Stocks’ Details

Senetas Corporation Limited

Decent Growth in Revenue: Senetas Corporation Limited (ASX: SEN) is an IT security products and services company, which provides high-speed data encryption protecting sensitive data for government and industry. The market capitalisation of the company stood at $61.68 million as on 18^th January 2021. On 21^st December 2020, the company introduced the market with high-assurance quantum resistant network encryption cybersecurity solution. The company added that the quantum resistant encryption would provide sensitive government and business network data with the necessary long-term protection against the rising threat of quantum computing by adding quantum resistant features to its current hardware network encryption platform. For the year ended 30^th June 2020, the company recorded operating revenue amounting to $22.6 million, reflecting a rise of 6.1% over pcp. Underlying segment operating profit before tax for the year witnessed a rise of 4.8% to $4.1 million.

Key Financials (Source: Company Reports)

Outlook: The company stated that the FY21 sales pipeline indicates a modest softening in near term sales demand. Despite this, the company is not expecting any material impact on recurring maintenance revenue. In addition, the company anticipates enjoying the benefit of cost-saving initiatives undertaken in FY20 across the business in FY21.

Stock Recommendation: The company closed FY20 with the strong balance sheet, which was comprised of a cash balance of $15.7 million and nil debt. During FY20, the company recorded a gross margin of 87%, which indicates lower inventory transfers and the depletion of Thales inventory. The stock of SEN has corrected 8.19% in the last three months. As a result, the stock is slightly below its 52-week low-high average of $0.058. On a technical analysis front, the stock has a support level of ~$0.049 and a resistance level of ~$0.068. Hence, considering the decent growth in operating revenue, strong balance sheet, and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.056, per share, down by 1.755% on 18^th January 2021.

Constellation Technologies Limited

Substantial Growth in Cash Receipts: Constellation Technologies Limited (ASX: CT1) deals in innovative solutions which leverage cloud, internet of things (IoT), edge-computing sensors, big data, analytics, machine learning (ML), artificial intelligence (AI) and other advanced technologies. The market capitalisation of the company stood at $46.38 million as on 18^th January 2021. During the quarter ended 30^th September 2020, the company witnessed a rise of 85% in cash receipts to $526k. During the same quarter, the company experienced growth in revenue, which was benefited from its  China operations and the commencement of three new projects. For the year ended 30^th June 2020, the company reported revenue amounting to $691,484, reflecting a rise of 19.43% over FY19. Loss for the year amounted to $2,923,876 against $2,177,277 in FY19.

Rising Cash Receipts (Source: Company Reports)

Outlook: The company expects its sales pipeline in China to grow moving forward. CT1 is also planning to carry out opportunistic acquisitions in order to support growth objectives.

Stock Recommendation: The company closed September 2020 quarter with a cash balance of $3.77 million. In the last three and nine months, the stock of CT1 has surged 94.44% and 75%, respectively. As a result, the stock is inclined towards its 52-week high level of $0.046. In addition, the stock is trading at a price to book value multiple of 10.5x against the industry median (Software & IT Services) of 5.9x on TTM basis. Thus, it seems that the stock is overvalued at the current trading level. On a technical analysis front, the stock has a support level of ~$0.024 and a resistance level of ~$0.039. Therefore, considering the steep price movement in the past few months, current trading level and valuation on TTM basis, we are of the view that most of the positive factors have been discounted at the current trading level and give an “Expensive” rating on the stock at the current market price of $0.034 per share with no change on 18^th January 2021. We further suggest investors to wait for a better entry-level.

Kyckr Limited

Launch of New SaaS Technology Platform:  Kyckr Limited (ASX: KYK) is in the provisioning 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 $27.50 million as on 18^th January 2021. In the month of December 2020, the company has launched a new SaaS technology platform “Company Watch”. The new platform expands Know-your-client (KYC) RegTech solution of KYK from the point in time, manual, one-off authentication of customers to real-time, automated, ongoing monitoring. The company entered FY21 with a growth of 16% in revenue to $646k in Q1 FY21. In addition, the company’s strategic focused has been turned to corporate clients, which witnessed a rise of 29% to $576k as a result of the addition of new customers and increasing usage by existing customers. Net cash outflow from the operating activities stood at $1.9 million.

Cash Flow (Source: Company Reports)

Outlook: Looking forward, the company would be focused on expanding its reach beyond its traditional markets of banks and payments companies. In addition, KYK would continue to build on its strategy to drive its enterprise pipeline and extend strategic partnerships into FY21.

Stock Recommendation: As on 30^th September 2020, the cash balance of the company stood at $8.6 million. Current ratio of the company stood at 4.97x in FY20 as compared to the industry median of 1.96x. This showcases that KYS is well-positioned to settle its short-term obligations against the broader industry. The stock of KYK has corrected 4.76% and 14.69% in the past six and nine months, respectively. The 52-week low-high range for the stock stands at $0.035 - $0.115, respectively. On the technical analysis front, the stock has a support level of ~A$0.07 and a resistance level of ~A$0.099. Thus, considering the growth in top-line, decent liquidity position, and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.078 per share, down by 2.501% on 18^th January 2021.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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