Brainchip Holdings Limited

BRN Details

Commences Volume Production for Akida AI Chip: Brainchip Holdings Limited (ASX: BRN) is a technology developer of hardware and software solutions for machine learning (ML) and artificial intelligence (“AI”) applications. It is developing its proprietary Akida Neuromorphic System-on-Chip (NSoC) and network for requirements in civil surveillance, financial technology, gaming, and advanced vision systems. As of 15 April 2021, the market capitalisation of the company stood at ~$1.04 billion. On 13 April 2021, BRN announced that it has commenced manufacturing its Akida™ AKD1000 processor chip for applications in the edge Artificial Intelligence (AI) devices. The chip’s engineering layout for the production has been developed and released in collaboration with Socionext, developer of custom SoC solutions. The chip has been sent for production to TSMC (Taiwan Semiconductor Manufacturing Company) for mass volume manufacturing. The chip production has been commenced after testing AKD1000 samples through an Early Access Program (EAP) amongst customers in key markets for a range of uses.

A Sneak-Peak at the FY20 Results: For FY20, BRN reported a revenue of US$120k, up by 60% on FY19, due to its EAP product sales, revenue from engineering support and development. It started Akida NSoC evaluation boards’ shipments in November 2020, contracted for a NASA Phase I program to fulfil their spaceflight needs and deliver EAP Evaluation Kits. It recorded a net loss of US$26.82 million for the year.

In December 2020, it also inked an Intellectual Property license (IPL) agreement with Renesas Electronics America Inc., a Japanese subsidiary. Besides the evaluation boards, BRN has also developed the Akida Development Environment (ADE), a development environment enabling potential customers to design a neural network. In August 2020, BRN signed an equity financing facility with LDA Capital and raised ~US15.1 million at a premium to the share price. This facility also enabled access to a further $34 million to BRN. It held cash and cash equivalents of US$19.13 million as of 31 December 2020.

FY20 Financials (Source: Company Reports)

Key Risks: The company is exposed to the risk of delay in producing the chips, co-developing new products with partners, technology integration with III party providers, the risk of protecting and developing IP, government regulatory changes for its AI-related products.  

Outlook: BRN has started producing units (NSoC chips) and expects to make them available around August 2021. It also aims to keep IP licencing in key focus.

Stock Recommendation: The stock of BRN gave a positive return of 64.28% in the past six months and a positive return of 475% in the past nine months. The stock is currently trading above the 52-weeks’ average price level of $0.039-$0.97. The stock of BRN has a support level of ~$0.536 and a resistance level of ~$0.621. Considering the significant returns in the past six months and the past nine months, the ongoing shipments and business contracts, the commencement of Akida chips production in FY20, the volume expected in August 2021, we give a ‘Hold’ rating on the stock at the current market price of $0.575, down by ~9.449% on 15 April 2021.

BRN Daily Technical Chart (Source: Source: Refinitiv, Thomson Reuters)  

LiveTiles Limited 

LVT Details

Independent Directors Appointed: LiveTiles Limited (ASX: LVT) is a developer and seller of digital workplace software via subscription contracts. It has more than 1,000 enterprise customers and operations in Europe, Asia, North America, and Australia. As of 15 April 2021, the market capitalisation of the company stood at ~$196.16 million. On 15 April 2021, LVT announced the appointment of Jesse Todd and Fiona Le Brocq as the Independent Non-Executive Directors on the company Board.

Certification for Information Security Management: The company has recently announced that it has obtained certification for information security management to accelerate its sales procedure. It will assure the present and new customers regarding the best industry practices being followed and assist in the sales pitch process.

Release of Escrow Shares: On 12 April 2021, LVT announced the release of 3.97 million ordinary shares from its voluntary escrow account. These securities will be released on 19 April 2021.

Earn-Out Target Achieved by CYCL: On 1 March 2021, LVT announced that CYCL, a company it acquired in December 2019, had met its maiden earn-out target as of 31 December 2020. It also announced the successful integration of products -LiveTiles Reach and LiveTiles Intranet (now) in its product portfolio. The integration has extensively driven increased demand for LVT product combined deals at an Enterprise scale. It has also helped LVT become one of the leading players in the Employee Experience Platform (EXP) market.

Release of 1HFY21 Results: The company reported an increase in revenue of 13% YoY to $20.25 million in 1HFY21 due to the growth (96% YoY) in services revenue. The total income, including revenue, increased to $20.54 million, up 12% YoY in 1HFY21. Its ARR (Annualised Recurring Revenue) increased to $58.1 million at 10% YoY. The customer base expanded to 1,132 in 1HFY21. During the period, LVT inked two new vital partnerships with Canva to launch the LiveTiles Employee Experience Academy and Human Link for LiveTiles Vibe (SaaS-based AI product). LVT incurred a net loss after tax of $21.55 million in 1HFY21. It held a cash and cash equivalent balance of $19.39 million as of 31 December 2020.

1HFY21 Financial Highlights (Source: Company Reports)

Key Risks: The Group is exposed to financial risks such as credit & investment risk, interest rate, liquidity, foreign currency risks, risk of driving revenue growth on the platform, acquiring customers on the platform, managing acquisition transition and integration.

Outlook: The company is optimistic about the acquisition benefits of CYCL and expecting upside avenues in the next year. CYCL’s core product (now Reach) has accounted for the two largest enterprise deals and accelerated its sales pipeline. It anticipates tapping opportunity in the US$300 billion addressable EXP market. It aims to focus on disciplined cost management and control.

Stock Recommendation: The stock of LVT gave a negative return of 10.63% in the past three months and a negative return of 6.66% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level of $0.18-$0.305. The stock of LVT has a support level of ~$0.184 and a resistance level of ~$0.234. On a TTM basis, the stock of LVT is trading at an EV/Sales multiple of 4.5x lower than the industry (Technology) median 5.9x, thus seems undervalued. Considering the current trading levels, the decent financial performance of LVT in 1HFY21, valuation on a TTM basis, and associated risks of growing the platform, services, and users on the network, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.210, down by 2.326% on 15 April 2021.

LVT Daily Technical 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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