Stocks’ Details

Envirosuite Limited

Proposed issue of Securities: Envirosuite Limited (ASX: EVS) develops and supplies environmental management technology platform solution deals with environmental intelligence risk management, incident intelligence, impact modelling, source identification, etc. The company serves industries like oil refineries, port operators, and mining and wastewater in global markets. The market capitalisation of the company as on 17 May 2021 stood at $102.78 million. EVS has proposed to issue 10,000,000 shares at $0.200 in the security market. 

Q3FY21 Financial Performance: During the period, the company has reported an increase in new ARR sales by 180% to $2.1 million compared to the previous quarter. The total ARR stood at $42.5 million during the period end. EVS recorded One-off revenue of $1.7 million in hardware and services. It has added 13 new customers during the period, which is expected to augment the revenue streams of the company.

H1FY21 Performance Update: During the period, the company reported revenue of $23.56 million, an increase from a revenue of $3.72 million in the pcp. EBITDA stood at negative $4.84 million during the period.

H1FY21 Financial Performance (Source: Company Reports)

Outlook: The company will launch a new product in Q3FY21 which might give an earnings growth in the near-term future. As per the recent market tailwind, Biden's proposal on water infrastructure of US $111 billion might raise the demand for EVS Water product suite. EVS expects demand for its products going forward and has a decent pipeline for Q4FY21.

Key Risks: The company had to stop the production due to covid-19 and lockdown restrictions, any further restriction might impact the earning in the near-term future.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Data Source: Refinitiv, Thomson Reuters, Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The company has recently announced that, Alberto Calderon, former Chief Executive officer of Orica, has joined as an advisor to the CEO of the company. As per ASX, the stock of EVS is trading below its average 52-weeks’ levels of $0.099-$0.255. The stock of EVS gave a negative return of ~47.36% in the past six months and a negative return of ~13.04% in the past one week. On a technical analysis front, the stock of EVS has a support level of ~$0.094 and a resistance level of ~$0.13. We have valued the stock using an EV/Sales multiple-based illustrative relative valuation and have arrived at a target price of low double-digit upside (in % terms). We believe the company can trade at a slight premium to its peer average EV/Sales (NTM Trading multiple), considering the robust growth in ARR, and decent increase in top-line in H1FY21. For the purpose, have taken peers such as Class Ltd (ASX: CL1), 99 Wuxian Ltd (ASX: NNT), Adacel Technologies Ltd (ASX: ADA). Considering the new projects in the pipeline, improved financial performance, favourable market tailwinds in the near term and the key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.100 as on 17 May 2021.    

BluGlass Limited

Appointment Laser Industry Executive to the Board: BluGlass Limited (ASX: BLG) develops and commercializes remote plasma chemical vapour deposition technology for manufacturing semiconductor materials in Australia. The market capitalisation of the company as on 17 May 2021 stood at $44.07 million.  As per a recent announcement, Jean-Michel Pelaprat, laser industry pioneer, has joined the Company's Board as a Non-Executive Director.

Q3FY21 Financial Performance: During the period, the company has reported receipts of $117,000, of which $84,000 was for microLED and LED foundry services and $33,000 was laser diode revenue. It ended the period with a cash position of $2.5 million as of 31 March 2021. It has appointed Dr Arkadi Goulakov as a Senior Laser Scientist for its US operations.

Q3FY21 Cash Flow from Operations (Source: Company Reports)

Outlook: BluGlass looks forward to launch its first laser diode commercial product in FY21. The company expects to gain an R&D rebate of $2.5 million to $3.0 million at the end of the financial year. The company is focused on multiple packaging solutions which are in the manufacturing pipeline.

Key Risk: BluGlass has been impacted on its supply chain due to Covid-19 and lockdown restriction, and there is presence of continued uncertainty across the developed market. 

Stock Recommendation: The company has reported an increased traction in customer engagement and growing demand for Laser diode. The stock of BLG is trading below its average 52-weeks’ levels of $0.021-$0.135. The stock of BLG gave a positive return of ~158% in the past one year and a negative return of ~6.06% in the past one week. On a technical analysis front, the stock of BLG has a support level of ~$0.057 and a resistance level of ~$0.1. On a TTM basis, the stock of BLG is trading at a P/B multiple of 4.8x, lower than the industry average (Technology) of 7.7x. Considering the current trading levels and valuation on TTM basis, improved cashflow, new product launch and the key risks associated with the business, we recommend a ‘Speculative Buy' rating on the stock at the current market price of $0.062, up by 1.639% as on May 17, 2021.   

Kyckr Limited

Contract Update: Kyckr Limited (ASX: KYK) provides B2B services to businesses that organises and provides accurate data from primary sources that mitigate fraud, money laundering and financial crime. KYK uses innovative technology that helps to save regulatory and commercial costs. The market capitalisation of the company as on 17 May 2021 stood at $17.19 million. As per a recent announcement, the company has reported a rise in demand and signed 12 contracts with a combined value of $788,761.

Q3FY21 Financial Performance: During the period, the company has recorded revenue up by 10% to $645K in Q3FY21 vs $587K in Q3FY20. KYK has reported a lower website revenue at $55k compared to the prior year due to a reduction in individual client activity. The cash position during the period end was $5.7 million.

Q3FY21 Financial Performance (Source: Company Reports)

Outlook: The company is focused on UBO Verify product development and marketing activities that will launch in May. The uptick in economic activity might aid in an increase in on boarding activities of the company. The company has reported four new partners integrated and contract renewal from existing customers. It will continue to promote its product offerings in key jurisdictions with the increased adoption of KYC technology. 

Key Risk: The company has been impacted in the Web-based revenue for individual clients due to the outbreak of COVID-19. The second wave of the pandemic and further lockdowns and restrictions might have an impact on the company's growth.

Stock Recommendation: As per a recent update, the company has reported an increase of 13% in Annual Recurring Revenue (ARR) compared to the prior quarter. The stock of KYK is trading below its average 52-weeks’ levels of $0.043-$0.105. The stock of KYK gave a negative return of ~50.56% in the past six months and a negative return of ~10.20% in the past one week. On a technical analysis front, the stock of KYK has a support level of ~$0.04 and a resistance level of ~$0.063. On a TTM basis, the stock of KYK is trading at a P/B multiple of 1.1x, lower than the industry average (Industrials) of 2.8x. Considering the current trading levels and valuation on TTM basis, growth on revenue, increase in ARR, absence of debt on the balance sheet and the key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.044, down by 12.001% as on May 17, 2021. 

Comparative Price Chart (Source: Refinitiv, Thomson Reuters) 

Note: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

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