Goodfood Market Corp.

Goodfood Market Corp. (TSX: FOOD) is a leading online grocery company in Canada, which provides fresh meal solutions and groceries to the retailers via the eCommerce segment. 

Key Highlights:

• Deployment of electric cargo vans for delivery: The company recently deployed ten all-electric cargo vans which would be used for grocery deliveries to its customers. Each of the van is supported with powered refrigeration system to optimize delivery range in support of the company’s same-day/last-mile delivery operations. We expect the above would support the company’s delivery segments in the coming days.
  

• Growth from online grocery segment: In the recent past, the online grocery segment has been in the limelight, because the sector witnessed an upthrust in demand due to the changing consumer preference on account of restrictions imposed due to covid. Subsequently, the company also witnessed a rapid growth its subscriber base and basket sizes within the grocery segment who opted for home-delivery. Additionally, the management is focusing on highly targeted marketing campaigns, capacity expansion through additional facilities and investments in automation, increasing its product offering and expansion in national platform. This is expected to accommodate a higher consumer base in the coming days, which would subsequently support the company’s sales volume.
  

• Jump in Subscriber’s base: At the end of May 31, 2021, the company reported active subscriber’s base of 317,000, reflecting an increase of 45,000, or 17% on y-o-y basis.

Q3FY21 Financial Highlights:

• FOOD impresses with its third quarter results, wherein the company posted revenue of CAD 107.795 million as compared to CAD 86.600 million in Q3FY20. The growth was aided by the expansion of the company’s same-day delivery option across the two new metropolitan cities in Canada. Moreover, the group reported an increase in the average basket size and higher-order frequency, which supported the company’s topline.
• Gross profit stood significantly higher at CAD 37.732 million, climbed from CAD 24.910 million in pcp, thanks to an elevated revenue, partially offset by a higher cost of sales (CAD 70.063 million v/s CAD 61.690 million in pcp).
• The quarter was marked by a surge in selling, general and administrative expense (CAD 36.875 million v/s CAD 19.486 million in pcp), increase in depreciation and amortization (CAD 2.379 million v/s CAD 1.484 million in pcp), partially offset by a lower net finance cost (CAD 0.431 million v/s CAD 1.154 million in pcp).
• The group reported a net loss of CAD 2.014 million, as compared to a net profit of CAD 2.786 million in pcp.         

Q3FY21 Income Statement Highlights (Source: Company Report)

Risks: Despite a growth in the top-line, the company encountered net loss in Q3FY21, due to a sharp rise in the input costs. Hence, continuation of the above trend is likely to drag the company’s upcoming performance.

Valuation Methodology (Illustrative): EV to Sales based

Stock Recommendation:

The company reported improved working capital management and posted its quick ratio and current ratio of 2.52x and 2.74x, respectively, in Q3FY21, respectively, higher than the industry median of 1.14x and 1.73x, respectively. The above is a key positive and indicates ample short-term liquidity. We have valued the stock using the EV to Sales based relative valuation method and have arrived at a double-digit upside (in percentage terms). For the said purposes, we have considered Rogers Sugar Inc, MTY Food Group Inc etc. Considering the aforesaid facts, we recommend a ‘Speculative Buy’ rating on the stock of FOOD at the last traded price of CAD 7.66 on November 01, 2021.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

Technical Analysis Summary

One-Year Technical Price Chart (as on November 01, 2021). Analysis by Kalkine Group 

Mogo Inc.

Mogo Inc. (TSX: MOGO) is a Canadian based financial technology company, which offers finance application to consumers with solutions which help them to control their financial health. 

Key Updates:

• Improved margins: The company commands higher margin than its peers, which indicates improved operational efficiencies. Notably, in Q2FY21, the company reported gross margin and pretax margin of 94.2% and 66.3%, respectively, higher than the industry median of 82.9% and 33.6%, respectively.
  

• Positive Technical: On a daily chart, the stock of MOGO closed above its simple moving averages of 20-days and 50-days, respectively, indicating a possible up move from the current level.

Technical Price Chart (as on November 01, 2021). Source: REFINITIV, Analysis by Kalkine Group

• New acquisition: Recently, the company reported acquisition of Canadian registered investment dealer, Fortification Capital Inc., which is expected to provide a free stock trading platform to its customers and would provide necessary components on the regulatory and technology side to complement its existing offerings.

• Result announcement: The company would disclose its Q3FY21 result on November 10, 2021.

Q2FY21 Financial Highlights:

• MOGO announces its quarterly result, wherein the company posted revenue of CAD 13.665 million, jumped from CAD 10.559 million in the previous corresponding period (pcp). The increase was driven by exponential growth from Subscription and services revenue (CAD 8.218 million v/s CAD 4.536 million in pcp).
• Gross profit surged to CAD 12.094 million from CAD 9.572 million in pcp, thanks to the elevated revenue, partially offset by higher cost of revenue.
• The quarter was marked by higher Technology and development costs, increase in Marketing expense and higher General and administration.
• The group reported its net income of CAD 9.045 million, as compared to a net loss of CAD 1.550 million in pcp. The company’s profitability was supported by revaluation gain of CAD 24.850 million.

Q2FY21 Income Statement Highlight (Source: Company Report)

Risks: The company reported net cash used in operating activities of CAD 12.630 million during H1 FY21, as compared to a net cash from operations of CAD 37.417 million from the pcp and continuation of the above trend would dampen the company’s overall performance. 

Valuation Methodology (Illustrative): EV to Sales

Stock Recommendation:

The company has improved debt to equity ratio of 0.29x, as compared to the industry median of 1.15x. A lower debt to equity ratio provides higher financial flexibility. Notably, long-term debt to total capital stood at 22.7%, lower than the industry median of 29.2%. We have valued the stock using the EV to Sales-based valuation methodology and have arrived at a double-digit upside (in percentage terms).  For the said purposes, we have considered peers like Voyager Digital Ltd, Lightspeed Commerce Inc etc. Considering the aforesaid facts, we recommend a ‘Speculative Buy’ rating on the stock of MOGO at the last traded price of CAD 7.64 on November 01, 2021.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

Technical Analysis Summary

One-Year Technical Price Chart (as on November 01, 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.