Winpak Ltd

Winpak Ltd (TSX: WPK) manufactures and sells a wide range of packaging materials utilized for foods, beverages, and healthcare applications.

Key Updates

• Strong YTD Performance: For 9MFY21, the company reported a 12.9% y-o-y growth in its topline to USD 722.9 million from USD 640.4 million, supported by a ~8.8% increase in sales volumes. Notably, the rigid packaging and flexible lidding operating segment achieved volume growth of 9% from pcp, supported by significant advancement within the rigid container volumes due to rising demand for pet food trays coupled with the launch of dessert container products.

• RSI Hovering at an Oversold Zone: On the daily chart, the 14-day RSI of the stock is trading near its oversold zone of 18.4868, which might lead to a possible price recovery from the current level. Moreover, the WPK stock closed below the lower range of the 20-days Bollinger band, suggesting a possible up move from the current level.

• Positive Outlook: For FY21, the group expects improved performance within the flexible packaging segment, supported by notable volume growth from retail protein and cheese products along with resilient activity from the biaxially oriented nylon film non-food retail and hospitality segments. In the recent past, the company saw strong momentum from the retort of pet food, snack food and specialized printed packaging products and expects this momentum to continue in the coming quarters. Moreover, the management is focusing on additional opportunities within the pharmaceutical sector and the nutritional powder products category. The successful addition of clients would lead to improved business prospects.

Q3FY21 Financial Highlights

• WPK announced its quarterly result (Q3FY21, ended September 26, 2021), wherein it posted revenue of USD 254.166 million, higher than USD 210.605 million in the previous corresponding period. The growth was driven by improved performance from all three segments of the company.
• Gross profit stood at USD 62.028 million, a slide from USD 66.002 million in pcp, due to significantly higher cost of sales (USD 192.138 million v/s USD 144.603 million in pcp).
• Income from operations was down USD 28.315 million, from USD 37.792 million in Q3FY20. The decline was primarily due to higher sales, marketing & distribution expenses, and research and technical expenses.
• The company reported a net income of USD 21.350 million, compared to USD 27.372 million in pcp. The decline was due to higher expenses, partially offset by lower income tax.

Q3FY21 Income Statement Highlights (Source: Company Report)

Risks Associated with Investment

The bulk of the company's expenses are related to raw materials, and elevated raw material costs would lead to margin pressure and might dampen its profitability. Moreover, the group's performance is dependent on the changing consumer preferences, and hence, a shift in consumer preference could adversely affect its overall performance.

Valuation Methodology (illustrative): Price to Cash Flow

Stock Recommendation

For 9MFY21, the company paid a handsome dividend of USD 164.055 million, significantly higher than USD 4.311 million in pcp. Moreover, it reported higher operating and net margins of 11.1% and 8.4%, respectively, in Q3FY21, compared to the industry median of 10.6% and 6.4%, indicating better operational efficiency. We have valued the stock using the Price to CF-based relative valuation method and have arrived at a double-digit upside (in percentage terms). For the said purposes, we have considered peers like CCL Industries Inc, Intertape Polymer Group Inc, etc. Considering the aforesaid facts, we recommend a 'Buy' rating on the stock of WPK at the last traded price of CAD 34.91 on November 30, 2021.

One-Year Technical Price Chart (as on November 30, 2021). Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.

OceanaGold Corporation

OceanaGold Corporation (TSX: OGC) is engaged in the exploration and development of gold and other minerals and has a presence across the Philippines, New Zealand, and, to a lesser extent, the United States.

Key Highlights

• RSI at Oversold Zone: On the daily chart, the 14-day RSI of OGC stock is hovering at an oversold zone of 36.5761. Moreover, the stock also closed near the lower range of the 20-days Bollinger band. The above indicates a potential up move in the coming trading sessions.

Technical Price Chart (as on November 30, 2021). Source: REFINITIV, Analysis by Kalkine Group

• Strong Profit Margins: The group commands an impressive profit margin compared to the industry median, which is a key positive as it indicates improved operational efficiency. Notably, in Q3FY21, the company posted EBITDA and operating margins of 42.7% and 18.3%, respectively, compared to the industry median of 8.9% and 9.0%. Moreover, its net margin for the quarter was 21.9%, higher than the industry median of 6.5%.

• On Track for Achieving FY21 Production Guidance: For 9MFY21, the company reported its total production of 256.2 koz of gold, higher than 202.5 koz in pcp. As per the management, OGC is likely to achieve its FY21 guidance of 350 to 370 koz of gold production. The above is supported by better-than-expected gold production from the Didipio mine in the Philippines and more robust production from the United States at Haile.

• Prudent Working Capital Management: The company has prudent working capital management and posted its quick ratio and a current ratio of 0.88x and 1.51x, respectively, in Q3FY21 v/s the industry median of 0.60x and 1.09x. The above indicates better utilization of resources compared to the industry median.

