Kyckr Limited

KYK Details

Q3FY21 Results Released: Kyckr Limited (ASX: KYK) is an information aggregator and service provider to financial institutions and banks seeking protection against terrorism financing, money laundering and fraudulent tax practices. As of 27 April 2021, the market capitalisation of the company stood at ~$18.91 million. KYK reported the highest revenue of $645k, up by 10% YoY for Q3FY21 amidst the continuing impact of the pandemic on its institutional client onboarding activity. The March 2021 revenue also stood the highest at $274k, 39% up on a pcp basis. KYK’s Enterprise business has underpinned the quarterly revenue growth, driving it up by 22% YoY for the March quarter. The quarter saw collaboration with BAE Systems Applied Intelligence and a new one-year contract with a global top 15 life assurance firm to integrate its solution into the client’s Customer Lifecycle Management platform. It has almost completed the product development of its UBO Verify service. KYK has a cash balance of $5.7 million as of 31 March 2021.

1HFY21 Operating Cash flow Highlights (Source: Company Reports)

Contracts Update: On 14 April 2021, KYK announced the signing of twelve contracts worth $788k calendar year to date with BFSI companies. KYK cannot disclose the client names publicly due to the nature of its business and has declared that the counterparties and contracts both are not material. It also announced achieving its first yearly Ultimate Beneficial Owner (UBO) (not of UBO Verify) data sale of $155K for a single partner in Q3FY21.

Key Risks: The company faces the risk of technological innovations, regulatory changes in its operating domain, partnership challenges, delayed launch of its services and new client acquisition due to COVID-19 restrictions and uncertainty.  

Outlook: It plans to promote its products in its leading jurisdictions with the increase in the adoption of KYC technology and penalties on companies owing to compliance issues. It is in the process of launching UBO Verify and has sped up its marketing activity in advance of May. KYK forecasts to accrue $209,000 by way of new contract deals in FY21.

Stock Recommendation: The stock of KYK gave a negative return of 28.57% in the past three months and a negative return of 34.52% in the past six months. The stock is currently trading towards its 52-weeks’ low level of $0.054. The stock of KYK has a support level of ~$0.044 and a resistance level of ~$0.069. On a TTM basis, the stock of KYK is trading at a price to book value multiple of 1.2x, lower than the industry (Professional & Commercial Services) median 3.2x, thus seems undervalued. Considering the current trading levels, a record increase in Q3FY21 and March revenue, growth of Enterprise business revenue, the launch of new service in May, new partnerships agreement, valuation on a TTM basis and associated risks of the pandemic, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.055 on 27 April 2021.

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

Douugh Limited

DOU Details

Launch of Funding Feature in Partnership with Stripe: Douugh Limited (ASX: DOU) provides a subscription-based financial wellness platform (Douugh App) to customers via a debit card and a smart bank account. As of 27 April 2021, the market capitalisation of the company stood at ~$109.44 million. On 23 April 2021, DOU announced the roll-out of an instant bank account funding feature in collaboration with the US-based Stripe. With this feature, DOU customers can connect their Visa or Mastercard debit cards to the App to enable instant funding from their company account. The company generates a fee income of 3% by offering this added feature to its customers. 

Completion of Goodments Pty Limited’s Acquisition: On 16 April 2021, DOU announced the acquisition of 99.8% of the issued capital of Goodments Pty Limited (GPL) after fulfilling all necessary conditions. It has given 8.20 million shares to the suppliers of GPL as part of the acquisition payment. DOU issued 2.01 million options to the newly appointed Global Head of Wealth – Mr Tom Culver. It will acquire the rest of the issued capital of GPL separately as per the Corporations Act 2001 regulations. With this acquisition, DOU acquires GPL’s app platform and over 13k customers.

Q3FY21 Financial Results: During Q3FY21, DOU reported a growth of 6.5x in its total debit card spend, 5.5x growth in total deposits and 2.6x in its customer acquisition, all on a QoQ basis. In Q3FY21, DOU introduced a new instant online card in partnership with Mastercard and registered a growth of 2.6x on QoQ. During the quarter, DOU received a Registered Investment Advisor (RIA) licence by the US SEC (Securities & Exchange Commission) to provide wealth management services via its “Wealth Jars” product in the US. It has also entered a marketing partnership with Rakuten to seek new customers and higher App downloads.  

Total Spend by Customers (Source: Company Reports)

Key Risks: The company faces the risk of the pandemic on the manufacturing of plastic cards inventory, growth of platform users, launch of new products and services, and changing industry regulations.

Outlook: DOU has planned growth via more partnerships and the launch of new features in 2HFY21. It plans to make some key improvements in the GPL’s App, and re-introduce Australia’s platform in partnership with BaaS partner RAB. DOU is also planning to launch its Android App (in the late-stage development) and Douugh Wealth solution in Q4FY21.

Stock Recommendation: The stock of DOU gave a negative return of 45.76% in the past six months and a positive return of 841.17% in the past nine months. The stock is currently trading lower than the 52-weeks’ price level of $0.048-$0.49. The stock of DOU has a support level of ~$0.149 and a resistance level of ~$0.181. Considering the current trading levels, high gross margin in 1HFY21, robust growth in key metrics of DOU in Q3FY21, launch of new features planned in FY21 and new partnerships signed, acquisition synergies, and key risks associated with the business, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.160, down by ~3.031% on 27 April 2021.

DOU Daily Technical 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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