Esports Mogul Limited

ESH Details

FY20 Performance Update: Esports Mogul Limited (ASX: ESH) is an eSports media and software company. The market capitalisation of the company as on 11 March 2021 stood at ~$43.15 million.  The company has recently declared its FY20 results and reported an improvement in revenues to $303,621, compared to $86,991 in the previous corresponding year. The net loss has reduced to $5.48 million from a loss of $5.92 million during the same period under consideration. There was an improvement in the cash position of the company to $8.13 million as on 31 December 2020, compared to $4.29 million in the previous year-end period.

FY20 Financial Performance (Source: Company Reports)

December 2020 Quarterly Business Update: The company delivered the strongest quarter performance during the given period with an increase of ~441% in revenue, compared to the previous quarter and a growth of ~264% on the previous corresponding period. It raised ~$8 million during a placement round and a further $668,000 from exercised options.

Outlook: The company has further developed its tournament-as-a-service offerings for global brands, advertisers and agencies. It continues to focus on improvement in automation, user-generated content as it aims to enhance the esports experience for gamers. ESH plans to move into mobile and further refine the business model in FY21. As per a recent update, the company has been chosen to drive Kellogg’s Halo 5 Tournament Series in the United States and Canada. 

Key Risks: ESH is exposed to fluctuations in foreign currencies as it has to pay its suppliers in foreign currency for work in regards to SEA Esports Pte Ltd and GameGeek Pte Ltd. The company is also exposed to equity price risk, with its equity investments being susceptible to price change.

Stock Recommendation: The company has announced on 22 October 2020 that it has entered into a strategic partnership with NASDAQ-listed Super League Gaming Inc and work on revenue-generating opportunities by providing comprehensive solutions for brands through esports tournament activations and streaming. As per ASX, the stock of ESH is trading below its average 52-weeks’ levels of $0.003-$0.031. The stock of ESH gave a positive return of ~14.28% in the past six months and a positive return of ~6.66% in the past one week. On a technical analysis front, the stock of ESH has a support level of ~$0.013 and a resistance level of ~$0.018. Considering the current trading levels, improved financial performance, a decent balance sheet, key strategic partnerships and the key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.016, up by 6.666% as on March 11, 2021.

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

Spacetalk Ltd

SPA Details

H1FY21 Performance Update: Spacetalk Ltd (ASX: SPA) is engaged in the development and sales of wearables. The market capitalisation of the company as on 11 March 2021 stood at ~$18.19 million. In a recent update, the company has announced its H1FY21 results with an increase in wearables revenue by ~13% to $7.1 million, on pcp. The Group revenue stood at $8.25 million, driven by a strong half of wearables sales and App revenue. It reported revenue from schools at $1 million during the same period. There was also a decrease in the operating expenditure by ~17% to $3.8 million. EBITDA grew by ~36% to $0.6 million during the same period. The cash position of the company stood at $1.6 million as on 31 December 2020.

H1FY21 Financial Performance (Source: Company Reports)

Outlook: The company plans to grow its top-line by offering an expanded product suite. It is expanding Spacetalk Life for seniors' distribution to a B2B2C model and have witnessed decent interest from aged care and home care providers. It is focussed on its global market penetration, with a go-to-market planned for CY21.

Key Risks: The company is exposed to interest rate risk, credit risk, liquidity risk and foreign risk arising from the use of its financial instruments. The carrying amount of financial assets to other parties in the balance sheet reflects the company’s exposure to credit risk in relation to those assets. The Group has its operations spread out in the USA, New Zealand, United Kingdom & Australia and might be impacted by the fluctuations in the foreign currency. 

Stock Recommendation: Advanced dialogues for bricks & mortar retail launch are being held in the UK, led by the new UK Country Head. As per ASX, the stock of SPA is trading below its average 52-weeks’ levels of $0.069-$0.210. The stock of SPA gave a negative return of ~15.99% in the past three months and a negative return of ~27.58% in the past one month. On a technical analysis front, the stock of SPA has a support level of ~$0.09 and a resistance level of ~$0.126. On a TTM basis, the stock of SPA is trading at a P/BV multiple of 1.8x, lower than the industry average (Telecommunications Services) of 4.4x. Considering the current trading levels, improved business performance in H1FY21, its scalable business prospects and the key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.105, down by 4.546% as on March 11, 2021.

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

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