Q3FY21 Financial Highlights

• OGC announced its quarterly result, wherein it reported revenue of USD 204.6 million, a jump from USD 97.9 million in Q3FY20. The increase was primarily due to higher gold sales (97.4 koz v/s 60.8 koz in pcp) coupled with a higher average gold price (per oz) of USD 1,797 v/s USD 1,601 in pcp.
• Operating profit stood higher at USD 37.5 million, compared to an operating loss of USD 22.2 million in pcp. The quarter was marked by higher cost of sales and general & administration expenses.
• The company turned profitable and reported a net profit of USD 44.9 million compared to a net loss of USD 96.8 million in pcp. The increase was supported by elevated revenue and operating profit.

Q3FY21 Income Statement Highlights (Source: Company Report)

Risks Associated with Investment

The company's operations might be hindered by events like delays in the execution of its upcoming projects, volatility in commodity prices, etc. Moreover, being unable to report a new drilling area's expected result would likely impact OGC's forthcoming performance and mineral reserves.

Valuation Methodology (Illustrative): Price to Cashflow

Stock Recommendation

Due to the resurgence of COVID 19 across different parts of the globe and rising uncertainties within the capital market, we expect gold prices to remain strong in the coming quarters due to the defensive nature of the asset class. The above would result in improved realization prices for the company, further supporting its overall performance. We have valued the stock using the price to cash flow-based valuation method and have arrived at a double-digit upside (in percentage terms). For the said purposes, we have considered peers like Resolute Mining Ltd, B2Gold Corp, etc. Considering the aforesaid facts, we recommend a 'Speculative Buy' rating on the stock of OGC at the last traded price of CAD 2.32 on November 30, 2021.

One-Year Technical Price Chart (as on November 30, 2021) Source: REFINITIV, Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.

Kidoz Inc. 

Kidoz Inc. (TSXV: KIDZ) is mainly engaged in creating consumer mobile software products and games. The firm is a kid-tech software developer and owner of the KIDOZ content discovery network. Its emphasis is on the development and marketing of an interactive game platform for families and children. 

Key Updates

• Encouraging Quarterly Performance: In Q3FY21, the company reported that it played more than 170 million rich media advertisements, which is ~70% higher than Q2FY21. The continuation of this trend would support the company's upcoming performance. Notably, KIDZ reported a 50% q-o-q growth in the paid app installs from its new Kidoz App Promotion campaigns, a significant positive.
• Solid Growth in Topline: For 9MFY21, it reported exponential growth in its income, which stood at USD 6.550 million, compared to USD 3.641 million in pcp, driven by a surge in income from Ad tech advertising revenue (USD 6.384 million v/s USD 3.316 million in pcp). The above indicates improved demand dynamics supported by solid growth from extensive mobile advertising coupled with the company's focus on contextual content.
• New Targeted Audience to Support Upcoming Growth: The company is marking its presence across teens (13 to 19) and parents' markets. Furthermore, it plans to provide gaming and app environments for its targeted consumers. The above is expected to increase the KIDZ' consumer base, which is impressive.

Q3FY21 Financial Highlights

• For Q3FY21, the company reported higher revenue of USD 2.815 million than USD 1.920 million in pcp. The growth was supported by higher income from Ad tech advertising revenue.
• Gross profit surged to USD 1.226 million, higher than USD 0.915 million in pcp, partially offset by higher cost of sales thanks to increased income.
• KIDZ witnessed a surge in general and administrative costs and salaries, wages, consultants and benefits, and selling and marketing expenses.
• Hence, it reported a net loss of USD 0.075 million v/s a net profit of USD 0.117 million in pcp.

Q3FY21 Income Statement Highlights (Source: Company Report)

Risks Associated with Investment

The company is incurring higher input costs, which is leading to suppressed bottom-line, and the continuation of the above trend is likely to dampen its overall performance in the long run.

Valuation Methodology (Illustrative): Price to Earnings-based

Stock Recommendation

In the recent past, the company saw encouraging growth in the Kidoz system, supported by the increased adoption rate amongst app developers, which is a key positive. Moreover, the mobile advertising ecosystem is expected to grow immensely in the coming years. It is expected to surpass USD 400 billion by 2023, and the company is highly poised to grab the related advantages coming from this sector.

We have valued the stock using the Price to Earnings based relative valuation method and have arrived at a double-digit upside (in percentage terms). For said purposes, we have considered peers like Sciplay Corp, Skillz Inc, etc. Considering the aforesaid facts, we recommend a 'Speculative Buy' rating on the stock of KIDZ at the last traded price of CAD 0.63 on November 30, 2021. 

One-Year Technical Price Chart (as on November 30, 2021). Source: REFINITIV, Analysis by Kalkine Group  

*The reference data in this report has been partly sourced from REFINITIV.

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.