SML Corporation Limited (ASX: SOP)

Incorporated in 2012, SOP is an engineering and product and service provider to critical industries and high energy industries. It provides rail services, water services, bulk liquid terminals, liquefied natural gas (LNG), and oil and gas services and pharmaceutical services, fuel installations services for defense, and food, beverage and dairy sectors. As on 26th November 2021, the market capitalization of the company stood at AUD 27.87 million.

Financial & Operational Updates – On 24^th November 2021, it signed a perpetual and exclusive Intellectual Property (IP) agreement to use Sichuan Green Tech Environmental Technology Co. Ltd.’s Composite Dry Powder (CDP) technology. As per the Quarterly Update on 28^th October 2021, revenue for 1QFY22 was up by ~44% (Pcp) and reported as AUD 2.6 million. It signed an MOU with Santos Ltd. to develop an AI-driven Solar renewable energy project system – Powerhouse Project. It was awarded ~AUD 3 million contract for Control and Monitoring System from Metro Trains Melbourne for its Metro Tunnel Project.

SOP closed its 1QFY22 with a net cash balance of ~AUD 8.00 million at the end of 30^th September 2021. As per the Annual Report released on 26^th August 2021, Revenue was down by ~25% Y-o-Y and was reported as ~AUD 8.39 million in FY21 versus ~AUD 11.12 million in FY20. Its Engineering Consultancy Services recorded the strongest year of revenue with an increase of ~15% Y-o-Y. Owing to the pandemic, the company posted a substantial increase in its net losses of ~167% Y-o-Y and reported as ~AUD 3.35 million in FY21 versus ~AUD 1.25 million for FY20

Technical Analysis: SOP stock price witnessed a robust rally from the low of AUD 0.020 in June 2020 to a 52-week high of AUD 0.140 tested in June 2021. Though, the prices are trading below the trend-following indicators 21-period SMA and 50-period SMA but taking a major support of the horizontal trend line at ~AUD 0.073 in a weekly chart. Moreover, the momentum oscillator RSI (14-period) has retraced from the higher levels and is placed at ~45.866 level indicating a possible upside movement. An immediate support level for the stock is at AUD 0.074 while immediate resistance level is AUD 0.092.

After considering SML’s recent developments on Composite Dry Powder technology, increase in 1QFY22 revenues and currently price trading at support level, the investors with a high-risk appetite can consider it’s as a ‘Speculative Buy’ along with incorporating the support and resistance as one of the tools while analysing the investment opportunity. The stock was analysed as per the closing market price of AUD 0.080 per share, up by ~2.564%, as of 26^th November 2021. However, the risk levels are extremely high in view of the efficient and effective provision of services.

Weekly Technical Chart – SOP

Source: REFINITIV

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

Note 2: Investment decisions should be made depending on the investors’ appetite for 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 the uptrend may take a pause due to profit booking or selling interest. 

The Green colour line reflects the 21-period moving average. SMA helps to identify existing price trend. If the prices are trading above the 21-period, then it shows prices are currently trading in a bullish trend, (Vice – Versa).

The Blue colour line reflects the 50-period moving average. SMA helps to identify existing price trend. If the prices are trading above the 50-period, then it shows prices are currently trading in a bullish trend, (Vice – Versa).

The Yellow colour line represents the Trendline.

The Purple colour line in the chart’s lower segment reflects the Relative Strength Index (14-Period) which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status while a reading of 30 or below suggests an oversold status.

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