Stocks’ Details

Buddy Technologies Ltd

Home Shopping Network to Sell LIFX: Buddy Technologies Ltd (ASX: BUD) is engaged in the designing, developing, and marketing a global data exchange. As on 14 October 2020, the market capitalization of the company stood at ~176.87 million. The company has recently announced that it will partner with HSN, Inc. to carry LIFX smart lights on-air in December 2020. Amazon.com, Inc. would be bundling the Company’s LIFX White product with selected non-screen Alexa devices as Prime Day bundles. The company has also reported that the manufacturing has resumed at capacity and stock is being rushed from China to various retail customers.

FY20 Financial Highlights: During FY20, total customer revenues went up from $8.9 million in FY19 to $31 million in FY20 and the gross margins stood at 30%. This increase was primarily the result of the addition of consumer business and a growth in commercial business revenues. The company also started its cost reduction projects which resulted in a drop of 63% in staff costs. In the same time span, the company set up a rapid expansion plan for the European market and delivered a new point of sale facilities for European retailers. The net loss for the year totaled $45.3 million which increased from a loss of $27.4 million in the prior year.

FY20 Financial Highlights (Source: Company Reports)

Stock Recommendation: The company retains a multi-faceted strength and is likely to deliver record growth and record revenues. The company is rapidly expanding into global markets. From the Balance sheet standpoint, the company reported total cash and cash equivalents of ~$2.5 million (included cash at bank and restricted cash) and a total debt of ~$14.8 million as of June 30, 2020. As per ASX, the stock of BUD is trading slightly above the average of its 52-weeks’ levels and thus retains limited potential for further growth. On a TTM basis, the stock of BUD is trading at an EV/Sales multiple of 6x, higher than the industry median (Technology) of 5.7x. Considering the current trading levels, decline in margins leveraged balance sheet and softer market conditions, we suggest our investors to wait for a better entry level and recommend an ‘Expensive’ rating on the stock at the current market price of $0.068 on 14 October 2020. 

Etherstack Plc

1H20 Financial Highlights: Etherstack Plc (ASX: ESK) is a provider of wireless communications software to the Professional/Land Mobile Radio and defence industries in Europe, Asia, and North America. As on 14 October 2020, the market capitalization of the company stood at ~A$74.99 million. During the first half ended 30 June 2020, the revenue of the company went up by 40% to US$2.40 million and generated a net cash of US$1.35 million from operating activities. In the same time span, the company reported a strong EBITDA of US$829k, up from a loss of US$66k in the pcp. At the end of the period, the company reported a cash balance of US$1.48 million and a total debt of US$1.64 million.

1H20 Financial Highlights (Source: Company Reports)

Strategic Wins: ESK entered into a strategic multi-year global teaming agreement with Samsung, to deliver next generation Mission Critical Push To Talk over LTE solutions to telecommunications carriers and governments across the globe. The Company has also won a material deal to supply digital radio network equipment to a resources sector customer in Western Australia.

Stock Recommendation: The company is currently undertaking development of new military waveform technology for the defence industry and reimagining the form factor and functionality of highly specialized communications devices. As per ASX, the stock of ESK is trading close to its 52-weeks’ low level of $0.120. The stock of ESK has a support level of ~$0.56 and a resistance level of ~$0.74. Considering the current trading levels, increased footprint in the European markets and decent financial performance, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.630, up by 1.612% on 14 October 2020.

Weebit Nano Ltd

Weebit Completes Stabilisation Process, Closer to Production: Weebit Nano Ltd (ASX: WBT) is a data memory technology business seeking to develop and commercialise its ReRAM silicon oxide technology. As on 14 October 2020, the market capitalization of the company stood at ~$85.13 million. The company has completed its technology stabilisation process and is ready to transfer its technology to a production fab. The final stage in the stabilization process reduced the non-uniformity in cell to cell and die to die and increased the level of functional cells. The final stabilisation phase continued the significant improvement of Weebit’s memory functionality and bought the level of functional cells to over 99%.

FY20 Financial Highlights: During FY20, the group has incurred a loss of $4.02 million, as compared to $6.69 million in the pcp. In the same time span, net cash outflows from operating activities went down to $1.98 million from $5.75 million and reported a cash balance of $4.11 million. As the group is in the research and development stage, it has not generated revenue.

FY20 Financial Highlights (Source: Company Reports)

Stock Recommendation: Weebit Nano Ltd has achieved significant commercial and technical progress over the past year. As per ASX, the stock of WBT is inclined towards its 52-weeks’ high level of $1.045 and gave a return of 192.85% in the past three months and a negative return of 4.65% in the past one month. On a TTM basis, the stock of WBT is trading at a price to book value multiple of 25.5x, higher than the industry median (Software & IT services) of 4.6x. The stock of WBT has a support level of ~$0.72 and a resistance level of ~$0.90. Considering the company’s stock price movement in the past months, current trading level, volatile returns, and softer market conditions, we suggest investors to wait to better entry levels and give an “Expensive” rating on the stock at the current market price of $0.815, up by 0.617% on 14 October 2020.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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