Stocks’ Details
 

Horizon Oil Limited

Decent Results in March 2020 Quarter: Horizon Oil Limited (ASX: HZN) is an energy company involved in the exploration and production of oil and gas. As at 15 May 2020, the company’s market capitalisation stood at $69.01 million. For the quarter ending 31 March 2020, the company reported total production of 391,900 bbls, up 4.8% on last quarter, taking the total year to date production to 1,146,749 bbls. For the March quarter, the company reported total sales of 305,590 bbls, generating revenue of around US$19.2 million. Despite the extraordinary challenges caused by the COVID-19 pandemic and the steep fall in oil prices, the company reported decent financial results in March quarter which demonstrates the strength of its base business.


Financial Summary (Source: Company Reports)

Covid-19 Update: In response to Covid-19, the company has implemented various cost saving initiatives which will further strengthen the company’s balance sheet. To deal with unprecedented decline in the oil prices, caused by the COVID-19 pandemic and oversupply in the market, the company has executed additional hedging to protect future cashflows and to preserve Horizon Oil’s strong liquidity position.

What to expect: With a strengthened balance sheet and sustained cashflow from its high margin, conventional oil fields, the company is currently well placed to evaluate appropriate growth opportunities. In FY20, the company expects its oil production to be in the range of 1.40 – 1.50 mmbbls. Further, it expects total revenue in FY20 to be between US$75 million – US$85 million. 

Stock Recommendation: The company continues to be in a strong financial position despite the global challenges caused by the COVID-19 pandemic. In the past six months, the stock of HZN has declined by 64.67%, and is trading close to its 52-week low, offering a decent opportunity for accumulation. For H1FY20, the company’s EBITDA margin stood at 53.5%, higher than the industry median of 32%. The company has a current ratio of 1.65%, higher than the industry median of 1.06%, demonstrating that the company is well equipped to pay its short-term obligations. On TTM basis, the stock is trading at a Price to Book multiple of 0.6x, lower than the industry median (Energy) of 0.9x. Considering the company’s strong financial and liquidity position, its FY20 outlook and current trading levels, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.055, up 3.77% on 15 May 2020.

Kyckr Limited

New annual contract signed with Commerzban: Kyckr Limited (ASX: KYK) is a regulatory technology (RegTech) company which is involved in the provision of data and technology solutions to accelerate customer acquisition and protect against money laundering, fraud and tax evasion. On 15 May 2020, the company announced that it has inked a new annual contract with one of Germany’s leading bank - Commerzbank AG, with an approximate minimum value of A$100,000 for the Kyckr for Business portal in the UK. This contract demonstrates the continued uptake of Kyckr’s technology by major banks. 

Record Revenue Recorded in April 2020: During April 2020, the company recorded its highest monthly revenue of $260,000, up 39% on the prior year. One of the major achievements during the April month was the extension of the company’s services to Citi Commercial Bank for up to USD$300,000. During the March quarter, the company had recorded a revenue of $623k, up 18% on pcp, despite the early impacts of COVID-19 in March. For the March quarter, the company reported operating cash outflow of $1.47 million.


Operating Cash Outflow (Source: Company Reports)

What to expect: The company continues to focus on executing commercial agreements from existing enterprise clients and prospects and strategic partners while increasing online growth from the new Kyckr.com platform. With recent client successes, the company is currently well placed to benefit from the demand for Know Your Customer technology. 

Stock Recommendation: Despite the COVID-19 restrictions put by Governments across the globe to limit the spread of the virus, there has only been a modest impact on the business. In the last six months, the stock has declined by 55.48% and is currently trading close to its 52 weeks low price, offering investors a decent opportunity for accumulation. However, the company is exposed to risks such as discontinuation of prevailing agreements, absence/delay in new tie-ups, external competition factors, etc. Currently, the company is in a decent financial position with a cash balance of A$3.1 million as of 31 March 2020. On TTM basis, the stock of KYK is trading at an EV/Sales multiple of 6x, lower than the industry average (Professional & Commercial Services) of 33.1x. The stock is trading at a Price to book value multiple of 1.2x, lower than the industry median (Professional & Commercial Services) of 1.7x. Considering the company’s recent client successes, the rising demand of KYC technology, the company’s decent financial position, and current trading levels along with the risks stated above, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.092, up by 33.33% on 15 May 2020, owing the recent signed contract with Commerzbank AG. 

BrainChip Holdings Ltd

Following Strict Cost Control Policies: BrainChip Holdings Ltd (ASX: BRN) is a leading global technology company which provides ultra-low power, high performance AI technology. As at 15 May 2020, the company’s market cap stood at $74.23 million.  Amid Covid-19 situation, the company is following strict cost control policies while its employees are work from home. Recently, the company received a loan of US$412,000 from US Government under the CARES Act Paycheck Protection Program. This will help the company in maintaining its employee base while exercising cost controls policies. 

March Quarter Update: During the March 2020 quarter, the company continued to work on the commercialization of Akida Intellectual property. Over the quarter, the company received authorization to export its AI technologies to non-restricted customers in countries such as Japan, Korea, Taiwan and China. For the quarter, the company reported operating cash outflow of US$3.67 million. At the end of March quarter, the company had a cash balance of US$3.7 million.


Operating Cash Outflow (Source: Company Reports)

Appointment of Dr Simon J. Thorpe: The company recently appointed highly experienced Dr Simon J. Thorpe to its Scientific Advisor Board.  Dr Thorpe is a founder SpikeNet and he has a long history and deep knowledge of spiking neural networks. His appointment is a valuable addition to the company’s Scientific Advisor Board.

Stock Recommendation: In the last one months, the company’s stock has provided a return of 21.43% to its shareholder. However, the stock is still trading close to the 52 weeks low price.  During FY19, current ratio of the company stood at 5.63x, higher than the industry median of 1.96x. In the same time span, Assets/Equity ratio of the company was 1.22x, lower than the industry median of 1.66x. Considering the company’s strict cost control policies, its operational progress in March quarter, and current trading levels, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.051 on 15 May 2020. 

 
Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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