Ebang International Holdings Inc

Ebang International Holdings Inc (NASDAQ: EBON) is a designer of ASIC (Application Specific Integrated Circuit) chips and is also engaged in manufacturing and sales of Bitcoin mining machines.

Investment Highlights - Ebang International Holdings Inc – Avoid at USD 5.94

• Despite the improvement in financial performance, the Company reported a significant decline in the revenue in the first half of the financial year 2020.
• As per valuation metrics, Price/Earnings multiple of the Ebang International Holdings Inc is currently higher as compared to the corresponding multiple of the Computer, Phone & Hardware Electronics industry, reflecting overstretched valuations.
• In the last three months, the Company delivered a negative return of ~36.32% and delivered lower returns compared to the benchmark Index.
• From the technical standpoint, 14-day RSI is supporting downward movement (around 52 level), which means the stock price could decline in the short term.

Key Risks

• Increased competition could reduce the number of available investment opportunities.
• The Company is also exposed to various operational and financial risks with cybercrime, regulatory changes, and foreign exchange fluctuations.

Recent News

On 31 December 2020, Ebang International Holdings announced that it expects to launch a cryptocurrency exchange in Q1 FY2021 and will be available for public testing as well. At present, the Company has concluded the internal testing of exchange.

Financial Highlights – H1 FY2020 (30 June 2020)

(Source: Interim Report, Company Website) 

• In the first half of the financial year 2020, due to lower product and service revenue, the total revenue for the period declined significantly.
• The profitability has improved but remained in the negative zone for the period, reflecting better control over expenses.
• The cash balance as on 30 June 2020 declined to $1,089,933 (31 December 2019: $3,464,262).

Six Months Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

Conclusion

The Company has shown an improvement in financial performance in the first half of the financial year 2020. The revenue declined significantly, while bottom-line performance improved but remained in the negative zone. The Company has a well-positioned balance sheet, while liquidity position declined, and government grants were also declined. The Company’s operational performance was significantly impacted by the outbreak of the covid-19 pandemic, as it interrupted manufacturing activities globally. The Company faces a shortage of raw materials as its suppliers reduced their production capabilities. The stock made a 52-week low and high of USD 3.80 and USD 14.95, respectively.

Based on the above rationale, we have given an “Avoid” recommendation on Ebang International Holdings Inc at the closing price of USD 5.94 (as on 14 January 2021), and with support from few catalysts needs to be evaluated at a later stage such as planning to launch a blockchain-enabled financial business and online brokerage.

Zomedica Corp

Zomedica Corp (AMEX: ZOM) is a Pharmaceuticals & Biotechnology Company. The Company is engaged in the development of products for companion animals.

Investment Highlights - Zomedica Corp – Avoid at USD 1.01

• The Company remained in the development stage and did not have any product approval for sale and marketing, which resulted in no revenue generation.
• The Company has reported a negative ROE (return on equity) of 12%. The Company’s ROE remained in the negative zone from the past three years.
• As per valuation metrics, Price/Earnings & Price/Book Value multiples of the Zomedica Corp are currently higher as compared to the corresponding multiples of the Biotechnology & Medical Research industry, reflecting overstretched valuations.
• From the technical standpoint, 14-day RSI is in the overbought zone and is supporting downward movement (around 70 level), which means the stock price could decline in the short term.

Key Risks

• Any change in regulations and government policies could affect the overall business of the Company.
• The covid-19 outbreak has resulted in supply chain disruptions which will have a negative impact on the Company’s performance.

Financial Highlights – Q3 & 9M FY2020 (30 September 2020)

(Source: Quarterly Report, Company Website) 

• In the Q3 and 9M of the financial year 2020, the Company remained in the development phase and did not generate any revenue.
• The net loss and comprehensive loss in the third quarter increased, while for nine months period the loss declined.
• The cash balance as on 30 September 2020 surged significantly to $52,032,640 (31 December 2019: $510,586).

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

Conclusion

The Company has shown a decline in financial performance in the third quarter of the financial year 2020. The Company is in the development stage and hence rely on grants and cash balances to carry on all the business activities. The operations are financed by the sale of equity securities by private placements. The Bottom-line performance has declined significantly, with profitability remained in the negative zone. Zomedica Corp needs to manage its operating expenses unless it results in further deterioration in financial performance in the coming years. The Company’s operational performance was materially impacted by the impact of covid-19 as it resulted in travel bans, social distancing and self-imposed quarantine periods. The stock made a 52-week low and high of USD 0.0628 and USD 1.48, respectively.

Based on the above rationale, we have given an “Avoid” recommendation on Zomedica Corp at the closing price of USD 1.01 (as on 14 January 2021), and with support from few catalysts needs to be evaluated at a later stage such as the launch of TRUFORMA™ platform.

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