Stocks’ Details

BrainChip Holdings Limited

Collaboration with VORAGO Technologies: BrainChip Holdings Limited (ASX: BRN) is involved in the development of software and hardware-accelerated solutions for advanced artificial intelligence (AI) and machine learning applications. The market capitalisation of the company stood at $478.87 Mn as on 2^nd September 2020.  Recently, the company entered a collaboration with VORAGO Technologies by signing the Akida Early Access Program Agreement. This collaboration is likely to support a Phase 1 NASA program for a neuromorphic processor, which meets spacelight requirements. The company added that the Early Access Program Agreement includes payments, which are intended to offset its expenses to support the partner’s needs.  Previously, the company also entered into a partnership with Magik Eye Inc., to market a breakthrough solution for object detection, object classification and gesture recognition based on Invertible Light™ 3D depth-sensing technology of MagikEye and the Akida^TM neuromorphic processor.

As of now, BRN generates its revenues from BrainChip Inc., in the USA, and France based subsidiary BrainChip SAS. During 1H FY20, the company reported revenue amounting to US$13,397 as compared to US$66,635 of 1H FY19.

Key Financials (Source: Company Reports)

Growth Opportunities: BRN expects growth opportunities in emerging markets of Smart Sensors, Smart Homes and Smart Healthcare.

Key Risks: The company’s business activities are exposed to various operational risks, which include commercial viability and delays of new products and technology, delays in the establishment of an effective sales organization, as well as disruptions in the global economy.

Financing Facility:: The company reached a put option agreement with LDA Capital Limited and LDA Capital LLC, wherein, BRN would receive committed equity capital of A$29 million in the upcoming 12 months, which may be extended by the parties for additional 12 months. This financing facility bolsters the balance sheet of BRN and is likely to support the commercialisation of its groundbreaking Akida^TM technology. 

Stock Recommendation: The company ended the half-year with net assets of US$5,894,374, which include cash and cash equivalents of US$5,346,097. Current ratio of the company stood at 5.63x in FY19 as compared to the industry median of 1.97x. This reflects that the company is well-positioned to address its short-term obligations. On the technical analysis front, the stock of the company has a support level of ~A$0.354 and a resistance level of ~A$0.490. Therefore, considering the recent collaboration with VORAGO Technologies, growth opportunities in emerging markets, and financing facility, we give a “Hold” recommendation on the stock at the current market price of $0.475 per share, up by 53.226% owing to the collaboration update.

Adveritas Limited

Decent Growth in Revenue: Adveritas Limited (ASX: AV1) is engaged in the provision of comprehensive digital advertising fraud prevention services through its SaaS product, TrafficGuard®. The market capitalisation of the company stood at $31.08 Mn as on 2^nd September 2020. Recently, the company released its FY20 results, wherein it reported revenue from ordinary activities of $1,227,213, reflecting a rise of 91%. The company executed multiple sales strategies to generate revenue growth during 1H FY20. As a result, the company secured a number of key clients, including Go-Jek and MUV. In addition, the company adopted a “three by three” sales model to further optimise its sales strategies and maximise revenue growth. The three-pricing model includes Freemium, Land and expand, and Long-dated contracts.

Key Financials (Source: Company Reports)

Focus for Revenue Growth: The company is focused on generating revenue growth through the expansion of Freemium pipeline via increased digital marketing in multiple platforms and by executing strategic partnerships with agencies and domain name registries, actively pursuing upgrades of “land and expand” customers to larger and longer-dated contracts, and converting targets in Enterprise-level pipeline into customers. The company has scheduled to conduct its Annual General Meeting on 11^th September 2020.

Key Risks: The company’s business is exposed to a variety of financial risks, such as interest rate risk, foreign currency risk and credit risk.

Stock Recommendation: During FY20, the company successfully raised $13.9 million (before costs). As on 30^th June 2020, the cash and cash equivalents of the company stood at $8,351,840, with net current asset position of $7,505,053. On the technical analysis front, the stock of the company has a support level of ~A$0.064 and a resistance level of ~A$0.150. The stock of AV1 is inclined towards its 52-week low of $0.065, offering decent opportunities for accumulation. Hence, in light of the decent growth in revenue, three by three sales model, current trading levels, and key risks, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.100 per share, up by 3.093% on 2^nd September 2020.

Kyckr Limited

A Look at FY20 Results: Kyckr Limited (ASX: KYK) is engaged in the provision of data and technology solutions to ramp up customer acquisition and protect against money laundering, fraud and tax evasion. The market capitalisation of the company stood at $26.13 Mn as on 2^nd September 2020. The company was focused on building its enterprise channel and partnership model during FY20. Despite a slowdown in customer onboarding by its clients in the last two months of FY20 due to COVID-19, the company experienced decent growth in clients and revenue. For FY20, the company reported revenue amounting to $2.4 million with a rise of 12.2%. The company reported a growth of 20% in enterprise revenue to $0.8 million. The company reported a drop of 19% in loss after tax to $4.9 million.  The following picture gives an idea of options, performance rights and performance shares, which expired on 1^st September 2020:

Expired Securities (Source: Company Reports)

Outlook: The company seems to be well placed to finance its future growth as well as to manage the uncertain market conditions resulting from COVID-19. The company would continue to build on its strategy to drive its enterprise pipeline and extend strategic partnerships into FY21.

Key Risks: The company’s business could be impacted by the rising market share of competitors. In addition, the business is also exposed to market risk (including foreign currency risk, price risk and interest rate risk), credit risk and liquidity risk.

Stock Recommendation: During FY20, the company raised total capital of $13.9 million and possesses a decent balance sheet with cash on hand of $9.2 million at the end of July 2020.  Debt to equity multiple of the company stood at 0.01x in 1H FY20 as compared to the industry median of 0.04x. On the technical analysis front, the stock of the company has a support level of ~A$0.069 and a resistance level of ~A$0.093. KYK has an EV/Sales multiple of 8.5x against the industry average (Professional & Commercial Services) of 36.7x on TTM basis. The stock of KYK is trading at a price to book value multiple of 1.7x as compared to the industry average (Industrials) of 2.8x on TTM basis. The stock of KYK has corrected by 5% and 6.17% in the past one and three months, respectively. As a result, the stock is inclined towards its 52-week low of $0.035. Thus, considering the growth in topline, recovery in earnings, future focus, deleveraged balance sheet and key risks, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.075 per share, down by 1.316% on 2^nd September 2020.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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