Stocks’ Details

Clean TeQ Holdings Limited

Scandium Collaboration and Heads of Offtake Agreement: Clean TeQ Holdings Limited (ASX: CLQ) is an environmental and mining services group serving the air purification, resources recovery and water purification markets. The company has recently announced a collaboration with Panasonic Corporation Global Procurement Company to develop applications for Scandium Aluminium Alloys for Panasonic Group and has agreed to supply up to 5 tonnes of scandium oxide p.a. from the Company’s Sunrise Project in Australia.

Successful Customer Acceptance of World First CIF®: CLQ has announced the successful customer acceptance of commissioning and handover of a ground-breaking Ionic Filtration plant in Oman. For the quarter ended 30 September 2019, cash balance of the company was $73.2 million. The company has also received a cash payment of $14.6 million from the Australian Tax Office, representing the refundable tax offset available under the Research and Development Tax Incentive for FY18. In the same time period, cash flow from operating activities was $8.49 million.

 
Financial Performance (Source: Company Reports)

Outlook: The company is using technologies to find better ways to solve environmental problems and will pursue its objectives of advancing the development of the Sunrise Project as well as its suite of technology applications for the treatment of water in the water, municipal, industrial and resources sectors. 

Stock Recommendation: As per ASX, the stock is trading close to its 52-week low of $0.180, proffering a decent opportunity for accumulation. In the time span of 4 years from FY15 to FY19, the company witnessed a CAGR of over 110% in revenue. In the same time span, EBITDA margin and net margin have witnessed a substantial improvement. During the year, current ratio of the company stood at 8.05x, higher than the industry median of 1.49x. In terms of valuation, the stock is trading at a price/book value multiple of 0.7x, lower than the industry median (Industrials) of 2.1x. Thus, considering the current trading levels, high CAGR in revenue and improving EBITDA and net margin, we recommend a “Buy” rating on the stock at the current market price of $0.210, down 2.326% on December 30, 2019. 

Heramed Limited

Strategic Placement Completed to Expedite US Entry: Heramed Limited (ASX: HMD) is engaged in the development, manufacturing and distribution of fetal heart-beat monitors and other pregnancy-related solutions. As on 30 December 2019, the market capitalization of the company stood at $16.51 million. The company has received binding commitments from institutional investors for the placement of 9,184,076 fully paid ordinary shares at a price of $0.155 per share to raise $1,423,531. These funds will be utilized to progress business development initiatives and for strategic planning ahead of the Company’s imminent US market entry and to continue the development of its intellectual property suite and new technologies, including OrionAI and the second-generation foetal heart rate monitor, EchoBEAT.

For the 3^rd quarter of 2019, cash at bank stood at US$1.751 million with cash outflows from operating activities of US$0.813 million.


Cash Flow from Operating Activities (Source: Company Reports)

Growth Opportunities: The company is expected to enter selected US states and limited EU countries in the upcoming year. It is also planning to launch HeraBEAT Pro in the US markets and will initiate HeraCARE pilot preparations in Q2 of FY20. The company will further initiate strategy and process for reimbursement under German digital health ACT in Europe and is anticipating the expansion of the network with additional local partnerships hospitals, insurers in India.  

Stock Recommendation: As per ASX, the stock is trading close to its 52-week low of $0.137, proffering a decent opportunity to enter the market.During the FY19, current ratio of the company stood at 6.68x, higher than the industry median of 2.06x. This indicates that the company is sufficiently liquid for paying off its short-term liabilities. The company also reported a financially stable balance sheet with Debt/ Equity ratio at ‘Zero’, lower than the industry median of 0.3x. In terms of valuation, the stock is trading at a Price/Book Value multiple of 2.3x, lower than the industry average (Healthcare Equipment & Supplies) of 3.6x. Considering the current trading levels, stable balance sheet and lower Price/Book Value multiple, we recommend a “Speculative Buy” rating on the stock at the current market price of $0.160 as on December 30, 2019.

Indoor Skydive Australia Group Limited

Launch of FREAK Entertainment: Indoor Skydive Australia Group Limited (ASX: IDZ) operates in indoor skydiving facilities and specializes in the experiential leisure industry. As on 30 December 2019, the market capitalization of the company stood at $3.7 million. The company has recently launched its new virtual reality business, FREAK Entertainment, offering the user the most cutting edge, real life 4D encounter available in Australia.

For the year ended 30 June 2019, Indoor Skydive Australia Group Limited reported a loss after tax amounting to $7,400,998.


Financial Performance (Source: Company Reports)

Growth Opportunities: The company has set its key focus areas for FY20 and is anticipating growth through the introduction of the new IT booking system and website and introduction of Location Base Virtual Reality experiences into existing facilities. The company will also focus on its second location in the Gold Coast, which is scheduled to open early in the 4^th quarter of FY2020. IDZ will also introduce selective leisure and entertainment activities and will diversify through new VR locations to cater for Multiplayer and free roam models. 

Stock Recommendation: As per ASX, the stock of IDZ gave a return of 6.94% in the past 6 months and a return of 10% in the last one month. In the time span of 4 years from FY15 to FY19, the company witnessed a CAGR of 3.4% in revenue and a CAGR of 2.61% in gross profit. During the year, gross margin of the company stood at 77.6%, higher than the industry median of 52.8%, indicating that it is managing its costs well and is capable of converting its revenue into profits. In terms of valuation, the stock is trading at an EV/Sales multiple of 1.9x, lower than the industry median (Hotels & Entertainment Services) of 2.5x. Considering the returns in recent past, current trading levels, high gross margin and valuation, we recommend a “Speculative Buy” rating on the stock at the current market price of $0.011 on December 30, 2019.

 
Comparative Price Chart (Source: Thomson Reuters)

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