the past one month and three months, the stock has corrected by ~6.24% and ~35.71% and is trading below its 52-week low-high average of $0.075 - $0.205, respectively.
• On a TTM basis, the stock is trading at a P/BV multiple of 1.8x against the industry average (Consumer Cyclicals) of 3.3x. Thus, it seems that the stock is undervalued at the current trading levels.
• Key Risks: COVID-19 Led Uncertainties, Stiff Competition, Credit Risk, Forex Headwinds, etc.
• Considering the rising sales, increasing orders and order value, decent liquidity position, nil debt to equity, current trading level, valuation on TTM basis, and key risks associated with the business, we give a “Speculative Buy” rating on the stock at the closing market price of $0.1125, down by ~4.256% as on 25 March 2022.

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.

TOY Daily Technical Chart, Data Source: REFINITIV

2. Anglo Australian Resources NL (Recommendation: Speculative Buy, Market Cap: ~$65.57 million)

Anglo Australian Resources NL (ASX: AAR) is engaged in progressing its 100% owned Mandilla Gold Project and evaluating its portfolio of tenements and projects to identify opportunities to maximise value for shareholders.

Update on Drilling: Recently, the company has received assay results from the final three drill holes from the drilling program at Onedin conducted in Q4CY21. The results indicate the continuity of high-grade copper, zinc, lead, silver, and molybdenum across the Onedin deposit.

Operational and Financial Highlights: During the half-year ended 31 December 2021, the company made significant progress towards the development of Mandilla, which mainly include 31,261 meters of drilling, comprising 17,605 meters of reverse circulation (RC) drilling, 3,396 meters of diamond drilling and 10,260 meters of air-core (AC) drilling. AAR posted a net loss amounting to $1.28 million against net loss of $1.36 million in 1HFY21. At the end of 1HFY22, the company had cash and cash equivalents of $6.11 million as compared to $9.81 million at the end of 1HFY21.

Net Loss Trend (Source: Analysis by Kalkine Group)

Outlook: Looking forward, the company would initiate drilling at Feysville after receiving necessary approvals. AAR expects that the initial exploration will commence with diamond drilling at Think Big to improve the structural understanding of this target.

SWOT Analysis:

Stock Recommendation:

• During the past one month, the stock has corrected by ~4.54% and is trading above its 52-week low-high average of $0.074 - $0.125, respectively.
• On a TTM basis, the stock is trading at a P/BV multiple of 3x against the industry median (Metals & Mining) of 3.3x. Thus, it seems that the stock is undervalued at the current trading levels.
• Key Risks: COVID-19 Led Uncertainties, Commodity Price Risk, Forex Headwinds, etc.
• Considering the decent assay results, operational progress in 1HFY22, nil debt to equity, current trading level, valuation on a TTM basis, and key risks associated with the business, we give a “Speculative Buy” rating on the stock at the closing market price of $0.105, down by ~4.546% as on 25 March 2022.

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.

AAR Daily Technical Chart, Data Source: REFINITIV

3. Atlas Pearls Ltd (Recommendation: Speculative Buy, Market Cap: ~$22.67 million)

Atlas Pearls Ltd (ASX: ATP) is engaged in the production of South Sea pearls at its operation located across Indonesia. The company is also involved in perfume manufacturing and distribution and jewellery retailing.

Operational and Financial Summary: During 1HFY22, the company rolled out its online sales platform in response to the COVID-19 pandemic. This allowed ATP to continue selling its pearls worldwide in uncertain times. The online platform backed the sale of pearls in line with a 24-month harvest period. ATP recorded revenue of ~$12.36 million against ~$6.82 million in 1HFY21. The company witnessed another profitable period with a net profit of ~$4.13 million against a loss of ~$0.74 million in 1HFY21. At the end of 1HFY22, ATP had cash and cash equivalents of ~$4.41 million in 1HFY22 against ~$3.02 million at the end of 1HFY21.

Current Ratio Trend (Source: Analysis by Kalkine Group)

Outlook: For the quarter ended March 2022, ATP anticipates harvesting 160,000 pearls and sales of ~75,000 pearls. Looking forward, the company is focused on operational process improvements to ensure harvest quality is maximized. In addition, the online platform would continue to be the primary medium for the sale of pearls whilst increasing customer reach.

SWOT Analysis:

Stock Recommendation:

• The stock is approaching its 52-week high price of $0.058.
• On a TTM basis, the stock is trading at a P/BV multiple of 1.0x against the industry median (Basic Materials) of 2.3x. Thus, it seems that the stock is undervalued at the current trading levels.
• Key Risks: COVID-19 Led Uncertainties, Demand & Supply Risk, Credit Risk, Forex Headwinds, etc.
• Considering the rising revenue, turnaround in the bottom line, decent liquidity position, current trading level, valuation on TTM basis, and key risks associated with the business, we give a “Speculative Buy” rating on the stock at the closing market price of $0.053, as on 25 March 2022.

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.

ATP Daily Technical Chart, Data Source: REFINITIV

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.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: 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.

Disclaimer

Kalkine New Zealand Limited is authorised to provide general advice only. The information on this website does not take into account any of your investment objectives, financial situation or needs. Before you make a decision about whether to acquire a financial product, you should obtain the Product Disclosure Statement from the product issuer. You should consider the appropriateness of advice taking into account your own objectives, financial situation and needs and seek independent financial advice before making any financial decisions.