Mach7 Technologies Limited

M7T Details

Q1FY22 Financial Performance: Mach7 Technologies Limited (ASX: M7T) is engaged in developing solutions that provide a complete view of the patient to inform on diagnosis, reduce care delivery delays and costs, and improve patient outcomes.

• Robust Sale Orders Reported: M7T landed multiple major sales orders in Q1FY22, clocking $16.2 million, the highest quarterly sales ever recorded, substantially up by 368% sequentially. With these results, sales have already registered 63% of FY21 orders of $25.6 million.
• License and Contract Updates –
  • Luke’s Boise purchased M7T’s eUnity universe viewing solution license at $443,000 for the first year.
  • Advocate Aurora Health issued a license to M7T’s eUnity universe viewing solution with a contract value of $4.3 million.
  • Trinity Health entered a 7-year contract with M7T at a combined contract value of $16.45 million.
• Financial Position: The September quarter was seasonally down for cash receipts due to annual renewals’ high weighing, which shall fall in H2FY22. Cash collections from recent contract wins are estimated to flow in by Q2FY22. Net operating cash outflow stood at $1.9 million with a strong cash position of $17.2 million and no debt.

FY21 Operating Metrics, Analysis by Kalkine Group

Key Risks and Challenges

M7T is subject to clinical trials and regulatory requirements considering the healthcare technology space. The threat of substitution is immense, owing to frequently changing and advancing technologies.

Outlook

M7T expects strong revenue results and maintains its near-term target of increasing $27 million in revenue for CY21. Once the target mentioned above is met, M7T will have delivered $15 million in H1FY22. FY22 revenue results are expected to be $19 million over the FY21 reported revenue. M7T is seeking positive EBITDA for FY22.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock’s historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation

The stock of M7T gave a negative return of ~46.816% in the past year. The stock is currently trading at its 52-weeks’ low of $0.715. The stock has been valued using the EV/Sales multiple-based illustrative relative valuation method and arrived at a target price low double-digit (in percentage terms). The company might trade at some discount to its peers; considering business uncertainties and litigation cases; the company might trade at a slight discount to its peers’ average. For valuation, few peers like CogState Ltd (ASX: CGS), Alcidion Group Ltd (ASX: ALC), Beamtree Holdings Ltd (ASX: BMT), and others have been considered. Considering the current trading levels, increased contract wins, favourable sale orders, key associated risks with the business, and upside indicated by valuation, we give a “Speculative Buy” recommendation on the stock at the closing price of $0.710,  down by ~6.579% as of 21 January 2022.

M7T Daily Technical Chart, Data Source: REFINITIV 

Castillo Copper Limited

CCZ Details

Assays unlock BHA East Zone Potential: Castillo Copper Limited (ASX: CCZ) is mainly involved in exploring copper across Australia and Zambia. On 14 January 2022, CCZ announced a lithium update mentioning the high potential of BHA East Zone as examined by battery metal drill-hole assays. Key pointers to the update include –

• A recent geographical review of the BHA East Zone Project suggested the availability of 108 drill-holes yielding cobalt values of over 200ppm, with the highest clocking of 9,500ppm.
• Surface assays have delivered several zones anomalous for cobalt & copper, and zinc. This is a timely discovery that substantially improves the project’s exploration potential.

Q1FY22 Operational Updates

• Big One Deposit Update: The initial assays received from drill-holes claim up to 9.19% Cu, with the best interceptions being 9m @ 1.42% Cu, 5m @ 1.06% Cu, and 3m @1.22% Cu.
• Lithium Project Update: CCZ secured an option to acquire two future lithium projects, namely Litchfield Lithium Project and Picasso Lithium Project, for 90 days.
• Zambia Projects Update: Large targets were determined through an Induced Polarisation survey in Zambia’s copper belt.
• Cash Flow Position: For the period, CCZ clocked a net cash outflow from operating activities of ~$518,000. Exploration and evaluation activities absorbed $1.53 million, and CCZ’s cash balance stood $10.26 million.

Q1FY22 Cash Flow Position, Analysis by Kalkine Group

Key Risks and Challenges

CCZ currently stands at the exploration stage with nil revenue streams yet realised; hence, negative returns are expected to continue. Any delays in feasibility studies or drilling may drain cash and weaken equity issue potential.

Outlook

CCZ’s lithium update on the BHA East Zone project is a timely discovery that substantially improves the project’s exploration potential. The company expects to commercialise a fuller drilling campaign at Arya prospects in H1FY22.

Stock Recommendation

The stock of CCZ gave a negative return of ~55.385% in the past year. The stock is currently trading lower than the 52-weeks average price level band of $0.028 - $0.072. On a TTM basis, the stock is trading at a price to book value multiple of 2.0x, lower than the industry (Basic Materials) median of 2.8x, thus seeming undervalued. Considering the company’s ongoing exploration progress, decent outlook, current trading levels, the recent surge in lithium stocks, valuation on a TTM basis, and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the market price of $0.028, as of 21 January 2022, 12:22 PM (GMT+10), Sydney, Eastern Australia.

CCZ Daily Technical Chart, Data Source: REFINITIV

Note: The purple line reflects the RSI (14-day period)

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 previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and is 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.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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