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

1. Toys"R"Us ANZ Limited (Recommendation: Speculative Buy, Market Cap: ~$73.25 million)

Toys“R”Us ANZ Limited (ASX: TOY) is e-commerce direct to consumer retailer of toy, baby, hobby and lifestyle products.

Insights of Q3FY22: During the quarter ended 30 April 2022, the company experienced sustained performance in sales despite the pausing of shipments in February 2022. Through its Australian e-commerce website, the company recorded a rise of 17% in e-commerce orders to 42.7k. In addition, the average order value (AOV) amounted to $115.40 for the quarter. This rose to $120 for the March/April period, which excluded the extensive upgrade closure period disruption. The company seems to have a decent market position, evident by the rising active e-commerce to 198k at the end of April, indicating a growth of 42% on a YoY basis. TOY witnessed low Cost of Customer Acquisition (CAC), which improved to $9.20 in March and $9.85 in April from an average of $10.10. This act as a strong testament to the performance of the Toys“R”Us brand and Intellectual property (IP).

Rising Customers (Source: Analysis by Kalkine Group)

Outlook: Looking forward, the company would be focused on generating top-line growth to attain its medium-term goal of 5% market share penetration in the toys, baby and hobby markets within all licensed regions. TOY’s expansion to the UK indicates a significant near-term growth opportunity for Toys“R”Us as the UK is the largest toy market in Europe, as cited in the company report.

SWOT Analysis:

Stock Recommendation:

• During the past one month and three months, the stock has corrected by ~16.16% and ~40.71%, respectively. The stock is trading near its 52-week low level of $0.080, offering a decent opportunity for accumulation.
• On a TTM basis, the stock is trading at a P/BV multiple of 1.3x against the industry average (Consumer Cyclicals) of 2.6x. 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 ratio, 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 $0.086, up by ~1.176% as of 10 June 2022.

Markets are trading in a highly volatile zone currently due to certain macroeconomic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

TOY Daily Technical Chart, Data Source: REFINITIV

2. Astral Resources NL (Recommendation: Speculative Buy, Market Cap: ~$49.48 million)

Astral Resources NL (ASX: AAR) is involved in progressing its 100% owned Mandilla Gold Project.

Business Updates:  The below picture gives an overview of the key business updates:

Business Updates (Source: Analysis by Kalkine Group)

Q3FY22 Summary: During the quarter, the company finished 293 air-core drill holes for an aggregate of 10,260m identified significant gold anomalism to the southeast of Eos. The upgraded JORC 2012 Mineral Resource Estimate (MRE) stood at 24Mt at 1.0g/t Au for 784koz of contained gold completed, encompassing the cornerstone Theia and Iris deposits and an inaugural MRE at the Eos discovery. At the end of the quarter, the company had a cash balance of $4.8 million.

Net Losses (Source: Analysis by Kalkine Group)

Outlook: The company believes that the continued AC, RC and DD drilling at Mandilla to increase the MRE beyond 1,000,000 ozs. Looking forward, AAR would mainly be focused on the commencing Feysville drill program and progressing technical development studies.

SWOT Analysis:

Stock Recommendation:

• During the past month, the stock has corrected by ~5.88% and is trading near its 52-week low level of $0.074, offering a decent opportunity for accumulation.
• On a TTM basis, the stock is trading at a P/BV multiple of 1.3x against the industry median (Basic Materials) of 2.0x. Thus, it seems that the stock is undervalued at the current trading levels.
• Key Risks: COVID-19 Disruption, Climate Change Risk, Commodity Price Risk, etc.
• Considering the outstanding metallurgical testwork results, 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 $0.080, down by ~3.614% as on 10 June 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. Flexiroam Limited (Recommendation: Speculative Buy, Market Cap: ~$23.09 million)

Flexiroam Limited (ASX: FRX) is engaged in telecommunications and Internet of Things (IoT) connectivity. FRX provides connectivity across any device in any part of the world, for any application.

Change in Directors’ Interest: Recently, the company announced that director Marc Barnett has made a change to holdings in the company by acquiring 25,147,059 fully paid ordinary shares.

Insights of FY22: With respect to its strategic growth plan, FRX achieved numerous milestones in FY22. The company recorded strong financial performance, evident by the growth of 40% in revenue to $3.69 million. This was backed by efforts to capitalise on the increase in global travel and initial revenue from the Solutions business. Gross profit and cash receipts rose by 250% and 95% to $1.48 million and $3.45 million, respectively. The company’s app was integrated with travel booking partners, and the CORE Operating system was enhanced.

Current Ratio Trend (Source: Analysis by Kalkine Group)

Outlook: During 2HFY22, FRX signed 15 Solutions contracts, which would help in generating cash from Q1 FY23 and will add $2 million of annualised revenue. FRX believes that three of its new partners are multi-billion-dollar companies, which are providing sufficient opportunities for contract expansion in the future. The company is expecting to deliver a 100% increase in revenue to A$7.2 million in FY23.

SWOT Analysis:

Stock Recommendation:

• During the past three months, the stock has corrected by ~24.99% and is trading near to its 52-week low-high average of $0.023-$0.059, offering a decent opportunity for accumulation.
• FRX has an EV/Sales multiple of 5.7x against the industry average (Telecommunications Services) of 9.2x on a TTM basis. Thus, it seems that the stock is undervalued at the current trading levels.
• Key Risks: COVID-19 led Uncertainties, Stiff Competition, Technology Risk, etc.
• Considering the rising revenue, growing cash receipts, decent liquidity position, optimistic outlook, 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 $0.036 as of 10 June 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.

FRX Daily Technical Chart, Data Source: REFINITIV

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 for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting 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

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.