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Zip Co Limited (ASX: Z1P)
Z1P operates as a digital payment service provider. Based in Australia, Z1P provides retail finance solutions to small, medium, and enterprise businesses. It caters to retail, education, health, and travel sectors in Australia. Z1P was listed in ASX on December 09, 2009. It holds a market capitalization of AUD 2.26 billion as of January 07, 2022.
Financial and Operational Updates: In the recent trading update, Z1P witnessed a 52% uptick in transaction volume in November 2021, with growth spanning across the globe. The number of transactions reached 7.5 million, showing an increase of 86% over the prior year. Due to robust offtake in digital payment solutions and aggressive expansion, the company posted a 71% uptick in the number of customers reaching to 9.2 million in November 2021. As announced on December 22, 2021, JP Morgan Chase & Co. has picked up a 5.03% stake in Z1P, representing 29.631 million shares.
On November 12, 2021, Z1P completed the acquisition of Twisto Payments a.s. for EUR 73.8 million. The acquisition provides access to the European market with a strong merchant network. As per the 2021 annual report, Z1P posted net loss of $658.7 million in FY21 as compared to $19.9 million in PcP.
Technical Analysis: Z1P's prices are trading in a downward trend and are sustaining below an upward sloping trend line breakout level for the past 2 months. On the weekly chart, the leading indicator RSI (14-period) is trading in an oversold zone at ~26.60 levels. The trend-following indicator 21-period SMA and 50-period SMA are placed above the CMP and may act as resistance levels for the stock. Now an immediate support level for the stock is AUD 3.40, while resistance is at AUD 4.40 level.
Considering the current trading levels, widening losses in FY21, and increased regulatory scrutiny in recent periods in the BNPL space, and increased risk of impaired loan assets, investing in this stock at such uncertain levels should be taken with a calculated approach, hence a ‘Watch’ stance is suggested. The stock was analyzed as per the closing price of AUD 3.820 per share as of 7th January 2022.
Weekly Technical Chart – Z1P
Source: REFINITIV
DW8 Limited (ASX: DW8)
DW8 (formerly known as Digital Wine Ventures Limited) is an investment company with a portfolio of assets in technology-driven businesses catering to the wine and beverage sector worldwide. It provides a cloud-based platform, WineDepot, to streamline wine and beverage distribution. DW8 was listed in ASX on April 04, 2001. It holds a market capitalization of AUD 126.92 million as of January 07, 2021.
Financial and Operational Updates: On December 24, 2021, DW8 signed a binding agreement to effect purchase, sale and long-term leaseback of the National Distribution Centre (NDC). It is expecting the settlement in Q3FY22 and the transaction to deliver a one-off cash profit of about $3.5 million to DW8. Post-exercise of stock options by its directors, DW8 is expected to realize cash proceeds of $459k as per the announcement on December 16, 2021. The company’s logistics platform, WineDepot, is expected to gain strength and will be integrated with the newly acquired Kaddy Australia Pty Limited. Kaddy has a network of over 2,000 wholesale buyers and 450 suppliers.
In Q1FY22, DW8 posted operating cash outflows of $2.30 million and closed the period with a cash balance of $6.06 million, down from $6.78 million posted in the preceding quarter. In FY21, the company reported a net loss of $6.93 million as compared to the loss of $2.04 million in PcP.
Technical Analysis: DW8's prices are trading below the support turned resistance level AUD 0.054, indicating the possibility of a downside direction. On the weekly chart, the leading indicator RSI (14-period) is trading in negative territory at ~39.93 levels. The trend-following indicator 21-period SMA and 50-period SMA are placed above the CMP and may act as resistance levels for the stock. Now an immediate support level for the stock is AUD 0.044 while resistance is at AUD 0.054 level.
Considering the negative operating cash flows and widening of losses, and technical levels, investing in this stock at such uncertain levels should be taken with a calculated approach, hence a ‘Watch’ stance is suggested. The stock was analyzed as per the closing price of AUD 0.050 per share as of 7th January 2022.
Weekly Technical Chart – DW8
Source: REFINITIV
Note: The purple color line in the chart depicts RSI (14-period), while the yellow color line represents the trend line. The sky-blue and red-color lines show 21-Period SMA and 50-Period SMA, respectively. The green-color histogram at the bottom of the charts represents volumes.
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.
Disclosure: Kalkine’s Director Kunal Sawhney owns shares of Zip Co Limited. Kalkine Pty Ltd has recommended Zip Co Limited as general investment advice only (under AFSL 425376).
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