Jumia Technologies AG

Jumia Technologies AG (NYSE: JMIA) is a German-based company specialized in e-commerce which operates an online marketplace for African consumers to buy and sell goods. The Company offers several products, including dresses, leggings, skirts, polo shirts, belts, watches, sunglasses, health products, beauty products, and a range of products for children.

Key highlights 

• Key initiatives starting to pay off: The management took some prudent steps regarding business mix rebalancing, operational efficiencies, and portfolio optimization as a result of this the group continue to reduce their Adjusted EBITDA loss.

Source: Company 

• Record Gross profit after Fulfillment expense: The group earned a record gross profit after fulfillment expense in Q3 2020, which reached to EUR 6.6 million, compared to a loss of EUR 1.7 million in the third quarter of 2019.

Source: Company

• Robust performance from JumiaPay: The group’s Jumia Pay has shown a robust performance under which transactions accounted for 34% of total orders and TPV grew by 50% taking on-platform penetration to 26% of GMV.

Source: Company 

Financial overview of Q3 2020

Source: Company 

• In Q3 2020 the company reported EUR 33.6 million revenue, compared to EUR 40.9 million in the previous corresponding period. The revenue decline primarily due to First Party revenue, which decreased by 53%. This was in line with the group’s strategy to undertake fewer sales on a first-party basis as they focus on running an asset-light marketplace model.
• Cost of sales as a % to revenue in Q3 2020 improved to 31%, compared to 53.5% in Q3 2019.
• Due to the lower cost of sales, the gross profit increased by 22% and stood at EUR 23.2 million in Q3 2020, compared to EUR 19 million in the previous corresponding period.
• In Q3 2020 the company registered an operating loss of EUR 28 million, decreased by 49%, compared to EUR 54.6 million in Q3 2019. The company was demonstrating meaningful progress on the path to profitability.
• Net loss was registered at EUR 32.4 million in the reported quarter, against EUR 50 million in Q3 2019. 

Risks associated with investment

Due to the spread of the COVID-19 virus, global economic activity has melted to some extent. This may result in lower consumer spending, which might act as a drag for the company, which would dampen the company's overall performance. 

Stock recommendation

The Company has a leading pan-African e-commerce platform, which has focused over the past 12 months to advance towards breakeven firmly. They have made significant progress on its path to profitability with adjusted EBITDA loss in the third quarter of 2020, decreasing by 50%, against the previous corresponding period. The group had initiated business mix rebalancing late last year, which increased their exposure to everyday product categories. This combined with enhanced promotional discipline supported unit economics. Besides, they made multiple enhancements across the logistics and marketing operations that led to a decrease in Fulfillment and marketing expenses for the third quarter of 2020 by 20% and 55%, respectively; thus, they clocked healthy gross profit. On the valuation front, the stock is available at forward EV/Sales multiple of 20.9x, which is significantly higher compared to the industry mean of 3.6x. In January 2021, the stock has already generated a return of almost 95%. Hence, based on the aforementioned facts, we prefer to remain on the sideline and recommend an “Expensive” rating on the stock at the closing price of USD 57.37 on January 27, 2021.

Source: Refinitiv (Thomson Reuters)

NexGen Energy Ltd.

NexGen Energy Ltd. (AMEX: NXE) is an exploration and development stage entity engaged in the acquisition, exploration and evaluation and development of uranium properties in Canada.

Q3FY20 Financial Highlights:

• NXE announced its quarterly results, wherein the group posted a higher loss from operations at CAD 21.36 million, significantly higher than CAD 0.73 million in the previous corresponding period (pcp).
• The quarter was marked by mark to market loss on convertible debenture amounting CAD 13.59 million, as compared to a gain of CAD 6.95 million in Q3FY19. Interest expense stood higher at CAD 3.45 million compared to CAD 2.97 million in pcp. However, the group witness a decline in certain expenses like salaries, benefit and director’s fees (CAD 1.102 million versus CAD 1.173 million in pcp), office and administrative costs (CAD 0.30 million versus CAD 0.366 million in pcp), professional fees (CAD 0.595 million versus CAD 0.906 million in pcp).
• Net loss for the quarter increased to CAD 21.51 million versus CAD 0.81 million in pcp.
• The group reported a cash balance of CAD 78.622 million, while total assets were recorded at CAD 353.996 million.

Q3FY20 Income Statement Highlights (Source: Company Reports)

Risks: The company is yet to report any revenue, while the operations do not provide any surety of revenue generation. Moreover, the management has not reported any acquisition or merger news in the recent past and, hence the company is likely to report higher accumulated deficit in the coming quarters.

Stock Recommendation

The future performance depends on third-party financing like debt or equity as the company is yet to report an income. The company reported a higher accumulated deficit of CAD 153.637 million in Q3FY20, increased from CAD 103.501 million in FY19. The stock of NXE appreciated ~113% and ~154% in the last nine months and one year, respectively and closed near the upper band of its 52-weeks trading range of USD 3.09 and USD 0.50. The stock has made a decent rally in the recent past, which was not supported by any fundamental metrics. Hence, we are skeptical about the stock’s potential. Considering the aforesaid facts, price movement, we recommend an ‘Expensive’ rating on the stock at the closing price of USD 2.80 on January 27, 2021.

NXE Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.