ClearVue Technologies Limited

CPV Details

Proceeds from Options Conversion: ClearVue Technologies Limited (ASX: CPV) is a technology operator in the building integrated photovoltaic (BPIV) sector. It is engaged in applying solar technology in building surfaces, particularly building and glass facades, to provide renewable energy. As of 7 June 2021, the market capitalisation of CPV stood at ~$75.36 million. On 4 June 2021, CPV announced that Chairman Victor Rosenberg notified it regarding the exercise of all his 22.66 million unquoted options at $0.25c per option. As a result, he now holds 27.41 million shares in CPV versus 22.07 million. Besides, CPV also notified ASX that another major shareholder exercised his 3.006 million unlisted options at $0.25c per option. Both the transactions will result in $6.41 million in proceeds.

On 31 May 2021, CPV raised $2.12 million from the conversion of 8.48 million unquoted options at $0.25c per option by a substantial shareholder. It expects to complete an issue of 8.48 million new shares due to this option conversion. It keeps receiving more option conversion notifications from the smaller shareholders.

Joint Venture (JV) with eLstar Dynamics: On 26 May 2021, CPV inked a term sheet to set up a JV with eLstar Dynamics Holdings B.V. in the Netherlands (eLstar). The companies have signed the term sheet following a partnership agreement entered in April 2020. The JV will integrate CPV and eLstar technologies to commercialise a product suite of smart windows.

Key Takeaways for March (Q3FY21) Quarter: In March 2021, CPV announced its new online marketing campaign and website focussing on the European and US markets. In Australia, CPV progressed on the delivery work of different demonstration projects. It opened its world-first solar glass greenhouse at Murdoch University.

In Q3FY21, CPV inked a new distribution agreement with Tomita Technologies for green housing in Japan. The company received $21,000 cash receipts and incurred $969,000 net cash outflows for the March quarter. It held a cash and cash equivalents balance of $2.79 million as of 31 March 2021. Post Q3FY21, CPV announced the completion of its dual listing onto the OTCQB® in the US under stock ticker OTC CVUEF. It also declared the appointment of Dieter Moor as its European CEO from 1 May 2021.

Net Loss after Income Tax (Analysis by Kalkine Group)

Key Risks: The company faces the risk of new product launch, timely raise of funds for marketing and product development activities. It bears the risk of competition from peers and technological changes in the industry.

Outlook: CPV continues its sales and marketing activities in Northern Europe, Australia, and North America. CPV has started work on expanding its office in West Perth, Western Australia and planning to separate product showroom to include its expanding product range. It expects to complete the expanded office for occupation in coming weeks. CPV has developed new single and double-glazed prototype products to expand its product range offering. Currently, the designs are in the testing and trial stage. It expects to introduce a ready-to-market product within the next 12 months after the product testing certification and any production scaling issues.

Stock Recommendation: The stock of CPV gave a positive return of 140.54% in the past nine months and a positive return of 229.62% in the past year. The stock is currently trading lower than the 52-weeks’ average price level of $0.097-$0.990. The stock of CPV has a support level of ~$0.408 and a resistance level of ~$0.482. On a TTM basis, the stock of CPV is trading at a price to book value multiple of 14.6x higher than the industry (Basic Materials) median of 2.8x, thus seems overvalued. Considering the significant returns in the past nine months and past year, the recent news of product designs development, US listing on the OTCQB, and Japanese distribution agreement signed, valuation on a TTM basis, we believe most of the factors have been covered in the stock performance ta the current juncture. We suggest investors to wait for better entry levels and give an ‘Expensive’ rating on the stock at the current market price of $0.445, down by 5.320% on 7 June 2021.

CPV Daily Technical Chart, Data Source: REFINITIV 

Quickstep Holdings Limited

QHL Details

Secured New F-35 Orders: Quickstep Holdings Limited (ASX: QHL) offers advanced composite parts and manufacturing processes for the defence, marine, aerospace, automotive, and other transportation sectors. As of 7 June 2021, the market capitalisation of QHL stood at ~$35.81 million. On 3 June 2021, QHL announced that Director Patrick Largier now holds 1.4 million Class A and 500,000 Class B shares in QHL via an on-market ordinary share purchase at $0.046 per share. Besides, on 24 May 2021, QHL announced receiving more order commitments of $4.7 million for its F-35 vertical tail production program from an existing customer. The program has been started, and QHL will implement it over 22 months. QHL expects further incremental orders for the program; however, not expecting any change in the provided FY21 guidance.

Signed MOU Agreement with TASA: On 11 May 2021, QHL announced entering a non-binding MOU (Memorandum of Understanding) with TASA (Triumph Aviation Services Asia), a subsidiary of Triumph Group (NYSE: TGI). The agreement provides the proposed aftermarket services such as MRO, repair development, and spares pooling for the aerostructures market for the Australasia region.

