Buddy Platform Limited

Synergistic Acquisition with LIFX: Buddy Platform Limited (ASX: BUD) is a small-cap company with market capitalization of A$105.66 Mn as of February 08, 2019. Recently, the company has entered into a binding agreement and plan of merger to acquire 100% of the issued share capital of Lifi Labs, Inc. which is a leading global Smart Light company. The acquisition includes the cash consideration of US$26.5 million along with other considerations. However, the transaction is dependent on the satisfaction of certain conditions including the completion of acquisition financing and shareholder approvals. The acquisition will create synergies through a globally deployed energy and sensing platform in LIFX’s lights to Buddy’s Ohm energy monitoring product and vice-versa. The LIFX Acquisition will reportedly be affected by way of a merger under which Buddy’s newly incorporated wholly-owned subsidiary, Buddy Apollo, Inc. will merge with LIFX. Additionally, the company has announced to raise A$18.1 million (before costs) through the private placement of issuing 226,250k new Shares at a price of $0.08 per share. The Placement is subject to the Company obtaining shareholder approval of the issue of securities in connection with the LIFX Acquisition at the General Meeting and procuring the remaining funds for the Cash Consideration. Bell Potter Securities will lead the Private Placement event, and the proceeds will be utilized to fund a portion of the Cash Consideration for the acquisition of LIFX.And, the rest funding will be procured from the debt financing for the acquisition of LIFX.

FY18 P&L Statement (Source: Company Report)

On the financial front, the service revenue for the company stood at $2.08 million in FY18 compared to $1.04 million in FY17. The growth in revenue is primarily driven by growing deployments of the Buddy Ohm Suite of products and continuing growth in buddy cloud customers. The loss for the year was down by 18.1% and amounting to $13.87 Mn in FY18 over the prior year on the back of higher revenues and lower operating expenses.

Among the key ratios, the asset turnover stood at 0.14x in FY 18 compared to 0.11x in FY17, up by 20.2% Y-o-Y and the current ratio increased by 72.9% to 13.50x in FY18 from 7.81x in FY17.

What to Expect From BUD: The sales infrastructure of the company provides the company with a global footprint and access to the growing smart spaces market. Moreover, the company is well funded to continue to drive the sales and marketing efforts and continue to work with the sales partners and support them going forward.

The stock price has fallen by about 21.74% in the past three months and by almost 3.23 % in the past one month (as at February 08, 2019).Meanwhile, the aforesaid acquisition with LIFX might be a major milestone for the group to generate revenue, the stock will be an interesting one to watch for any potential buying opportunity with more catalysts if any, that the group may reveal going forward. As of now, we have a wait and watch stance on the stock at the current market price of $0.090 (down 6.25% on February 08, 2019).
 

The Citadel Group Limited

Strong financial performance: The Citadel Group Limited (ASX: CGL) is into information technology, providing services and vocational education and training.It is also engaged in developing and delivering technology solutions to Fed and several State government departments.

As per the recent announcements, 2,714 fully paid ordinary shares that were held under the voluntary escrow has been released by the company. Moreover, it updated about the appointment of the new Company Secretary Ms. Vanessa Chidrawi. Ms. Chidrawi has experience of twelve years in private practice of commercial law and litigation. She has acted as General Counsel and Company Secretary for several listed companies and has experience in mining industry as well.


Financial Results (Source: Company Report)

On the financial front, statutory total revenues from continuing operations were $108.5 million in FY18 compared to $98.8 million in FY17, up by ~10.0% primarily derived from long term managed services, high quality strategic advisory services and software-as-a-service.The company’s pre-tax ROA stood at 18.4% in FY 2018, a YoY rise of 1.2%. Its ROE stood at 20.5% in FY 2018 reflecting YoY increase of 3.2%.

What to Expect From CGL: Citadel will focus on continuing the development and delivering leading secure enterprise information management products and services in the sectors like eHealth, National Security/Defence, all levels of Government and Tertiary Education that are its key drivers, since information security and trust is paramount in these sectors.

Moreover, the group will increase the investments in cloud-enabled software so that it can deploy its solutions to Australian and international markets in a rapid pace. New winning of contracts and scalable cloud-enabled software sales will decide the growth of the company going forward.

The stock has been performing well with returns of 23.47% over the last six months and generating a YTD return of 20.89%. It is trading at a PE multiple of 23.56x. Considering the decent fundamentals coupled with the short-term trading scenario, we maintain our “Hold” rating on the stock at current market price of $8.680 per share.
 

Syntonic Limited

Strong Quarterly Progress: Syntonic Limited (ASX: SYT) is into information technology and mobile services. The company has recently published its quarterly report for the three months ending 31 December 2018, where it reported that the quarterly active users had a growth of 80.1% in the previous quarter to ~7.47 million.


Revenue and Quarterly Active Users Trend (Source: Company Report)

The company reported a record quarterly revenue of A$1.875 million, up by 90.0% as compared to Q1 FY 2019 in which it generated A$0.989 million. The increase was primarily driven by new carrier deployments and early ramping up of revenues from Syntonic Brazil Tecnologia LTDA. The cash receipts of the company stood at A$1.120 million in Q2 FY19, an increase by 88.0% as compared to Q1 FY 2019 in which the amount stood at A$0.594 million. As at 31 December 2018, the company had a cash and cash equivalent of $2.48 Mn.

What to Expect From SYT: Going forward, it has a positive operational outlook on the back of broadening of the business base, and strong growth in revenues, cash receipts and active users. The company is focussed on its revenue growth and operational momentum going forward in Q3 FY19.

The stock of Syntonic is, however, trading close to 52-week lower level, with a YTD return of ~27.27% and -30.0% return over the last three months period. Based on foregoing, we maintain our “Hold” recommendation on the stock at the current market price of A$0.007 per share.
 

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