1. SenSen Networks Limited (Recommendation: Speculative Buy, Market Cap: ~$87.79 million)

SenSen Networks Limited (ASX: SNS) is a leading Sensor AI Data enterprise that offers customised, real-time and batch processing of data alongside SaaS solutions.

Q2FY22 Result Highlights: For Q2FY22, the company recorded record customer cash receipts of $1.5 million, up 35% over pcp. During the quarter, the company won 8 new commercial contracts for a combined value of more than $4.8 million. Over the quarter, the company repaid $1.3 million of debt, which strengthened its balance sheet.

Cash and Debt Scenario: As at 31 December 2021, the company had cash and cash equivalents of $8.1 million and unused finance facilities available of $1.8 million.

Current Ratio (Source: Analysis by Kalkine Group)

Outlook: SNS continues to invest in sales and marketing initiatives to drive top-line growth. For FY22, the company expects its total revenue of around $11 million. The company recently won Digital Curbside Management Contract with TfNSW, from which it is expected to earn ~A$437K ex GST over the period of the initial contract.

SWOT Analysis:

 

Stock Recommendation:

• Over the last three months, the stock has corrected by 10.71%.
• The stock is trading lower than the average 52-week price level band of $0.235 and $0.105.
• On a TTM basis, the stock is trading at an EV/Sales multiple of 14.6x, lower than the industry (Software and IT Services) average of 69.5x.
• Key Risks: Key Risks: Foreign Currency Risk, COVID-19 Uncertainties, Technology Disruption, etc.
• Considering the company’s decent Q2FY22 performance, recently won contracts, modest outlook, valuation on TTM basis, and key risks associated with the business, we give a “Speculative Buy” rating on the stock at the closing price of $0.125, down by 7.408%, as on 28 January 2022.

SNS Daily Technical Chart, Data Source: REFINITIV

2. HRL Holdings Ltd (Recommendation: Speculative Buy, Market Cap: ~$49.43 million)

HRL Holdings Ltd (ASX: HRL) is mainly involved in providing sampling, laboratory testing and data management services across Australia and New Zealand.  The company’s customers operate within the food, environmental, occupational hygiene and construction industries.

H1FY21 Result Highlights: For H1FY22, the company reported total revenue of $18.0 million, up 10% on the previous corresponding period (pcp), underpinned by growth in environmental and product origin testing. The company reported underlying EBITDA of $2 million, down by 45% on pcp, impacted by weak dairy and honey seasons and COVID-19.

Cash and Debt Scenario: As at 31 December 2021, the company had cash of $852k and debt (comprising borrowings and lease liabilities) of $6.55 million. For FY21, the company reported current ratio of 1.13x, up from 0.89x in FY20.

Current Ratio Trend (Source: Analysis by Kalkine Group)

Outlook: Over the next 2-3 years, the company expects its growth to be supported by the continued organic expansion of services and market share gains for the Laboratory segment. By FY24, the company expects its revenue to organically grow to $45-50 million (excluding JV operations) at industry leading margins.

SWOT Analysis:

 

Stock Recommendation:

• Over the last three months, the stock has corrected by 16.66% and is trading lower than the average 52-week price level band of $0.086 - $0.145.
• On a TTM basis, the stock is trading at a price to book multiple of 1.8x, lower than the industry (industrials) median of 2.1x.
• Key Risks: COVID-19 Lockdowns, Demand/Supply Volatility, Labour Shortages, etc.
• Considering the growth in environmental and product origin testing, expected organic expansion of services and market share gains, modest outlook, current trading level, valuation on TTM basis, and key risks associated with the business, we give a “Speculative Buy” rating on the stock at the current market price of $0.093 as on 28 January 2022, 12:30 PM (GMT+10), Sydney, Eastern Australia.

HRL Weekly Technical Chart, Data Source: REFINITIV

3. Cellnet Group Limited (Recommendation: Speculative Buy, Market Cap: ~$16.07 million)

Cellnet Group Limited (ASX: CLT) is a leading distributor of lifestyle technology products with operations across Australia and New Zealand.

Q1FY22 Result Highlights: Despite the challenging operating conditions from the lockdown restrictions across Australia and New Zealand, the company reported a net profit before tax of $286,000 in Q1FY22. The company’s online sales in the first-quarter increased 47% on pcp, with increased revenue on direct sites. Over the quarter, the company’s trading margins improved 330 basis points year-on-year, due to increased online sales at higher margins.

Cash and Debt Scenario: As of 30 June 2021, the company had robust balance sheet with $7.0 million cash at bank. Further, the company had total interest-bearing loans and borrowings of $8.36 million lease liabilities of $481k.

Current Ratio Trend (Source: Analysis by Kalkine Group)

Outlook: The company expects improvement in availability of new generation of gaming consoles from Sony and Microsoft, which will improve the demand for gaming accessories. With decent momentum from the new iPhone launch and pent-up consumer demand for new gaming consoles, the company is optimistic for its outlook for the year ahead.

SWOT Analysis:

Stock Recommendation:

• Over the last one month, the stock has corrected by ~27.58%.
• The stock is currently trading lower than the average 52-week price level band of $0.052- $0.175.
• On a TTM basis, the stock is trading at a price to book multiple of 0.5x, lower than the industry (consumer cyclicals) median of 3.9x.
• Key Risks: COVID-19 Uncertainties, Stiff Competition, Technology Disruption, etc.
• Considering the resilient performance in Q1FY22, rising online sales, decent outlook, current trading level, valuation on TTM basis, and key associated risk, we give a “Speculative Buy’ rating on the stock at the closing price of $0.063, down by 4.546% as on 28 January 2022.

CLT Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: 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.

Technical Indicators Defined:

• Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.
• Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.
• Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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