KYCKR Limited

KYK Details

Adding-Up New Enterprise Clients: Kyckr Limited (ASX: KYK) provides services to banks and other financial institutions that seek protection against money laundering, terrorism financing, and tax fraud. The company's services include onboarding new customers and the cleansing and remediation of existing customer books. The company was able to add 11 new international enterprise clients, which has resulted in a 38% YoY increase in Annual Recurring Revenue. This, in turn, aided the Enterprise revenue to grow by 20% YoY. Furthermore, KYK has acquired four new partners utilising KYCKR information feeds to their service offerings, and negotiations with 12 partners are at various stages. KYK has released two products in 1HFY21, namely, Perpetual KYC and prototype UBOverify products, which may yield revenues in 2HFY21.

Financial Highlights for 1HFY21: KYK has reported a growth in revenues in 1HFY21 by 9% YoY to $1.23mn as compared with $1.15mn in 1HFY20. An increase in enterprise revenue by 20%, along with addition of 11 new enterprise clients aided the revenue growth during the period, despite Covid-19 challenges. The company has posted a loss of $2.81mn in 1HFY21 as compared to $2.28mn in 1HFY20.

Financial Highlights 1HFY21 (Source: Company Reports)

Change in Director’s Interest: KYK’s director, Mr Rajarshi Ray has acquired 500,000 additional shares for a total value of $33,389.89, on 2 February 2021. Number of securities held post-acquisition came in at 865,480 shares.

Key Risks: KYK business can severely be impacted by fluctuations in foreign exchange currency due to its presence in multiple countries. The company’s business can be impacted by any technical failure or the introduction of new technology, which may outdate the current technology being utilised by KYK.

Outlook: As per the company reports, KYK will be focusing more on generating Annual Recurring Revenue (ARR) through the acquisition of new international enterprise clients and reducing their focus on non-enterprise online activities due to the Covid-19 impact. KYK has released two products in 1HFY21 Perpetual KYC and prototype UBOverify products, which are expected to garner additional revenues in 2HFY21.

Stock Recommendation: In the last one month, KYK has decreased by 19.11% and by 29.48% in the last three months. The current market capitalisation of KYK stands at ~$18.91mn as on 15 March 2021. The stock is currently trading below the average of its 52-weeks’ price level range of $0.035-$0.110. On the technical analysis front, the stock has a support level of ~$0.043 and a resistance of ~$0.063. On a TTM basis, the stock of KYK is trading at a P/BV multiple of 1.2x, lower than the industry average (Professional and Commercial Services) of 3.0x. Considering KYK’s optimistic outlook on generating ARR through new clients, launching new products for revenue growth, valuation on TTM basis, current trading levels, and key risks associated with the business, we recommend a “Speculative Buy” rating on the stock at the current market price of $0.055, as on 15 March 2021.

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

Digitalx Limited

DCC Details

Business to Grow Via Additional Capital: DigitalX Limited (ASX: DCC) is engaged in software development and trading, which includes the development of software for retail-based consumer applications, Bitcoin trading, and Bitcoin mining. The company has announced raising ~$8.81mn from the placement of US institutional investors on 4 March 2021. The company is planning to utilise these funds for the development and roll-out of its Drawbridge RegTech product and for the promotional activities of its Bitcoin and digital investment funds.

1HFY21 Key Financial Highlights: DCC has registered a revenue of $0.281mn in 1HFY21 as compared with ~$0.280mn in 1HFY20. The company was able to minimise its losses significantly from $6.54mn in 1HFY20 to $1.01mn in 1HFY21 due to the elimination of losses on digital assets in 1HFY21 and realising foreign exchange gains in 1HFY21.

Key Highlights 1HFY21 (Source: Company Reports)

Outlook: DCC remains on track to focus on developing DrawBridge product features and undertake initiatives to market the product for the acquisition of new customers. The company will be presenting DrawBridge to more than 1000 delegates, at the 2021 Accelerate RegTech conference, in late March 2021.

Stock Recommendation: In the last one month, DCC has increased by 14.86% and decreased by 1.16% in the last three months. The current market capitalisation of DCC stands at ~$55.93mn as on 15 March 2021. The stock is currently trading above the average of its 52-weeks’ price level range of $0.012-$0.135. On the technical analysis front, the stock has a support level of ~$0.078 and a resistance of ~$0.102. On a TTM basis, the stock of DCC is trading at a P/BV multiple of 2.5x, lower than the industry average (Software & IT Services Sector) of 5.2x. Considering DCC’s optimistic outlook on the development of its DrawBridge product, minimisation of its losses in 1HFY21, valuation on TTM basis, and current trading levels, we recommend a “Hold” rating on the stock at the current market price of $0.085, up by 8.974% as on 15 March 2021.

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

Novatti Group Limited 

NOV Details

Commercial Launch of Lifepay: Novatti Group Limited (ASX: NOV) is a financial transaction software technology and payment services’ provider. The company is engaged in the sales and deployment of the Novatti Platform, and transaction services. The company operates via three segments: Novatti Platform, Transaction Services, and Novatti Group Limited. The company has filed an application with IP Australia to secure a multi-cryptocurrency payment gateway. After a successful launch on strong demand for NOV’s integrated financial platform Lifepay, NOV is moving to full commercial launch for Lifepay. The platform enables the customers to manage their daily life transactions. The company is planning for additional features, such as international transfers and value-added merchant services, to extend its services through Lifepay.

Financial Highlights for 1HFY21: NOV has posted the highest ever half-yearly sales revenues to $7.35mn in 1HFY21, an increase of 49% YoY. Similarly, NOV has registered a $4.3mn from its core payments processing business, an increase of 59% YoY. The company holds more than $9.1mn in cash and equivalents at the end of December 2020, which indicates that the company has enough cash to meet its growth objective. The company has posted lower losses in 1HFY21 to $3.23mn as compared with $6.73mn in 1HFY20.

Cash Availability as at 31 December 2020 (Source: Company Reports)

Outlook: As per the company reports, NOV is planning to add features to its existing integrated financial platform. The additional features, such as international transaction and merchant services will add the company to garner additional revenues, going forward.

Stock Recommendation: In the last one month, NOV has increased by 71.15% and by 64.81% in the last three months. The current market capitalisation of NOV stands at ~$93.59mn as on 15 March 2021. The stock is currently trading above the average of its 52-weeks’ price level range of $0.083-$0.530. On the technical analysis front, the stock has a support level of ~$0.42 and a resistance of ~$0.469. On a TTM basis, the stock of NOV is trading at an EV/Sales multiple of 5.3x, higher than the industry median (Professional and Commercial Services Sector) of 3.0x, and thus seems overvalued. Considering the decent performance in the past months, current trading levels, and valuation on TTM basis, we suggest investors to book profit and give a “Sell” rating on the stock at the current market price of $0.445, up by 8.536% as on 15 March 2021.

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

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