1. Buddy Technologies Ltd (Recommendation: Speculative Buy, Market Cap: ~$116.87 Mn)

Reduction in H1FY21 Net Loss: Buddy Technologies Ltd (ASX: BUD) is a leader in IoT and cloud-based technology, and it provides simple, affordable and engaging solutions for customers of any size to make their spaces smarter.

• For the six-months ending 31 December 2020 (H1FY21), the company reported total revenues of $17.3 million, down by 18.7% on pcp. Net cash used in operating activities stood at $5.8 million in H1FY21. Net loss for H1FY21 stood at $5.61 million, lower than $14.77 million in pcp, mainly due to reduction in cost of sales, decline in advertising, marketing & travel expenses, and foreign exchange gains.
• Cash and Debt Scenario: As at 31 December 2020, the company had cash and cash equivalents of $7.2 million and borrowing of $12.8 million. Current ratio for H1FY21 stood at 0.49x, up from 0.31x in H2FY20. Debt to equity ratio for H1FY21 stood at 0.38x.
• Outlook: The company recently announced that the first major shipments of LIFX products destined for the North American market have arrived on-shore at the company’s warehouses and they will be on-shelf in Amazon and Best Buy stores in the coming weeks. The EBITDA in March 2021 is expected to be highest monthly EBITDA in the company’s history. In the second half of FY21, the company expects its revenue to be in the range of A$24 million- A$28 million.

A Pictorial Presentation of Key Financials

SWOT Analysis:

Stock Recommendation: 

• The stock of BUD has corrected by 12.24% in the last three months and is trading below the average 52-week price band, offering a decent opportunity for accumulation.
• On the technical analysis front, the stock has a support level of ~$0.039 and resistance of ~$0.055.
• In H2FY21, the company expects its revenue to be in the range of A$24 million- A$28 million.
• On the TTM basis, the stock is trading at a price to book value multiple of 3.4x, lower than the industry average of 8.8x, thus seems undervalued.
• Key Risks: Technology Disruption, Foreign Currency Risk, Stiff Competition.
• Considering the company’s plan of shipping new mass-market LIFX Switch product specifically for the rapidly growing North American market, expected EBITDA growth in March 2021 month, decent H2FY21 revenue guidance, current trading level,
  valuation on TTM basis and associated key risks, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.043, up by 10.256% as on 26 March 2021, owing to the update regarding the first major shipments of new LIFX product.

 

2. DroneShield Ltd (Recommendation: Speculative Buy, Market Cap: ~$64.33 Mn)

Decent Growth in FY20 Revenue and Cash Receipts: DroneShield Ltd (ASX: DRO) offers a variety of drone detection technology solutions and off-the-shelf products designed to suit a variety of terrestrial, maritime or airborne platforms.

• For the year ended 31 December 2020 (FY20), the company reported revenue from continuing activities of $5.55 million, up 58% on the previous year. Over the year, the company has witnessed several contracts wins and successful trials with high profile marquee customers, across a range of products. Net loss for FY20 stood at ~$5.86 million.
• Cash and Debt Scenario: With a cash balance of around A$16 million as at 31 December 2020, and no debt in the balance sheet, DRO seems well funded to support future growth. Current ratio for FY20 stood at 6.66x, up from 3.25x in FY19, demonstrating that the company has improved its ability to pay short-term obligations.
• Outlook: DRO provides best-in-class performance across a suite of multi-platform product, which gives it a competitive advantage. DRO recently received an order of around $1 million from a high-profile Government customer from a Five Eyes country, demonstrating the industry leading capabilities of DroneShield products. The payment of the order is expected in June 2021 quarter. With its geographically diversified near-term high conviction revenue pipeline, counter-drone products that provide multi-layered solutions, DRO seems well placed to scale to a “tier one” sovereign defence industry capability provider.

 

A Pictorial Presentation of Key Financials

SWOT Analysis:

Stock Recommendation:

• Over the last six months, the stock has corrected by 21.42% and is trading slightly lower than the average 52-week price level band of $0.084- $0.250, offering a decent opportunity for accumulation.
• On the technical analysis front, the stock has a support level of ~$0.150 and a resistance of ~$0.180.
• DRO has a decent sales pipeline with A$100 million in active contract discussions and total sales opportunities of A$195 million.
• Key Risk: Technology Disruption, COVID-19 Uncertainties, Foreign Currency Risk.
• Considering the company’s decent performance in FY20, its decent sales pipeline, recently received orders, healthy balance sheet, current trading level, and associated key risks, we give a “Speculative Buy” recommendation on the stock at the closing price of $0.160, down by 3.031% as on 26 March 2021.

3. NetLinkz Limited (Recommendation: Speculative Buy, Market Cap: $108.20 Mn)

Decent Top-line Growth in H1FY21: NetLinkz Limited (ASX: NET) is a provider of secure and efficient cloud network solutions. During H1FY21, the company expanded into new markets as network security and the cloud revolution continue globally.

• During H1FY21, the company deployed capital to its highest leverage growth opportunities and core strengths to deliver top-line growth whilst pursuing cash flow break-even. For H1FY21, NET reported revenue of $8.72 million, up 1,262% on pcp. Net Loss for H1FY21 stood at $15.6 million. The company recently signed an MOU with Uni Systems Information Technology to establish a partnership based on Netlinkz’s Virtual Secure Network (VSN) patented overlay technology platform and to support the launch of a range of innovative services and solutions to the benefit of its clients.
• Cash and Debt Scenario: As at 31 December 2020, the company had cash of Cash and cash equivalents of $4.97 million and borrowing of $4. 84 million. Current ratio for H1FY21 stood at 0.91x, up from 0.34x in H2FY20. Debt to equity ratio for H1FY21 stood at 0.39x.
• Outlook: The second half of FY21 has commenced well for the company, underpinned by the advanced technology, a robust business development pipeline, growing recurring revenue streams. Looking ahead, the company is focused on increased penetration in key markets and an expanding geographical footprint.

A Pictorial Presentation of Key Financials

SWOT Analysis:

Stock Recommendation:

• In the last three months, the stock has corrected by 15.68% and is trading lower than the average 52-week price level and of $0.035 and $0.098, offering a decent opportunity for accumulation.
• On the technical analysis front, the stock has a support level of $0.035 and a resistance of $0.054.
• Recently signed MOU with Uni Systems Information Technology is expected to complement and further empower the company’s IoT offering.
• Key Risks: COVID-19 Uncertainties, Changes in Cloud-based Technologies, Foreign Currency Risk
• Considering the company decent top-line growth in H1FY21, modest outlook, rising cash balance, and current trading level and associated key risks, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.043 as on 26 March 2021.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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