Gold money Inc.

Gold money Inc. (TSX: XAU) is engaged in precious metal sales to its clients on its online platform. Its services include arranging delivery and storage of precious metals for its clients, coin retailing, and lending.

Key highlights 

• Growth in Asset Under Custody: The company's asset under management has grown gradually in recent years, owing to its continued focus on offering a smooth experience, as well as additional services such as custody arrangement, dealing, managing, and unrivalled research. It has clients in 120 countries and manages about CAD 2.26 billion in precious metal assets.

Source: Company 

• Generated net cash from operating activities: The company, in the reported period garnered net cash from operating activities of CAD 3.61 million compared to net cash used in operating activities of CAD 5.47 million in the previous corresponding period. The increase was attributable to non-cash adjustments and increase from changes in working capital.
• Improved operating matrix on sequential basis: On a sequential basis, the firm has showed some lively performance, improving on all criteria of its operational matrix. Furthermore, it is constantly collaborating with clients; as a result, its visibility is growing in tandem with volume, which is commendable.
  

Financial overview of Q1 2022 (Expressed in Canadian Dollars)

Source: Company

• In Q1 2022, the company posted revenue of CAD 94.7 million compared to CAD 173.4 million in Q1 2021. The lower revenue was primarily due to decreased metal trading operations.
• Gross profit in the reported period stood at CAD 6.1 million against CAD 10.6 million in the previous corresponding period. The decrease is due solely to decreases in gross margin, fee revenue and gain on revaluation of precious metals.
• Operating income for the period was of CAD 2.4 million compared to CAD 5.6 million in pcp, although the payroll expenses increased to CAD 1.4 million V/s CAD 1.3 million in pcp.
• Net income stood at CAD 0.9 million compared to CAD 6.0 million in pcp. The lower net income was mainly due to lower revenue along with above stated reasons.

Risks associated with investment

The Company is exposed to price risk concerning the price of gold, silver, platinum, and palladium held as assets. Commodity price risk is defined as the potential adverse impact on the earnings of the Company. Other risks involved are like Foreign Currency Risk, Interest Rate Risk, and Liquidity Risk, etc. 

Stock recommendation

Despite the fact that precious metals markets are now volatile, we anticipate strong performance in H1 2022 by the company as investors deal with the economic consequences of the pandemic and the low-interest-rate environment. Additionally, its expenditures would be significantly reduced over the next two financial quarters, and all of its clients would be returned to normal trading activity on the platforms following the brief period of transition and re-onboarding that occurred the previous quarter, which is a significant positive. Furthermore, the firm is improving sequentially, indicating that its operational matrix is improving. On top of all it intends to cut its payroll expenses from Q2 2022 onwards after the restructuring of its Jersey business. On the valuation front, the stock is available at an EV to Sales multiple of 0.3x on TTM basis, which is significantly lower than the industry median of 5.2x. Hence, considering the above rationale, we recommend a ‘Speculative Buy’ rating on the stock at the closing price of CAD 2.55 on September 16, 2021. 

Technical Analysis Summary

One-Year Technical Price Chart (as on September 16, 2021). Source: REFINITIV, Analysis by Kalkine Group

MAV Beauty Brands Inc

MAV Beauty Brands Inc. (TSX: MAV) is a global personal care company selling hair care, body care and beauty products in Canada, the United States, and internationally. The Company offers various products through retail partners and distributors.

Key highlights

• Creating brand value: MAV Beauty Brands offers a varied portfolio of authentic and rapidly expanding brands that provide consumers with a wide variety of high-quality and innovative products. To support the growth of its brands, the company continues to use its operational platform and innovation engine. We think the company's brands positions it as one of North America's most relevant and inventive personal care firms.
• Product innovation: We feel product innovation is vital to the company's long-term success. Its consumer-centric strategy and innovation cycle enable it to offer both highly successful new goods and upgrades to current items to consumers, retail partners, and distributors. Furthermore, via its continuing product innovation cycle, the firm has the potential to stay on-trend.
• Industry beating margins: The power of the company’s branded products bouquet enables it to draw higher operating and net margins in Q2 2021 against an industry median is a big positive.

• Elevated EBITDA: In Q2 2021, the company reported higher EBITDA at USD 8.3 million compared to USD 4.8 million in Q2 2020. The increase in EBITDA in the reported period was primarily attributable to a decrease in integration, restructuring, and other costs.
• New Leadership appointments: On 10 Aug 2021, the board has nominated Serge Jureidini as President and Chief Executive Officer, effective from August 17, 2021. Also, Mr. Chris Elsha, who is currently Board Chairman will act as Interim Chief Executive Officer until Mr. Jureidini commences employment.

Financial overview of Q2 2021

Source: Company

• In Q2 2021, the company posted revenue of USD 29.1 million compared to USD 29.6 million in the previous corresponding period.
• Cost of sales increased by 15.4% to USD 17.4 million in Q2 2021 compared to USD 15.1 million in Q2 2020, as a result its gross profit declined to USD 11.6 million against USD 14.5 million in pcp.
• The company posted lower total expenses to USD 6.1 million compared to USD 12.5 million. The fall in total expenses was supported by negative restricting and integration cost.
• On the back of lower total expenses, the company posted increased net income at USD 4.0 million compared to USD 1.6 million in pcp, partially offset by higher income tax expense.

Risks associated with investment

Extension of government’s restrictions for the closure of stores would be likely to dampen the company’s sales volume and the overall performance of the company. Also, there is a possibility that consumers might cut down on discretionary spending. On the other hand, it holds lengthy cash cycle days which puts pressure on its balance sheet. Some other risks are also linked to the company performance such as high competition, foreign exchange, and supply chain issues.

Valuation Methodology (Illustrative): EV to Sales

Stock recommendation

The firm has a broad collection of authentic and fast expanding brands that provide customers with a wide choice of high-quality and innovative products, and it continues to use its operational platform and innovation engine to help its brands succeed. We believe the company's brands positions it as one of North America's most relevant and inventive personal care companies. Furthermore, the firm increased its EBITDA to USD 8.3 million in the reporting quarter, up from USD 4.8 million in Q2 2020, and has an industry-leading margin profile, which is a significant plus. Therefore, based on the above rationale and valuation, we recommend a “Speculative Buy” rating on the stock at the closing price of CAD 2.11 on September 16, 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 September 16, 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.