Cirralto Limited

CRO Details

Business Update: Cirralto Limited (ASX: CRO) is engaged in the development of technology assets, that enable migration to the cloud. The market capitalisation of the company as on 08 March 2021, stood at ~$166.40 million. As per a recent update, the company has received capital commitments of $18 million, mostly from institutional investors. It plans to use the proceeds to accelerate the development of payments technology via the Spenda and SYNK’D platforms.

H1FY21 Performance Update: The company reported an increase in revenues to $629,092 during H1FY21, compared to $269,855 in the previous corresponding period. Net loss narrowed down to $1.26 million from $1.82 million during the same period in FY20. There was a cash outflow from operating activities of $1.35 million. The cash position of the company improved significantly to $3.95 million as on 31 December 2020 from $273,628 on 30 June 2020.

H1FY21 Financial Performance (Source: Company Reports)

Outlook: The company will look to leverage its existing supply chain relationships to promote the Spenda product suite and payment solutions. It will look to bundle the spenda software and payments services to create competitive advantage across the Xero customer base.

Stock Recommendation: There has been a reduction in the current ratio of the company to 0.28x in FY20 from 0.97x in FY19. As per ASX, the stock of CRO is trading below its average 52-weeks’ levels of $0.002-$0.210. The stock of CRO gave a positive return of ~100% in the past three months and a negative return of ~19.99% in the past one week. On a technical analysis front, the stock of CRO has a support level of ~$0.072 and a resistance level of ~$0.086. Considering the volatile returns in the past few months, continued losses of the company and a significant reduction in the liquidity position, we give an ‘Avoid’ rating on the stock at the current market price of $0.076, down by 7.318% as on March 08, 2021.

CRO Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Veris Limited

VRS Details

Share Purchase Plan: Veris Limited (ASX: VRS) provides surveying, planning and design services. The market capitalisation of the company as on 08 March 2021, stood at ~$33.92 million. As per a recent update, the company has announced a Share Purchase Plan in order to provide eligible shareholders to participate in the company's capital raising activities. The eligible shareholders will have the opportunity to purchase up to $30,000 worth of shares at the same price as that of the recent placement round of $0.07 per share. The given round will not have any brokerage or transaction costs for the client. Under the plan, shareholders may apply for a maximum of $30,000 worth of shares and a minimum of $2,000 worth of shares. The company will use the proceeds for further growth and value realisation of Veris Australia and Aqura Technologies. This also includes investment in the latest equipment technology and the expansion of its ‘As-a-Service’ models.

H1FY21 Performance Update: During the period, the company reported revenues of $50.08 million. There was an increase in revenue for Aqura Technologies to $11.14 million, compared to $10.40 million in the prior corresponding period. EBITDA grew by ~289% to $6.03 million, with Veris Australia reflecting a ~451% increase on the prior corresponding period. The cash position of the company was at $2.44 million as on 31 December 2020 with borrowings of $6.5 million on the balance sheet.

H1FY21 Financial Performance (Source: Company Reports)

Outlook: There has been a significant turnaround in the business of the company. The business restructures and focused management in Veris Australia has enabled signs of improvement and there has been continued organic growth in Aqura Technologies, aided by decent margin performance. The company has a decent order book and pipeline and is well-positioned to execute on future strategies, supported by the recent fundraise of ~$7.5 million.

Stock Recommendation: On 04 March 2021, the company has completed a placement to sophisticated, professional and institutional investors to raise ~$7.1 million. As per ASX, the stock of VRS is trading above its average 52-weeks’ levels of $0.018-$0.088. The stock of VRS gave a positive return of ~127.58% in the past six months and a positive return of ~94.11% in the past nine months. On a technical analysis front, the stock of VRS has a support level of ~$0.062 and a resistance level of ~$0.076. Considering the current trading levels, decent EBITDA performance, an increase in debt to equity ratio and the key risks associated with the business, we are of the view that most of the positive factors have been discounted at current juncture. Hence, we suggest investors to wait for better entry level, and give an ‘Expensive’ on the stock at the current market price of $0.066, down by 1.493% as on March 08, 2021.

VRS Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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