YPB delivers on all fronts

Anti-Counterfeit and Customer Engagement solutions provider YPB Group Ltd (ASX:YPB) nailed the trifecta in the March quarter, achieving a 39% increase in quarter on quarter cash receipts, reducing the costs of goods sold and resultantly delivering enhanced gross profit margins.

YPB is targeting a growth industry through its proprietary technology suite that provides certainty of authenticity and connects brands directly to consumers enabling new levels of market intelligence.

In an evolving marketplace and with the rapid growth of cross border commerce, YPB’s expertise currently focuses on the rapidly growing consumer markets of Australia, South East Asia and China.

With cash receipts from sales up nearly 40% and further growth in the pipeline, along with a general overhead expenditure reduction of 12% that is now potentially sustainable, the company’s financial stability and growth potential is clearly evident.

Earnings update imminent

Given YPB has a market capitalisation of $7 million, the company appears to be punching well above its weight.

However, this may not be the case for much longer with management poised to provide an earnings update in the June quarter, a potential share price catalyst.

The sustainability of decreased overheads appears fairly well assured with management saying, “Reduced costs reflect the positive flow-through of the operational streamlining initiatives that took effect from October 2018, as well as further headcount reductions made in January 2019.”

From an operational perspective, cash from sales was boosted by the payment receipted from a significant order placed in the previous quarter by one the group’s key clients in relation to the application of YPB’s anti-counterfeit mark on one of the world’s most issued passports.

From a broader perspective, the March quarter result was assisted by a larger proportion of earnings being generated by higher margin anti-counterfeit sales with a lower contribution from lower margin retail anti-theft products.

Sales initiative is to drive revenue growth

The sustained activities of the newer sales team members appointed over the last two quarters are starting to flow through to the pipeline numbers, indicating the potential for sustainable sales growth.

An uptick in the effectiveness of sales activity has been assisted by key appointments that come with strong sales and industry experience.

Management said that the company is receiving excellent feedback from its current and prospective clients and distributors.

The industry-driven refinement of YPB’s products particularly in the wine and broader caps and closures space is starting to yield early results, with the promise of significant distribution by packaging and product producers.

Management expects to be in a position to update the market in the coming weeks on several of YPB’s major initiatives that it anticipates will materially contribute to the group’s earnings performance in the 2019 calendar year.

Should the company provide a clear and positive near-term earnings outlook this could result in significant share price momentum in the June quarter.