A Look at the 1HFY21 Results: QHL reported total sales of $41.5 million in 1HFY21, up by 7.94% YoY owing to an increase in Joint Strike Fighter (JSF) program volumes to full-rate production. It posted an NPAT of $0.81 million, down by 44% on a YoY basis. QHL invested $1.5 million of capex to introduce new technology, improve operational efficiency, and enhance capacity. QHL’s net debt has reduced to $3.7 million since the results announced for FY20 due to robust operating cash flow. It held a cash and cash equivalent of 1.88 million as of 31 December 2020.  

Growth in Earnings from FY2018-FY2020; (Analysis by Kalkine Group)

Key Risks: The company faces the risk of deteriorating freight capacity via land and sea, port delays, supply of components and raw materials from the States due to the continuing pandemic environment. 

Outlook: QHL estimates its FY21 customer revenues to increase year on year, given no change in the currency exchange rates. It is experiencing a return of COVID-19 led supply chain challenges of air and sea freight. Given no change in the status quo and variables, QHL expects PBT growth generation over FY20 in its base business. However, it expects reported profits might be affected by initial losses from the recent acquisition of BACR (Boeing Australia’s Component Repair Capability). QHL expects the BACR acquisition to be earnings accretive by year two.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of QHL gave a positive return of 26.67% in the past week and a negative return of 16.17% in the past three months. The stock is currently trading lower than the 52-weeks’ average price level of $0.044-$0.105. We have valued the stock using the Enterprise Value to Sales based illustrative relative valuation method and have arrived at a target price of low double-digit upside (in % terms). We believe that the company can trade at a slight discount than its peer average, considering the dip in the statutory EBITDA & NPAT on pcp, expected COVID-19 supply chain issues, the impact of initial BACR acquisition losses on the reported profits. For this purpose, we have taken peers like Austal Limited (ASX: ASB), Electro Optic Systems Holdings Limited (ASX: EOS), Xtek Limited (ASX: XTE) and others. Considering the current trading levels, increase in top line and positive net cash from operating activities in 1HFY21, a new order for F-35 production, year on year revenue growth forecast given no change in variables in FY21, valuation, and risk of supply issues due to the COVID-19 and acquisition synergies from BACR, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.057, up by 13.999% on 7 June 2021.

QHL Daily Technical Chart, Data Source: REFINITIV 

Clime Capital Limited

CAM Details

NTA Update & Convertible Notes Buy-Back: Clime Capital Limited (ASX: CAM) is engaged in the investment in securities, quoted on domestic and overseas securities exchanges and selected unlisted unit trusts. As of 7 June 2021, the market capitalisation of CAM stood at ~$120.06 million. On 7 June 2021, CAM announced that the net tangible assets (NTA) before tax for the week ended 4 June 2021 stood at $0.970 per share. It also recently announced the on-market buy back of convertible notes on issue up to 5 million notes. It has started the buyback offer from 4 June 2021 and will continue until 30 November 2021, being the maturity date. Each note carries a face value of $0.96 and 6.25% p.a. interest rate payable quarterly in arrears. The purpose of the buyback is to effective capital management benefitting the shareholders. CAM will post a daily report via Appendix 3E on ASX depending on the occurrence of the transactions.

Portfolio Update & June Quarter Dividend: As of 12 May 2021, the gross portfolio value of CAM is ~153 million. It declared a fully franked dividend of 1.25 cents per share for Q4FY21. The dividend declared for the quarter is above the 1.215 cents guidance provided 1.215 cents previously on 29 March 2021. The higher dividend for Q4FY21 demonstrates robust profit in the initial ten months of FY21. By April end, CAM has added $17 million to its profit balance.

March Quarter Key Takeaways: For Q3FY21, the CAM portfolio generated a return of 4.5% pre-tax net of fees relative to a 3.6% return for the S&P/ ASX200 Accumulation Index. Its top three shareholders amongst the top twenty shareholders of the company were Amcor, APN Property Group, and BHP Billiton.

Revenue & Net Income from FY2018-FY2020; (Analysis by Kalkine Group)

Key Risks: The company faces a host of financial risks such as liquidity, credit risk on its financial asset’s portfolio. The company investments face the market risks of fall in the fair value of equities and interest rate changes.

Stock Recommendation: CAM has set 5 July 2021 as the ex-dividend date for Q4FY21 and the dividend payable date as 28 July 2021. The stock of CAM gave a positive return of 3.409% in the past three months and a positive return of 5.202% in the past six months. The stock of CAM gave a positive return of 18.181% in the past nine months. The stock is currently trading higher than the 52-weeks’ average price level band of $0.750-$0.915. The stock of CAM has a support level of ~$0.895 and a resistance level of ~$0.93. Considering the high trading levels, negative ROE, declining revenue, and net income from FY2018-FY2020, we suggest investors to book profit and give a ‘Sell’ rating on the stock at the current market price of $0.910, up by 0.552% as on 7 June 2021.

CAM Daily Technical Chart, Data Source: REFINITIV 

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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