Really good post,
@malkayCan I throw in some additional fundamental analysis which may have slipped by those who have not paid great detail to the announcements over the past few months. It is relevant to the Pro-Hygiene business and gives me even more assurance of this company's growth trajectory. Bear with me, it takes a little explaining...
In March this year, HT8 released their new Pro-Hygiene (anti-COVID) range. They envisaged monthly sales c. $400k. In May, they updated the market with P-H sales for April of $1.05m. April was a game-changing month for HT8, which also delivered $1.67m in tech sales for a $2.72m month.
As part of the June quarterly (Q4 20), HT8 summarised a successful quarter with $6.59m in sales, including $1.4m from P-H sales. Deducting April's results, we get an average of $180k P-H sales per month for May and June, and over $1.7m per month for IT/CE sales. While P-H saw a sharp decline in May and June, what I really like is the steady increase in their core products. This is far more important.
Into Q1 21, we started exceptionally well. $3.44m in sales for July which included an historic record for IT/CE sales. In September the August sales were released showing a similarly impressive $3.32m sales. HT8 also announced "$1.4m revenue in July and August" for its P-H products. HT8 has just clarified to me via email that this means $1.4m across both months, i.e. an average of $700k per month, spiking due to 2nd wave but still well below April's peak. I'm quite excited by this. Why?
Because, again, it shows the continued growth of the IT/CE core business: July must have been $2.7m and August $2.6m, give or take. Q1 21 was rounded out with another $3m month in September, for a truly impressive $9.8m quarter (approx. 70% FY20 total, and a healthy $800k+ EBIT).
The core IT/CE business continues to grow rapidly, thanks to reasons well covered above by malkay and the many other informed HT8 posters (Stockfella & co.). It is exciting to think what Q2 21 might look like given traditional consumer spending through this period. HT8 is well positioned, with a strong inventory, to meet this demand.
The table below helps put the above into context.
|
|
| Q4 20 | Q1 21 | Q2 21 (f/c) |
|
| Pre-Apr | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec |
| Rev | Tech | 695 | 1,670 | 1,750 | 1,765 | 2,740 | 2,620 | 2,540 | 2,800 | 2,900 | 2,850 |
| Hyg | - | 1,050 | 180 | 180 | 700 | 700 | 500 | 400 | 300 | 200 |
| Tot | 695 | 2,720 | 1,930 | 1,945 | 3,440 | 3,320 | 3,040 | 3,200 | 3,200 | 3,050 |
|
|
|
|
| 6,595 |
|
| 9,800 |
|
| 9,450 |
I suspect the uncertainty around P-H sales is weighing on today's share price somewhat. However, my takeaway here is that any decline in P-H sales, while perhaps expected, when overlaid against the continued overall growth in monthly sales really highlights the success of the core IT/CE business. Core growth is far more sustainable than P-H quick wins. This will have a big impact on market sentiment, too, when it is fully understood with further announcements.
If we do get a Q2 21 as good as or better than my forecast above, it reaffirms my personal price target beyond 20c. It really depends what sort of P/E the market will eventually apply to us, but our peers sit at 20x and greater (in fact, KGN is well documented above 60x). As an example, extrapolating Q2 21 forecast results:
| Gross % | 18% |
| Gross $ | 1,701 |
| Net % | 8% |
| Net $ | 756 |
| Net $ yr | 3,024 |
| P/E | 25 |
| MC | 75,600 |
| SoI | 255,000 |
| Target SP | 0.30 |
A potential target price of 30c on a 25x P/E multiple... My guess is the market will begin the rerate upon affirmation of continued IT/CE growth and maintaining strong monthly revenue despite a potential drop in P-H sales. With the introduction of new verticals and the continued strength of its IT/CE growth, I have confidence it is a matter of time.
