Stocks’ Details

Netccentric Limited

Launch of Employee Share Ownership Offer (ESOO): Netccentric Limited (ASX: NCL) is a social commerce platform and marketing solutions provider for social media influencers. Its business segments include Display Ad network, Influencer platform, Digital asset production, Social media agency, and others. As of 19 March 2021, the market capitalisation of the company stood at ~$64.91 million. On 10 March 2021, NCL announced that it is rolling out an ESOO under its Employee Securities Incentive Plan (ESIP) sanctioned by its shareholders at its AGM, July 2020. As per the Employee Offer terms’, the company will offer unlisted options to its key employees (who will qualify to earn these options) in Taiwan and Malaysia to buy NCL shares or CDIs as per the case. NCL also proposed an offer to issue to its Non-Executive Directors with options on the same terms and conditions and seek shareholders’ approval at a general meeting.

Business and Strategy Updates: The company updated on the recent growth of its Nuffnang Live Commerce platform. It reported product orders of $312k in January 2021, up 65% from the monthly average of orders fulfilled during the Q4FY20 (December 2020) quarter. Besides delivering the volume growth, NCL also undertook a NIVEA campaign, its new client for its NLC platform. In a significant boost to the platform engagement, NCL plans to permit the integration of various digital wallets of consumers as payment options with its platform.

A Look at the FY20 Results: The Group reported an increase in revenue by 9% YoY to S$7.94 million. Excluding the divested-off entities in FY19, the Group’s underlying revenue increased by 15%. This increase is due to its core influencer marketing business, Nuffnang Malaysia (Up 21% YoY). For FY20, NCL earned a net profit after tax of S$49,592. The Group’s gross profit margin for FY20 remained at 48%. After tax, net profit to the owners of NCL went up by 101% YoY to S$1,803 in FY20. AQS held a cash and cash equivalents balance of S$3.37 million as of 31 December 2020.

FY20 Financial Highlights (Source: Company Reports)

Key Risks: NCL faces the risk of dependence on other social media platforms, a fall in the growth of internet usage and penetration, and risk of control by present security holders, liquidity of shares. It is also exposed to the risk of joint venture arrangements and raise sufficient funds for expansion.

Outlook: NCL anticipates the Nuffnang Live Commerce platform to deliver revenue in FY21 and foster scalable growth for the company. The company is also actively scouting strategic inorganic avenues to grow its revenue trajectory.

Stock Recommendation: The stock of NCL gave a positive return of 238.23% in the past three months and a positive return of 360% in the past six months. The stock is currently trading slightly above the 52-weeks’ average price level of $0.022-$0.40. The stock of NCL has a support level of ~$0.213 and a resistance level of ~$0.251. On a TTM basis, the stock is trading at an EV/Sales value multiple of ~7.8x lower than the industry (Media & Publishing) median of ~12x, thus seems undervalued. Considering the increase in top-line and maiden profit in FY20, the decent outlook for FY21, decent stock performance in the past three and six months period, current trading level and valuation on a TTM basis, we believe that most of the company’s positives have been factored in at the current juncture. Hence, we suggest investors to wait for better entry levels and give an ‘Expensive’ rating on the stock at the current market price of $0.230 on 19 March 2021.

Aquis Entertainment Limited

A Look at the FY20 Results: Aquis Entertainment Limited (ASX: AQS) is engaged in gaming, entertainment, and leisure activities through its ownership of casino Canberra. As of 19 March 2021, the market capitalisation of the company stood at ~$57.39 million. AQS recorded a decrease of 23.7% YoY in operating revenue to $18.93 million in FY20 due to a government-mandated shutdown from March-August 2020 and limited patron visitation to the casino. Its EBITDA turned positive for FY20, amounting to $4.81 million due to improved efficiencies and a 36.94% reduction in operating expenses (payroll and marketing) for FY20. After tax, the net profit was $798k for FY20 vs a loss of $3.95 million in FY19. As of 31 December 2020, AQS had a cash balance of $7.25 million and undrawn borrowing facilities of $5.07 million. The Group had a positive net cash flow of $4.33 million in FY20.

