European Lithium Limited

European Lithium Limited (ASX: EUR) was incorporated in 2010, and it is involved in lithium exploration and development. It owns and operates the flagship Wolfsberg Lithium Project.

Financial and Operational Update: The company is spearheading its Wolfsberg Lithium Project in Austria through an agreement with Traxys to market the company’s Lithium Hydroxide. In addition, EUR signed a collaboration agreement with Jadar Resources to establish a technical advisory committee. Recently, it had issued 26.301 million shares to Milestone and Company Global DW LLC and received funding of $2.5 million. Effective 23 November 2021, EUR commenced trading on the US market through OTC (OTCQB). Under the September 2021 quarter update, there were ‘nil’ receipts from customers and negative operating cash flows on sizeable exploration expenses. Proceeds from the issue of shares inflated the cash balance to $8.629 million as of 30 September 2021, compared to $5.422 million at the end of 30 June 2021. The current ratio stood at 3.32x in FY21 over the industry median of 1.80x. As per the annual report released on 16 September 2021, EUR posted a total loss of ~AUD 3.96 million in FY21 compared to the total loss of ~AUD 3.26 million in FY20.

Technical Analysis

Daily Price Chart

Note: The purple color line in the chart depicts RSI (14-period). The sky-blue and green color lines represent 50-Period SMA and 21-Period SMA respectively.

On the daily chart, EUR prices are sustaining above the downward sloping trend line support zone and taking support of the same. Moreover, the prices are trading above the trend-following indicators 21-period and 50-period SMA, which may act as a support level for the stock.  The momentum oscillator RSI (14-period) is trading at ~55.97 level, indicating bullish momentum in the stock The crucial support level for the stock is placed at AUD 0.12, while the key resistance is at AUD 0.15.

Stock Recommendation

The company has recently signed a multi-tiered non-binding Memorandum of Agreement (MOA) with Traxys Europe S.A. to support the development and commercialisation of the Wolfsberg Lithium Project in Austria (Wolfsberg Project). Moreover, EUR collaborates with a research group from the University of Graz to develop a cluster for lithium hydroxide (LiOH) produced from recycled Lithium-Ion-Batteries to meet the EU green targets for the battery industry.

Therefore, considering the facts above and current trading levels, we give a “Speculative Buy” recommendation on the stock at the current market price of A$0.133 as of 7^th January 2022 (Time: 3:28 PM (GMT+10), Sydney, Australia).

BrainChip Holdings Ltd

BrainChip Holdings Ltd (ASX: BRN) is a technology company producing neuromorphic processors. The chip has a wide range of capabilities, including on-chip training, learning, and inference. By mimicking brain processing, the company makes a processing architecture called Akida, both scalable and flexible. Akida is focused on ultra-low power and fast AI Edge Network for vision, audio, olfactory and innovative transducer applications.

Financial and Operational Update: On 4 January 2022, the company announced appointment of Pia Turcinov as a non-executive director. Pia Turcinov is an accomplished executive and non-executive director with broad and strategic experience across various industries. On 21 November 2021, the company announced that it entered into a 4-year agreement with MegaChips for Akida IP to advance its technology positioning for next-generation, Edge-based AI solutions. This agreement is expected to bring an upfront license fee and additional payments spread over the agreement term. Also, the company will be eligible to receive a different amount based on engineering efforts, software support fees and royalties associated with MegaChip’s customer engagements.

Under its financial highlights, on 21 October 2021, the company released its quarterly activities report for the period ended 30 September 2021. The cash stood at US$23.9 million at the end of the quarter versus US$17.7 million in the prior quarter. Net operating cash outflows stood at US$4.0 million at the end of the quarter (Q2FY21: net outflows of US$3.1 million). Net investing cash outflows for the quarter stood at US$0.03 million (Q2FY21: US$0.003 million). Cash inflows from financing activities stood at US$10.28 million for the quarter. Also, the company released the first batch of Akida1000 production chips by Socionext.

Technical Analysis:

Monthly Price Chart

Note: The purple color line in the chart depicts RSI (14-period). The sky-blue and green color lines represent 50-Period SMA and 21-Period SMA respectively. The orange line represents the trend line.

BRN stock witnessed significant rally in the past 4 months and the prices have made a new all-time high level i.e., AUD 1.02. Prices are now trading near to its upward sloping trend line resistance level i.e., 1.07 from where sharp downside correction might occur. RSI (14-period) is hovering at ~80 level on a monthly chart that further indicates that the profit booking might occur at resistance levels. Immediate resistance levels are AUD 1.07 and AUD 1.21 while immediate support levels are AUD 0.82 and AUD 0.770.

Stock Recommendation

The company believes that it will recognize aggregate revenue of around US$2 million under the agreement over the current financial year and the financial year ending 31 December 2022. It expects to realize additional revenue from the license fee and additional revenue opportunities in subsequent financial years. This agreement adds significance to the company’s growth strategy as it provides a licensing fee for its Akida technology and provides broader opportunities to generate revenue from MegaChip’s substantial global customer base, which it would be unlikely to be able to access directly.

Therefore, considering the facts above and current trading levels, we give a “Watch” recommendation on the stock at the closing market price of A$0.97 per share, up 9.604% as of 7^th January 2022.

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 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 analysis has been achieved and subject to the factors discussed above alongside support levels provided.

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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