1. Adveritas Limited (Recommendation: Speculative Buy, Market Cap: ~$49.96 Million)

Decent Rise in H1FY21 Cash Receipts: Adveritas Limited (ASX: AV1) is primarily involved in the provision of comprehensive digital advertising fraud detection and prevention services through its software as a service (SaaS).

• For the half-year ended 30 December 2020, the company reported total revenue of $462k, up by 8% on the previous corresponding period (pcp). Cash receipts for H1FY21 stood at $504k, up 14% on pcp. Over the period, the company witnessed a ~167% increase in TrafficGuard Freemium subscribers to c1,440 (vs 30 June 2020). Statutory loss after income tax stood at $5.8 million in H1FY21.
• Cash and Debt Scenario: As at 31 December 2020, the company had a cash balance of $6.7 million and interest-bearing liabilities of $610k. Current ratio for H1FY21 stood at 4.77x, up from 2.79x in H1FY20. With its healthy balance sheet, comprising decent cash balance and low debt level, the company seems well capitalised to fund its accelerated growth initiatives.
• Outlook: AV1 has recently signed a “land and expand” contract with its first European customer, deezer, to supply TrafficGuard’s mobile app install anti-fraud SaaS solution. Looking ahead, the company is focused on expanding sales pipeline across gaming, cryptocurrency, insurance and online retail verticals. The new clients signed in H1FY21 are expected to provide full 6 months of revenue in H2FY21. The company’s ad fraud prevention software, TrafficGuard, is currently planning for integrations with several of the world’s most visited websites.
• Key Risks: COVID-19 pandemic could impact the company’s revenue as it could result in temporary suspension of services to clients at their request, temporary reduction of monthly licence fees, and deferral of final contract negotiations. Further, the company is also exposed to the foreign currency exchange risks.

A Pictorial Presentation of Key Metrics:

SWOT Analysis:

Stock Recommendation:

• Over the last three months, the stock has corrected by 26.82% and is trading close to its 52-weeks average price level band of $0.075- $0.225.
• On the technical analysis front, the stock has a support level of ~$0.130 and resistance of ~$0.21.
• On a TTM basis, the stock is trading at a price to book value multiple of 8.7x, lower than the industry average of 11.5x.
• Looking ahead, the company is focused on scaling up its advertising spend to increase both freemium numbers as well as conversion numbers.
• Key Risks: Technology Disruption, COVID-19 Uncertainties, Foreign Currency Risks
• Considering the rising subscribers, growing customer base, decent balance sheet, improved revenue in H1FY21, modest outlook and associated key risks, we give a “Speculative Buy” recommendation on the stock at the closing price of $0.150, up by 7.142% as on 9 April 2021.

2. Senetas Corporation Limited (Recommendation: Speculative Buy, Market Cap: $54.10 Mn)

Decent Sales Growth in H1FY21: Senetas Corporation Limited (ASX: SEN) is primarily involved in the development and manufacturing of certified, high-assurance encryption hardware, virtualised network encryption and advanced encrypted file sharing application.

• For H1FY21, the company reported group operating revenue of $14.3 million, up 35% on pcp. The company witnessed sales growth across all of its markets, particularly from the Middle East and Europe region driven by further penetration into Middle Eastern markets. Notably, the sales of 100Gbps encryptors to end-user customers doubled in H1FY21, compared to H1FY20. Net loss for H1FY21 stood at $2.39 million.
• As at 31 December 2020, the company had cash of $13.8 million and nil debt on balance sheet. Current ratio for H1FY21 stood at 6.72x, up from 3.06x in H1FY20.
• The development of new products and capabilities in recent years is expected to provide significant revenue growth for Senetas into the future. Growth outlook for Votiro’s CDR technology remains very positive, driven by the capability of Votiro’s File Disarmer to protect users against most ransomware threats. Further, the company’s new relationship with Thales and Menlo Security in the US market is developing opportunities with government and commercial clients.

A Pictorial Presentation of Key Financials:

SWOT Analysis:

Stock Recommendation:

• Over the last three months, the stock has corrected by 22.22% and is trading lower than the average 52-week price level range of $0.041 and $0.079, offering a decent opportunity for accumulation.
• On the technical analysis front, the stock has a support level of ~$0.037 and resistance of ~$0.058.
• The company’s quantum resistant encryption solutions are expected to provide additional revenue opportunities for SEN as the threats from quantum computing emerge in the coming years.
• Key Risks - Rising Competition, Changes in Technology and Market, COVID-19 Uncertainties.
• Considering the company’s decent sales growth, positive outlook, healthy balance sheet, current trading level, and associated key risks, we give a “Speculative Buy” recommendation to the stock at the closing price of $0.049, down by 2.001% as on 9 April 2021. 

3. Vortiv Limited (Recommendation: Speculative Buy, Market Cap: ~$18.97 Million) 

Decent growth in H1FY21 Revenue: Vortiv Limited (ASX: VOR) is a technology company that operates Decipher Works Pty Ltd, a cyber security company and Cloudten Industries Pty Ltd, a cloud and cloud security company. The company also holds a non-controlling interest in TSI India, a business operating a network of bank automated teller machines and bill payment systems in India.

• For H1FY21, the company reported revenue of $6.8 million, up 21% on pcp, driven by the company’s ability to grow its strong customer base, which is underpinned by the deep technical expertise and understanding of the clients’ complex IT environment. The company reported net cash flow from operations of $1.7 million, up 21% on pcp. Net profit before tax increased by 96% to $0.88 million as compared to $0.45 million in pcp.
• Cash and Debt Scenario: As at 30 September 2020, the company had cash of $1.8 million. The company had lease liabilities of around $0.4 million. Current ratio for H1FY21 stood at 1.35x, up from 0.55x in H1FY20.
• Outlook: In a recent trading update, the company informed that TSI India management has reported decent financial performance during December 2020 quarter, with unaudited revenue of $13.5 million and Underlying EBITDA of $3.3 million. The company is currently focused on pursuing well-priced, high growth acquisition opportunities which could benefit from public market listing and capital markets access. The company is planning to return $14.05 million (10 cents per share) through Equal Capital Reduction, subject to shareholder approval.

TSI India Financial Performance (Source: Company Reports) 

SWOT Analysis:

Stock Recommendation:

• The stock of VOR has provided a return of 8.9% in the last three months and is trading lower than the average 52-week price level band of $0.080 and $0.335.
• On the technical analysis front, the stock has a support level of ~$0.122 and resistance of ~$0.29.
• The company is focused on pursuing well-priced, high growth acquisition opportunities which could benefit from public market listing and capital markets access
• Key Risks: Technology Disruption, COVID-19 Uncertainties, Foreign Currency Risks
• Considering the company’s decent performance in H1FY21, modest outlook, healthy balance sheet, current trading level and associated key risks, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.135 as on 9 April 2021.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

Note: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above

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