AIM-listed Woodbois Limited Recorded Strong Growth In The First Quarter Of 2019

  • Jun 19, 2019 BST
  • Team Kalkine
AIM-listed Woodbois Limited Recorded Strong Growth In The First Quarter Of 2019

Alternative Investment Market-listed Woodbois Limited is a forestry and timber trading company with core operational activities comprises of production, processing, manufacturing and supply of sustainable African hardwood and hardwood products. As on September 17, 2010, its shares got admitted to the AIM, a submarket of the London Stock Exchange for trading. The outstanding market capitalisation of the company stood at £28.39 mn, which ranks it among the small-cap companies listed on the AIM-segment of the LSE. The group is a constituent of FTSE AIM All-Share and FTSE AIM All-Share-Share retail respectively. Woodbois Limited products are Lumber, Veneer and Plywoods. The group is headquartered in Guernsey.

Ownership

Lombard Odier Asset Management (Europe) Ltd. is the largest institutional investor in the group, with an aggregate holding of around 25%.

Trading Update

As on April 02, 2019, the group reported a recorded high quarterly trading update. During the period under consideration, the group recorded a revenue of $4.5 mn and registered a growth of 33% against FY18 quarterly average of $3.4 mn. Reported growth was supported by increased revenue from trading activities and sales of their own sawn timber and veneer production. During the first quarter of 2019, the group shipped around 114 containers of their own sawn timber and veneer, which was at record high level. This was more than 100% of the containers shipped during Q1 FY18 and approximately 50% above the 2018 quarterly average. Despite crucial headwinds which were beyond their control, this stellar step-up was achieved.

During the quarter, the group received two simultaneous trade finance funds that are going to strengthen their trading division. The group reported an energetic kick-start for 2019 and aimed to further increase by high levels of inflows and commitments in their Internal Trade Finance (ITF).

Corporate Consolidation

Woodbois made an enterprising start to 2019, with disposal of its agriculture assets in Tanzania and acquired 25% stake in the Montara Continental Limited. Meanwhile, the board of directors commented that corporate restructuring and increased focus of the group to timber trading and production would make Woodbois more captivating from the potential trade finance providers and investors standpoint.

During the quarter ended March 31, 2019, 1798 Volantis Team, a team within Lombard Odier Asset Management group invested around $5mn and acquired approximately 25% stake in the company and offered a loan of $5mn for trade finance purpose.

In the Trading update filed with the LSE, the group also announced that they are not going to exercise their options to purchase the business of Nouvelle Scierie Moderne de Sassandra. However, the group will maintain a healthy relationship with the Nouvelle Scierie Moderne de Sassandra, and they will continue to have exclusivity over their production of timber in Ivory Coast as well as exploring opportunities with them in other timber ventures across West Africa.

During the period under consideration, the group announced that new kilns would be installed and operational by the third quarter of FY19 and installation of kilns could add $700,000 annually to the bottom line of the company.

With the business now fully operational, the group would drive its profitability through expansion while keeping margins consistently higher.

Financial Highlights: FY18

During the FY18, group’s reported revenue for the year stood at $13.4 mn against $7.9 mn recorded in the previous financial year. On YoY basis, the group reported a revenue growth of 70% and this was mainly driven by 93% surge in their Forestry revenue from their own production assets and trading revenue surged by 57% on a YoY basis.

Pre-tax loss for the financial year ended December 31, 2018, was at $5.6 mn against the loss of $7.3 mn recorded in the year-ago period.

During the FY18, inventory of the group surged by 23% on a YoY basis, and this was primarily because of increased timber production in Gabon, Africa.

On a YoY basis, working capital requirement of the timber manufacturer surged by $2.0 mn, but remained in line with the management expectations.

Basic loss per share attributed to shareholders stood at 1.76 cents versus 0.74 cents recorded in the year-ago period. However, diluted loss per share for the FY18 stood at 1.36 cents per share against the earnings per share of 0.50 cents.

Cash Flows

Cash flow from operating activities was an outflow of $7.5 mn against the outflow of $25.5 mn recorded in the previous financial year. Recorded cash outflow from investment-related activities was at $3.24 mn against the outflow of $7.9 mn recorded in 2017. At the end of the FY18, cash and cash equivalent stood at $1.9mn against $2.08 mn recorded in the year-ago period.

Key ratios

Group’s gross margin for the FY18 stood at 15.72%, which was considerably below the industry average of 40.60. In FY18, the gross margin recorded was considerably better than the gross margin of 5.7% recorded in the FY17.

However, the Liquidity position of the group in terms of current ratio was below the industry peers. The group's current ratio for FY18 stood at 0.85 against the industry average of 1.31. Also, the long-term debt contribution to the total capital stood at 11.2% as compared with the industry average of 24.9%.

Stock Performance

Daily price chart (as on June 19, 2019), before the market close. (Source: Thomson Reuters).

At the time of writing (before the market close, at 03:36 PM GMT), shares of the WBI were quoting at GBX 6.07 and declined around 0.82% against the previous day closing price. During the day session (before the market close), shares have a touched a day high of GBX 6.13 and a low of GBX 6.01 respectively.

The stock was carrying a beta of 1.4x, which indicates that the stock is highly volatile against the benchmark index.

52wk High/Low range

In the past 52wks, shares of the WBI have registered a high of GBX 9.24 and a low of GBX 4.80, and at the current market price as quoted in the price chart, shares were trading approximately 33.98% below the 52w high price level and approximately 27% above the 52w low price level.

Price Performance (%)

On a YoY basis, the stock has delivered a price return of negative 30%, and in the past three months, the stock was down by approximately 14.0%. However, the stock has fallen substantially in the past five trading sessions.

Simple Moving Average (SMA)

From the SMA standpoint, shares of WBI were trading below the 30-day, 60-day and 200-day SMA prices. This is a bearish technical measure and indicates that the stock could fall further from the current trading level or near-term recovery in the stock price seems to be tough.

Volume Summary

The 5-day average daily volume traded at the London Stock Exchange stood at 771,080.60, which was 22.6% above the 30-day average daily volume of 628,115.97 traded on the LSE. Today’s volume before the market close stood at 281,564 with only four trades took place.

Relative Strength Index (RSI)

The 14-day and 9-day RSI of the stock stood at 30.62 and 20.7, respectively, that indicates the stock has entered an oversold zone.

Bollinger Band®

At the current trading level, upper Bollinger Band® of the stock stood at GBX7.62, the lower band stood at GBX5.95, and 20-day SMA of the stock stood at 6.79. This indicates that the stock is trending towards the lower Bollinger Band® and could fall further from the current trading levels. However, the stock has crucial resistance at GBX 6.79.

The bottom line is, overall technical trends are not supporting a near-term surge in the price.

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