Harvest Technology Group Ltd

HTG Details

Material Business Updates: Harvest Technology Group Ltd (ASX: HTG) is a technology & communications company the delivers real-time remote control, communication, automation, and monitoring capabilities for the energy, resources, and renewable sectors.

• HTG Engages in Entitlement Offer: As announced on 13 December 2021, HTG got engaged in 1 to 10 accelerated non-renounceable entitlement offer, raising $11.1 million to fund working capital investment to streamline HTG’s Three-Phase Strategi Plan.
• Key Partnerships: HTG has engaged into three key partnerships via concrete agreements in the global communication space –
  • Reseller Agreement with Speedcast
  • Completion of the integration of Infinity Nodestream with WebEx (a Cisco product)
  • Establishing development partner for Inmarsat’s VELARIS network

Q1FY22 Operational Update

• Cash Position: HTG reported a closing cash balance of $4.001 million as of 30 September 2021. Operating cash outflow stood at $1.525 million for Q1FY21.
• Update on Three-Phase Strategic Plan: The final conditions are met for HTG’s strategic plan to transition Group to Phase 2 from Phase 1. Phase 2 involves expanding market penetration, product development, and establishing relationships and alliances with global industry services and solution providers.
• Innovation Hub: During the commencement of April 2021, lease negotiations were finalized, and an agreement was executed for a 7-year lease, with an option of 5-year, about HTG’s innovation hub at Technology Park in Bentley, WA.

FY21 Financials, Analysis by Kalkine Group

Key Risks and Challenges

• High Requirement of Intellectual Property Rights: A considerable part of HTG’s operations depend on its ability to protect, establish, and maintain trade secrets.
• Export Controls: US government imposes export controls that are particularly prevalent in technology products. Export controls can restrict product or service delivery in the US.

Outlook

HTG estimates the market size of global technology demand at a value of US$132 billion. A substantial pipeline with a significant customer base of over 10,000 targeted customers shall deliver stable revenue growth levels. HTG expects to embark upon a substantial revenue uptick in FY22 and beyond. With key partnerships in place, HTG has developed recurring revenue streams.

Stock Recommendation

The stock of HTG gave a negative return of ~26.98% in the past one year. The stock is currently trading lower than the 52-weeks’ average price level band of $0.210 - $0.500. On a TTM basis, the stock of HTG is trading at a price to book value multiple of 7.7x, lower than the industry average (Technology) of 8.7x, signalling undervaluation. Considering the current trading levels, valuation on TTM basis, successful completion of Phase 1 Strategic Phase, optimistic outlook, entitlement offer in place, and associated key risks with the business, we give a “Speculative Buy” recommendation on the stock at the closing market price of $0.230, as of 14 December 2021.

HTG Daily Technical Chart, Data Source: REFINITIV 

Adslot Ltd.

ADS Details

Key Press Releases: Adslot Ltd. (ASX: ADS) provides trading technology, services, and advertising. The company’s trading technology includes Adslot and Symphony. On 16 November 2021, ADS announced a successful resolution in historical R&D Tax Incentive Claim for FY16 and its appeal to the Administrative Appeals Tribunal (AAT). It is expecting $1.5 million refund.

Q1FY22 Operational Activities

• Adslot Media Segment: Total Transaction Value (TTV) hiked by 14% on a sequential basis and stood at $5.63 million. Total executed trades stood at a count of 570 in the September 2021 quarter. ADS continues to expand trading with the most significant global media buyers. Key agency update stands as follows –
  • Substantial pre-activation activities were executed to launch Kinesso (a Health, Wellness & Lifestyle marketplace).
  • Trading commenced with GroupM UK, the most extensive media investment company globally.
  • ADS executed a master service agreement (MSA) with S4 Capital, a leading media company, and its subsidiary agencies – Media Monks and Firewood Marketing.
• Symphony Segment: The annualised value of media managed on the platform stood at $7.16 billion, up by 13%. ADS extended its master service agreement with GroupM until at least July 2024.
• Cash Position: Customers’ cash receipts stood at $3.59 million, up by 8% QoQ. Net cash outflow stood at $0.98 million, up by $0.73 million from the previous quarter.

FY21 Key Financial Line items, Analysis by Kalkine Group

Key Risks and Challenges

Currency Risk: ADS is exposed to foreign exchange prices. Thus, any adverse movement in foreign exchange rates may drastically affect company financials.

Frequent Shift in Technologies: Technologies is a frequently changing phenomenon. Any inability to adapt to the evolving technologies may present a high risk from competitors.

Outlook

The sales pipeline for trading on Adslot Media has surged substantially, primarily driven by continued progress with large buyers and partnerships. Considering the potential activation of additional marketplaces in Q2FY22, the company maintains its confidence in TTV growth for upcoming quarters. During Q1FY21, the company made efforts in publisher onboarding, curating inventory, and developing custom features.

Stock Recommendation

The ADS stock gave a negative return of ~17.857% in the past year. The stock is currently trading lower than the 52-weeks’ average price level band of $0.022 - $0.034. On a TTM basis, the stock of ADS is trading at a price to book value multiple of 2.6x, lower than the industry median (Software & IT Services) of 4.3x, signalling undervaluation. Considering the current trading levels, valuation on a TTM basis, TTV growth prospects, optimistic outlook, efforts in publisher on-boarding, curating inventory, and developing custom features, and associated key risks with the business, we give a “Speculative Buy” recommendation on the stock at the closing market price of $0.023, as of 14 December 2021.

ADS Weekly Technical Chart, Data Source: REFINITIV

Note: The purple line reflects the RSI (14-day period)

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

Note 2: 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.

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 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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