Stocks’ Details

Gentrack Group Limited

FY20 Results Update: Gentrack Group Limited (ASX: GTK) develops, integrates, and supports enterprise billing and customer management software solutions for the utility and airport industries. The market capitalisation of the company as on 10 March 2021, stood at ~$136.62 million. The company has recently announced its FY20 results and reported a revenue of NZ$100.5 million. There was a decrease in sales revenue during the period due to a reduction in project revenues. However, its airports business remains profitable despite the industry downturn. The ARR grew by 4.9% to NZ$81.3 million, compared to FY19. It reported an adjusted NPAT of NZ$2.4 million. It reported an improved net cash position of NZ$16.8 million during the period end, up by ~263% on the pcp.

FY20 Financial Performance (Source: Company Reports)

Outlook: The company has updated its FY21 guidance, with revenues close to or slightly ahead of FY20 revenues of NZ$100.5 million. It expects the EBITDA to be around ~NZ$5 million, given that the research and development costs are expensed. It is anticipating the incremental R&D costs to be ~NZ$3 million per quarter from Q3FY21.

Stock Recommendation: GTK expects to be net cash flow positive in FY21. As per ASX, the stock of GTK is trading above its average 52-weeks’ levels of $0.770-$1.935. The stock of GTK gave a positive return of ~0.3597% in the past one month and a negative return of ~8.22% in the past three months. On a technical analysis front, the stock of GTK has a support level of ~$1.193 and a resistance level of ~$1.936. Considering the current trading levels, profitability in core businesses despite the industry downturn and decent FY21 outlook, we recommend a ‘Hold’ rating on the stock at the current market price of $1.395, up by 0.722% as on March 10, 2021.

Change Financial Limited

H1FY21 Performance Update: Change Financial Limited (ASX: CCA) is engaged in the development of its core Mastercard certified processing platform and offers Banking as a Service (BaaS) solutions to businesses and financial institutions. The market capitalisation of the company as on 10 March 2021 stood at ~$42.28 million. The company has reported a decent increase in revenues to US$2.13 million in H1FY21, compared to a revenue of US$114,663 in the previous corresponding period. Net loss reduced by ~8% to US$1.59 million during the period, from a loss of US$1.73 million on the pcp. There was an improvement in the cash position of the company to US$4.19 million as on 31 December 2020, compared to US$2.96 million on 30 June 2020.

H1FY21 Financial Performance (Source: Company Reports)

Outlook: The company caters to more than 120 customers in 36 countries. It derives annuity income from blue-chip clients, including the likes of the major Australian banks and supermarkets. The company expects commercial and technical value in the customer base, technologies and the people that it has acquired and plans to accelerate the development of its payment processing technologies.

Stock Recommendation:  The company entered into an agreement to acquire the assets of Wirecard NZ & Australia effective 1 October 2020, for an effective reduced consideration of NZ$6.83 million. As per ASX, the stock of CCA is trading below its average 52-weeks’ levels of $0.044-$0.220. The stock of CCA gave a negative return of ~18.51% in the past three months and a negative return of ~0.21% in the past six months. On a technical analysis front, the stock of CCA has a support level of ~$0.09 and a resistance level of ~$0.141. On a TTM basis, the stock of CCA is trading at an EV/Sales multiple of 14.3x, higher than the industry median (Software & IT Services) of 6.9x. Considering the current trading levels, track record of incurring net losses, absence of major catalyst to drive the business, and valuation on TTM basis, we suggest an ‘Avoid’ rating on the stock at the current market price of $0.110, up by 4.761% as on 10 March 2021.

Delta Drone International Limited

OEM Deal with Doosan Mobility Innovation: Delta Drone International Limited (ASX: DLT) is a drone-based data systems provider. The market capitalisation of the company as on 10 March 2021, stood at ~$15.54 million. As per a recent update, the company has signed an OEM deal with South Korean manufacturer Doosan Mobility Innovation and integrate its patented SafeAir autonomous parachute technology with Doosan’s DS30 hydrogen-powered endurance drone. The project is expected to generate initial revenues in excess of $150,000 and is projected for completion in mid-2021.

FY20 Performance Update: During the period, the company generated a revenue of $3.4 million, aided by consistent annuity income from large mining customers, as well as increased adoption of drone technology in the agricultural sector. It reported a loss of $92,709 during the period, owing to legal and other acquisitions costs for the listed entity. It had net assets of $11.4 million as on 31 December 2020, with a cash position of $5.2 million.

The shareholders of Delta Drone International Limited (formerly ParaZero Limited) approved the acquisition of Delta Drone South Africa (Pty) Ltd from Delta Drone SA, on 3 December 2020.

FY20 Financial Performance (Source: Company Reports)

Outlook: The company is planning to execute its growth strategy in 2021 with CEO Christopher Clark relocating to Australia in the first quarter to support DLT’s Australian operations. With the new leadership and impressive suite of drone services, DLT seems to be well-positioned to expand its operations in FY21.

Stock Recommendation: On 25 February 2021, the company expanded its service offering and signed a confidential security service contract with a large mining organisation for air surveillance. As per ASX, the stock of DLT is trading below its average 52-weeks’ levels of $0.031-$0.052. The stock of DLT gave a negative return of ~11.42% in the past one month and a negative return of ~13.88% in the past three months. On a technical analysis front, the stock of DLT has a support level of ~$0.03 and a resistance level of ~$0.039. Considering the current trading levels, muted revenue performance in FY20, losses for the year and given the key risks associated with the business, we give an ‘Avoid’ rating on the stock at the current market price of $0.031 as on 10 March 2021.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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