Aeris Environmental Limited

AEI Details

Financial Performance FY21: Aeris Environment Limited (ASX: AEI) is engaged in developing and commercializing hygiene and remediation technology and energy efficiency services globally.

• Top-Line Status: Annual revenue for FY21 declined to $7.13 million relative to $14.63 million in FY20. Revenue drained significantly from both, sales and services. The impact of containment measures affected sales significantly.
• Loss Booking: During the period the company reported loss before tax of $5.99 million relative to $1.41 million PcP. The loss emerged from the issues associated with the service market during the pandemic times.
• Margins: Gross margins deteriorated significantly to 40% in FY21 relative to 55% in FY20, comsiderably reflecting low margin impact of NSW Health business.
• Cash Flow: The cash used in operating activities decreased to $1.28 million relative to $2.05 million in FY20, considerably attributed to $4.05 million decrease in trade debtors.
• Financial Position: As of 30 June 2021, AEI reported $11.37 million in cash receipts relative to $14.60 million in FY20. Net assets declined to $13.47 million relative to $19.31 million on 30 June 2020. Cash position stood at $11.49 million compared to $12.95 million on 30 June 2021.

Source: Company Report, Analysis by Kalkine Group

Key Risks and Challenges

• Supply Side Risk: Due to the pandemic factors, AEI experienced significant supply chain issues that have considerably impacted the financial performance.
• Regulatory Risk: To commercialize its product, AEI requires regulatory approval; any delays may pose significant impact on margins.

Outlook

• Reviewing Strategies: AEI is critically reviewing the deployment of its resources and development of new plans to support distributors and customers in meeting growth requirements.
• Expansion in China: AEI is targeting its investment in China to absorb domestic opportunities with potential to export novel technology, for instance, new biocidal polymers.
• Strengthening Operations: AIE is strategizing its commercial viability by engaging with consulting services to direct its focus on global sales growth.

Stock Recommendation

The stock of AEI gave a negative return of ~76.52% in the past one year. The stock is currently trading lower than the 52-weeks’ average price level band of $0.125 - $0.590. On a TTM basis, the stock of AEI is trading at an EV/Sales multiple of 1.19x, lower than the industry median (Professional & Commercial Services) of 3.86x, thus seems undervalued. Considering the current trading levels and valuation on TTM basis, decent balance sheet, recovery in global supply chain, strategic distribution partnership, existing regulatory approvals, and the key risks associated with the business we give a “Speculative Buy” recommendation on the stock at the market price of $0.135, down by ~6.897% as of 09 September 2021.

AEI Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV

Note 2: Investment decisions should be made depending on the investors' appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined: -

• Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.
• Resistance: A level where-in the stock prices tend to find resistance when they are rising, and the uptrend may take a pause due to profit booking or selling interest.
• Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices

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