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FYI and BDA in the news

June 18, 2021

At Wise Owl we invest in a carefully selected portfolio of ASX listed companies that we hold for the long term – and we share our research.

Today we are featuring two of our portfolio stocks that made announcements earlier this week:

Bod Australia Ltd (ASX: BDA) 

FYI Resources Ltd (ASX: FYI) 

 

Here’s a brief outline of the news: 

BDA is a cannabis focused healthcare company already generating revenue. This week BDA broadened its sales footprint in the United Kingdom via two new online retailers, which have a combined 15 million visitors per month across both UK websites. This considerably expands BDA’s CBII brand reach (CBII encompasses a range of BDA’s flagship CBD healthcare products including oils and skincare products), customer base and distribution footprint in a large and growing market.

FYI is positioning itself to be a significant producer of High Purity Alumina (HPA) in Western Australia. This week it received an impressive initial result for its inaugural Environmental, Social and Governance (ESG) rating. FYI is developing a strong and professional corporate culture – ideals that are being increasingly recognised across the investment community at retail and institutional levels. The reward vindicates FYI’s approach to ESG.

Let’s look at this news in more detail and why we continue to hold, starting with …

ASX: BDA

BDA is a cannabis company with an established revenue base from two verticals:

  1. Medicinal cannabis – sold via prescriptions, supported by clinical trials, and health professional education and awareness.
  2. CBD and hemp consumer products – sold off the shelf, BDA’s products are licensed to H&H Group globally to accelerate sales. 

We invested in BDA as we like the fact that BDA is already generating revenue, and is trading at a lower revenue multiple compared to its peers. 

BDA currently has a $38M market cap and is trading well below our entry price, despite continuing to deliver positive newsflow.

You can read more about why we invested in BDA here

This week, BDA announced that its entire range of CBII products will be stocked in the UK by two of Europe’s leading online retailers: Lookfantastic and Feelunique.

The deal was secured by BDA’s exclusive partner Health & Happiness Group Ltd.

Lookfantastic is Europe’s number one online premium health and beauty retailer and one of the world’s most successful premium online beauty retailers, generating 10 million visits per month, stocking over 660 brands and shipping to over 200 countries.

While the initial focus will be UK sales and distribution of CBII products, the companies will look to expand availability to other countries where CBD can be sold legally. 

CBII products will be launched on Lookfantastic’s website in the coming weeks.

Feelunique will also stock BDA’s CBII range.

Feelunique  is one of Europe’s leading premium e-commerce beauty retailers with a large and established UK customer base, stocking over 30,000 products and driving over five million unique visitors per month.

Products are expected to launch this month.

BDA is aiming for brand exposure, reach and a potential customer base that should hopefully result in increased sales revenue in the UK market. 

Given the early stage of the development of the UK CBD market, BDA hasn’t been able to give us a reliable estimate as to when additional sales revenue may be achieved.

These agreements are not exclusive and do not establish minimum sales volumes and have a minimum 12-month fixed term. 

However, with the CBD skincare market expected to grow to US$3.48 billion in value by 2026, we think these new retail partner agreements leave BDA well placed to capitalise on this growth.

ASX: FYI

FYI is positioning itself to be a significant producer of 4N and 5N High Purity Alumina (HPA) in the rapidly developing high-tech product markets. HPA is increasingly becoming the primary sought-after input material for certain high-tech products such as LED’s and other sapphire glass products. 

HPA’s application in lithium-ion batteries for the Electric Vehicle and static energy storage markets is also growing significantly. 

FYI is currently capped at $198.7M. A recently updated Definitive Feasibility Study  demonstrated its project can deliver a Net Present Value of over A$1.3BN.

We invested in FYI for several reasons: 

  1. FYI is leveraged to the “Battery Metals” thematic. We have done well in this space before.
  2. This is not exploration – FYI is at an advanced stage of development. FYI’s Definitive Feasibility Study demonstrated an NPV of over A$1.3BN.
  3. Potential Alcoa JV. FYI is in exclusive talks with Alcoa on a potential JV. FYI entered into an exclusivity period for this JV negotiation – and there are around 50 days to go until we find out the results of these negotiations.
  4. Cheaper and less energy intensive process. FYI’s HPA production is cheaper and has less carbon emissions than its peers.

You can read our deep dive on FYI here.

We think FYI is well positioned to bring its HPA plant into a reality over the coming years, after demonstrating all the project’s credentials over recent months.

Another thing we like about FYI is its focus on ESG.

This week FYI demonstrated its ESG credentials when it received an impressive initial result for its inaugural ESG rating.

The rating was delivered by independent ESG rating service company, Sustainalytics, a Morningstar Inc company, which provides a best-in-class analysis and methodology to measure a company’s exposure to industry specific ESG risks and rates how well a company manages those risks.

FYI achieved a ranking of 9th out of 153 peers, placing it in the top 6th percentile. It was top-ranked in three categories and had a top 5 ranking in a further five categories.

Sustainalytics calculated FYI’s initial ESG rating measured against their universe of approximately 14,000 global industry participants, including a sub-industry category of 153 direct peer and competitor companies.

FYI has proved it is committed to developing and continuing a strong corporate culture to implement its ESG objectives and its goal is to efficiently manage and grow its business under a defined ESG framework and to progressively improve the company and its ESG standards.

We think FYI is undervalued with its market cap of approximately $200M, and are looking forward to the result of the JV talks with Alcoa, as it will hopefully shine a light on how its project can proceed to the next stage. 

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S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this report is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

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