Constellation Technologies Limited

CT1 Details

H1FY21 Financial Update: Constellation Technologies Limited (ASX: CT1) provides innovative solutions which leverage cloud, IoT, big data etc. The market capitalisation of the company, as on 04 March 2021 stood at ~$39.65 million. The company delivered resilient financial performance during the period with revenues from ordinary activities at $780,506, compared to $298,381 during the previous corresponding period. The net loss widened to ~$1.53 million in H1FY21 from a loss of $757,400 in H1FY20 primarily due to the company expanding its operations into China and building support services in India and Australia. The cash position of the company stood at $4.10 million as on 31 December 2020. CT1 was awarded four more contracts with respect to wastewater applications in China. The company will continue to commercialise and develop this application through further expected deployments in China and Australia. It was also awarded a commercial contract for an innovative Wetlands Monitoring application.

H1FY21 Financial Performance (Source: Company Reports)

Key Risks: The Group has its operations spread out across different geographies that exposes it to the risk of currency fluctuation. It is primarily exposed to changes in the Chinese yuan and the Indian rupee against the Australian dollar. The company also has receivables on its balance sheet and has to maintain a proper framework for the collection of its outstanding dues for services rendered.

Outlook: The company is actively working on its current projects and plans to enhance its business pipeline with opportunities across China, Australia, the US and India. It will also look to form strategic relationships with major technology companies to integrate the Meridian CT Core into their product offerings. CT1 has deployed the MeridianCT platform to support a network of road and public space cameras in Australia for any natural hazard, having several end-users of this application in several industry sectors. This provides the company scope for working on other adjacent business opportunities. CT1’s existing cold chain solution is already being used to monitor vaccines in hospital refrigeration storage.

Stock Recommendation: CT1 has continued to consolidate development and deployment under its proprietary central IoT platform- Meridian CT Core. As per ASX, the stock of CT1 is trading below the average of its 52-weeks’ price band of $0.013-$0.045. The stock of CT1 gave a negative return of ~6.89% in the past six months and a negative return of ~24.99% in the past three months. On a technical analysis front, the stock of CT1 has a support level of ~$0.025 and a resistance level of ~$0.033. On a TTM basis, the stock of CT1 is trading at a P/BV multiple of 7.7x, lower than the industry average (Software & IT Services) of 12.7x. Considering the current trading level, valuation on TTM basis, recent contract wins, increase in revenues during H1FY21, a stable 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 $0.027, up by 7.999% as on 04 March 2021.

CT1 Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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