Netlinkz Limited
NET Details
Q3FY21 Performance Update: Netlinkz Limited (ASX: NET) provides cloud network solutions. The market capitalisation of the company as on 04 May 2021, stood at ~$83.04 million. The company has reported a decent increase in Group revenues by ~85% in Q3FY21, on pcp basis. It has signed a binding agreement with Uni Systems Information Technology to provide VSN based network solutions to European enterprises. The development of an open-source platform will help to facilitate IoT, 5G and AI systems and processes for the European market, through the use of Netlinkz IP. The revenues from Asia continued to grow, reflecting an increase in revenue from China to 89% on the previous corresponding period.
Improvement in Topline (Source: Company Reports)
Appointment of New Corporate Advisor: On 16 March 2021, the company has announced that it has appointed LoftusLane Capital Partners Pty Limited as its new advisor in regards to investor origination, capital raising, and business development. Led by Pushkar Thakur, LoftusLane has extensive expertise in the industrial space, and has got a decent track record in advising organisations and government.
Key Risks: The company undertakes certain transactions in foreign-denominated currency and is thus exposed to foreign exchange rate fluctuations. Further, the company is exposed to the risks and uncertainties caused by the COVID-19 pandemic.
Outlook: The company seems to be poised for a decent Q4FY21 results with expected seasonality of revenue, along with an increased proportion of recurring revenue. NET expects to generate growth in recurring revenue by ~50% in the next 3 years, aided by business expansion and diversification.
Stock Recommendation: After the successful deployment in Microsoft Azure, VSN now runs on all major cloud providers. As per a recent update, NET has announced that it has appointed Mr Stephen Gibbs as Non-Executive Chairman, effective from 15 March 2021. As per ASX, the stock of NET is trading below its average 52-weeks’ levels of $0.031-$0.098. The stock of NET gave a negative return of ~19.99% in the past one month and a negative return of ~5.88% in the past one week. On a technical analysis front, the stock of NET has a support level of ~$0.031 and a resistance level of ~$0.04. On a TTM basis, the stock of NET is trading at a P/BV multiple of 6.8x, lower than the industry average (Technology) of 9.5x. Considering the current trading levels and the valuation based on TTM basis, impressive revenue performance and the key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.032, down by 3.031% as on May 04, 2021.
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NET Daily Technical Chart (Source: Refinitiv, Thomson Reuters)
Adveritas Limited
AV1 Details
Q3FY21 Trading Update: Adveritas Limited (ASX: AV1) is engaged in the provision of digital advertising fraud prevention services through its SaaS product, TrafficGuard. The market capitalisation of the company as on 04 May 2021, stood at ~$46.40 million. During the quarter, the company reported an increase in Freemium subscribers by ~61% to over 2,300 subscribers at the end of Q3FY21, from 31 December 2020 levels. There has been an increase in the usage of TrafficGuard by 42% to 170 paying customers at the end of Q3FY21, from 31 December 2020. It reported ~63% growth in cash receipts during the period, on the pcp. AV1 ended the quarter with a cash position of $5.6 million as of 31 March 2021, with the absence of debt on the balance sheet.
Growth in Freemium Sign Ups (Source: Company Reports)
Key Risks: The Group is exposed to market risk, credit risk and liquidity risk arising from the use of its financial instruments. The company is also the risks and uncertainties caused by the COVID-19 pandemic as it could cause reduction in monthly licence fees and suspension of services to clients.
Outlook: The company has signed up new enterprise clients across Asia, North America and Europe and expects benefits of $191k to the annualised revenue going forward. AV1 will look for further growth by leveraging the cross-selling and up-selling opportunities.
Stock Recommendation: On 4 February 2021, the company has signed a contract with its first European customer, deezer, a French online music streaming service. deezer is expected to pay ~6,500 per month to AV1, for utilising the TrafficGuard’s mobile app anti-fraud solution. As per ASX, the stock of AV1 is trading below its average 52-weeks’ levels of $0.075-$0.225. The stock of AV1 gave a positive return of ~32.65% in the past six months and a negative return of ~3.70% in the past one week. On a technical analysis front, the stock of AV1 has a support level of ~$0.119 and a resistance level of ~$0.146. On a TTM basis, the stock of AV1 is trading at a P/BV multiple of 8.1x, lower than the industry average (Technology) of 9.5x. Considering the current trading levels and the valuation on TTM basis, increase in subscribers’ base and the key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.130, as on May 04, 2021.
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AV1 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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