Netlinkz Limited

NET Details

Robust Client Base: Netlinkz Limited (ASX: NET) is formerly called as iWebGate Limited. The company is engaged in providing a Software-Defined Wide Area Network (SD-WAN) solution to its customers. The company is present in Australia, the USA, and Europe. NET has registered robust growth in the number of clients. The company has added 43 new enterprise clients in the last 12 months ending December 2020 as compared with just 1 enterprise client in CY19. Due to the higher acceptability of Virtual Secure Network (VSN) in the markets, the company was able to increase its clients rapidly and posted higher revenues in CY2020.

Growth in Client Base (Source: Company Reports)

Appointment of a Corporate Advisor: The company has announced regarding the appointment of LoftusLane as their new corporate advisor. Pushkar Thakur, who is the Managing Director of LoftusLane, will be engaged in capital raising and business development activities for NET.

1HFY21 Financial Highlights: NET has posted a significant rise in its revenues to $8.7mn in 1HFY21 as compared with $0.64mn in 1HFY20. The company has posted a loss of $15.61mn in 1HFY21 against a loss of $10.93mn in 1HFY20. The company has registered an increase in cash and cash equivalents to $4.97mn as on 1HFY21 as compared with $1.43mn as on 2HFY20.

Key Risks: The company pose a risk of technological failure as they need to keep themselves updated with a change in technology regularly, any failure to update its technology may lead to loss of clients and customers. The company operates in many countries, so there is always a risk of fluctuation in the foreign exchange prices, which may lead to financial losses for the company.

Outlook: As per the company reports, NET is active in its business activities due to multiple revenue opportunities in Europe by signing up Uni Systems. The company has been associated with Fortune 100 retail clients and focusing on opportunities for expansion through reseller and partnership model. The company is well prepared to offer VSN services for an accelerating demand for network security. 

Stock Recommendation: In the last one month, NET has decreased by ~10.86% and by ~8.88% in the last three months. The current market capitalisation of NET stands at ~$100.65mn as of 8 April 2021. The stock is currently trading below the average 52-weeks’ price level range of ~$0.035-~$0.098. On the technical analysis front, the stock has a support level of ~$0.038 and a resistance of ~$0.044. On a TTM basis, the stock of NET is trading at a Price/Book multiple of 8.2x, lower than the industry average (Software & IT Services) of 9.2x. Considering, a robust growth in the client base for NET, growth in revenues, positive long-term outlook, valuation on TTM basis, current trading levels and key risks associated with the business, we recommend a “Speculative Buy” rating on the stock at the current market price of $0.040, as on 8 April 2021.

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

IOUpay Limited 

IOU Details

Tie Up with MYP1 to Augment BNPL Services IOUpay Limited (ASX: IOU) operates in BNPL segment and engaged in providing financial technology and digital commerce software solutions and services to its clients. The company enables its institutional customers to authenticate retail customers for their payment transactions. The company’s technology platform enables merchants to connect with end user customers using any mobile device and integrate mobile technology. The Company’s business divisions consist of mobile banking, digital payments, and digital services. The company has recently announced regarding its partnership with MYP1, a leading Smart Terminal Operator based in Malaysia. MYP1 will provide its services to connect BNPL services with merchants and customers. The tie-up would provide an opportunity to penetrate highly in South East Asian region and build a highly active merchant network.

1HFY21 Financial Highlights: The company has registered a decline in its revenue to $2.83mn in 1HFY21 as compared with $3.40mn in 1HFY20, due to pandemic situation. The company has registered a loss of ~$1.159mn in 1HFY21. IOU has posted an increase in its cash position to ~$8.54mn as on 1HFY21 as compared with ~$0.57mn as on 30 June 2020.

Cash Position as on 1HFY21 (Source: Company Reports)

Key Risks: The company is engaged in BNPL services and utilises technology for providing its services, any change in technology may pose a risk of business loss for the company. The company is exposed to pandemic situation risks as witnessed during Covid-19, the company has registered lower revenues and financial losses.

Outlook: As per the company reports, IOU expects an increasing trend in online purchasing and cashless payments during an extended Covid-19 situation. IOU is expecting a robust growth in digital commerce in South East Asia region and likely to progress with launching of new products and services to meet the growing demand for digital commerce in South East Asia region.

Stock Recommendation: In the last one month, IOU has decreased by ~19.99% and increased by ~145.16% in the last three months. The current market capitalisation of IOU stands at ~$215.05mn as of 8 April 2021. The stock is currently trading below the average 52-weeks’ price level range of ~$0.004-~$0.850. On the technical analysis front, the stock has a support level of ~$0.364 and a resistance of ~$0.428. On a TTM basis, the stock of IOU is trading at a Price/Book multiple of 14.9x, lower to the industry average (Investment Banking & Investment Services) of 21.8x. Considering, the strategic tie ups for higher penetration, positive outlook, valuation on TTM basis, current trading levels, and associated risks with the company, we recommend a “Speculative Buy” rating on the stock at the current market price of $0.385, down by ~1.283% as on 8 April 2021.

IOU 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.

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine do not hold interests in any of the securities or other financial products covered on the Kalkine website.