Jamieson Wellness Inc.

Jamieson Wellness Inc. (TSX: JWEL) is engaged in the manufacturing, distributing, and marketing of branded natural health products like vitamins, minerals, and supplements.

Key Highlights:

• Focus on higher product penetration across the international markets: The group derives the major revenues from its Jamieson brand, which is available across more than 45 countries, including key markets like Eastern Europe, Middle East, and Southeast Asia. Moreover, the group is focusing on higher market penetration, geographic expansion, and global Costco partnership and expects its international revenue to grow by 15% to 25% in FY21. Notably, from FY16 to FY20, international revenue grew at a CAGR of 23.7%, which is noteworthy.                            

Growth Rate Comparison, Analysis by Kalkine Group

• Margin Expansion: In recent years, the company reported a stable growth in adjusted margin supported by prudent capital investments, which has further improved the company’s capacity and operational efficiency. During FY16 to FY20, the company showcased an adjusted EBITDA margin expansion of 300 bps, which is worth mentioning.                                                                       

Q1FY21 Financial Highlights:

• JWEL announced its quarterly result, wherein the group posted revenue of CAD 98.270 million, surged from CAD 84.523 million in the previous corresponding period. The growth was driven by strong growth from Jamieson Brands (CAD 75.895 million v/s CAD 69.794 million in pcp).
• Gross profit stood higher at CAD 33.888 million, up 8.4% on y-o-y basis, thanks to the higher revenue, partially offset by the increased cost of sales (CAD 64.382 million v/s CAD 53.267 million pcp). Gross profit margin stood at 34.5%, lower than 37.0 % in the previous year.
• Earnings from operations slumped to CAD 10.520 million, from CAD 12.359 million mainly due to surge in selling, general and administrative expenses (CAD 20.766 million v/s CAD 17.632 million in pcp) coupled with higher share-based compensation expense (CAD 2.602 million v/s CAD 1.265 million in pcp).
• Adjusted EBITDA fell at CAD 18.542 million as compared to CAD 16.687 million in Q1FY20 mainly due to above reasons.
• Net income stood at CAD 6.136 million, as compared to CAD 8.011 million in Q1FY20.

Q1FY21 Income Statement Highlights (Source: Company Report)

Risks: The product of the company caters to the healthcare segment and are subjected to several regulatory approvals, and a delay in the above would hinder the company’s upcoming product launches. In addition to this, currency fluctuations, change in consumer preferences might dampen the company’s overall performances as well.

Valuation Methodology (Illustrative): Price to Earnings

Stock Recommendation:

For FY21, the company expects its total revenue in a range of CAD 421 million to CAD 438 million v/s CAD 404 million in FY20. Adjusted EBITDA is expected to grow by 8% to 14% to CAD 95 million - CAD 100 million. Adjusted EPS is expected within the range of CAD 1.24 to CAD 1.32 in FY21, reflecting a growth of 6.9% to 13.8% from FY20.  We have valued the stock using the Price to Earnings based relative valuation method and have arrived at a single-digit upside (in percentage terms). For the said purposes, we have considered peers like MTY Food Group Inc, Alcanna Inc etc. Considering the aforesaid facts, we recommend a ‘Hold’ rating on the stock at the last closing price of CAD 37.72 on May 27, 2021.

One-Year Technical Price Chart (as on May 27, 2021). Analysis by Kalkine Group

Copper Mountain Mining Corporation

Copper Mountain Mining Corporation (TSX: CMMC) is a copper producer, developer and explorer. Copper Mountain's flagship asset is the Copper Mountain mine located in southern British Columbia near the town of Princeton.

Key Highlights:

• Strong Profitability margins: The company enjoys improved margins over most of its peers, supported by declining all-in cost in the recent past. Moreover, the company expects its FY21 all-in cost to remain lower than FY20. EBITDA and Operating margin stood at 57.3% and 52.4%, respectively, compared to the industry median of 39.4% and 22.3%, respectively. Net margin stood strong at 32.1% compared to the industry median of 14.1%.

• Bullish Technical Indicator: The stock of CMMC trading above the long-term moving averages of 100-days, 150-days and 200-days, respectively, indicating a bullish pattern. Moreover, the stock price is in a strong uptrend from the last one year, supported by growing investor’s interest. The increase was primarily due to elevated metal prices in the recent past, which have further resulted to higher profitability.              

Technical Price Chart, Analysis by Kalkine Group

• Improved liquidity: The company reported improved liquidity of CAD 137.1 million in Q1 FY21, as compared to CAD 85.6 million in Q4 FY20. The current liquidity seems to be sufficient to fund the company’s near-term working capital needs and capital investments.

Q1 FY21 Financial Highlights:

• CMMC announced its Q1 FY21 result, wherein the group reported revenue of CAD 162.207 million, significantly higher than CAD 49.564 million in Q1 FY20. The increase was driven by strong momentum from the copper in the concentrate segment (CAD 145.257 million v/s CAD 39.921 million in FY20) due to a 51% y-o-y surge in the copper prices.
• Gross profit surged to CAD 96.280 million, as compared to a loss of CAD 14.949 million in the previous corresponding period (pcp), thanks to the higher revenue coupled with a flat cost of sales (CAD 65.927 million v/s CAD 64.513 million a year ago).
• The company posted an operating income of CAD 85.053 million, as compared to a loss of CAD 18.023 million in pcp. The period was marked by a higher general and administration expense (CAD 5.268 million v/s CAD 2.446 million in FY20) along with a higher share-based compensation expense (CAD 5.959 million v/s CAD 0.628 million in FY20).
• The group reported a net income of CAD 52.118 million, as compared to a net loss of CAD 43.458 million in pcp.

Q1 FY21 Income Statement Highlights (Source: Company Report)

Risk: Volatility in commodity prices would affect the company’s overall performance, including cash flows, margins, and profitability.

Stock Recommendation:

The company reported robust Cash flow growth in 1QFY21, supported by elevated metal prices. Cas flow from operations increased due to positive net income compared to a loss in pcp. Moreover, the group outperformed the industry on various financial metrics. We expect the group’s performance to remain strong as the demand for copper is likely to sustain in the foreseeable future. On the valuation front, the stock is available on a forward EV to EBITDA multiple of 4.6x compared to the industry (Basic Materials) median of 6.1x. Hence, considering the aforesaid facts, we give a ‘Hold’ rating on the stock at the last closing price of CAD 4.32 on May 27, 2021.

One-Year Technical Price Chart (as on May 27, 2021). Analysis by Kalkine Group 

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

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