FY20 Financial Highlights (Source: Company Reports)

Key Risks: The company faces the risk of low patron visitation in casino and closure of the casino due to the shutdown. It is exposed to further government-mandated changes in casino operation, including 1.5 metres of spacing required between patrons, specific entry needs and increased staffing levels to meet the additional requirements in place.

Outlook: The company announced holding an AGM on 14 May 2021 and will provide the agenda’s complete details around 15 April 2021. AQS is planning to revisit plans for the redevelopment of the casino as pandemic restrictions ease. It will also recommence talks regarding the detailed legislated requirements for the operation of electronic gaming machines (EGMs) in the casino to enable planning for the future.

Stock Recommendation: The stock of AQS gave a positive return of 737.83% in the past one month and a positive return of 785.71% in the past six months. The stock is trading lower than the average 52-weeks price level band of $0.012 and $0.820. The stock of AQS has a support level of ~$0.283 and a resistance level of ~$0.346. On a TTM basis, the stock is trading at a P/E value multiple of ~13.9x higher than the industry (Consumer Cyclicals) median of ~11.2x, thus seems overvalued. Considering the current trading levels, significant returns in the past 1 month and three months, and valuation on a TTM basis, we believe most of the company’s positives have been factored at the current juncture. Hence, we suggest investors wait for better entry levels, and we give an ‘Expensive’ rating on the stock at the current market price of $0.310 on 19 March 2021.

Sparc Technologies Limited

Antibacterial Properties Confirmed in Graphene-Based Additives: Sparc Technologies Limited (ASX: SPN) is a developer of new technology solutions for marine and protective coatings, biomedical and environmental applications using graphene’s properties. As of 19 March 2021, the market capitalisation of the company stood at ~$20.43 million. SPN conducted a test for evaluating the anti-microbial properties of its graphene-based additives in an epoxy coating system. It was observed that the additives destroy the E-Coli bacteria, improved coating and can be used in bacterial growth on surfaces in the hospitals, drinking water systems, public areas, and others.

1HFY21 Result Highlights: During 1HFY21, SPN completed the acquisition of 100% of the share capital of Graphene Technology Solutions Limited (GTS). Henceforth, it changed its principal operations to the R&D of new technologies using graphene. For the acquisition deal, SPN undertook a Share purchase agreement (SPA) to consolidate its issued capital on a 200:1 basis. Post-consolidation, SPN acquired all the ordinary GTS share capital and issued 29.5 million fully paid common shares.

Post-acquisition, Sparc has signed an exclusive licensing contract with the University of Adelaide and a partnership agreement within the ARC Graphene Enabled Industry Transformation Hub to develop graphene-based products and technologies.

During 1HFY21, the Group recorded a revenue (interest received) of $2,650 and registered an after-tax net loss of $2.65 million. SPN incurred recapitalisation expense of $1.54 million and $279k of non-cash share-based payment. SPN had cash outgoings from operating activities for 1HFY21 of $786k. It held a cash balance of $4.86 million as of 31 December 2020.

Highlights (Source: Company Reports)

Key Risks: The company runs the risk of commercialising innovative graphene uses in desired applications for sizeable industrial market. It is exposed to the risk of developing and testing the desired outcome/technology and seeking sufficient funding.  

Outlook: SPN will undertake further work to include more viruses, and bacteria and confirm the aforesaid test results. SPN has a robust pipeline of potential graphene applications to be developed in due course.

Stock Recommendation: The stock gave a negative return of 12.90% in the past one month and a negative return of 21.73% in the past three months. The stock is currently trading at $0.270 from its 52-weeks’ low of $0.001. The stock of SPN has a support level of ~$0.267 and a resistance level of ~$0.281. On a TTM basis, the stock is trading at a price to book value multiple of ~3.2x higher than the industry median of ~3.1x. Considering the current trading levels, negative returns in the past one month and three months period, net loss in FY20, and valuation on a TTM basis, we give an ‘Avoid’ rating on the stock at the current market price of $0.270, down by 6.897% on 19 March 2021.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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