Stocks’ Details

Linius Technologies Limited 

Focused on Near-term Revenue Growth: Linius Technologies Limited (ASX: LNU) is a technology company that has invented and patented the Video Virtualization Engine™ (VVE), which is available on Amazon Web Services, Microsoft Azure, and IBM Cloud.

June Quarter Highlights: During the period, the company launched the AI Meeting Solution, which was first integrated into the Livetiles platform and is expected to generate revenue in September/ early October 2020. The new personalised news service for Grafa is expected to begin operating in the current quarter. In April 2020, the company raised $1.7 million in the capital which will be used to drive revenue growth. The period was characterised by significant cost reductions in response to the COVID-19 impacts. During the quarter, cash used in operating activities stood at $1.06 million. At the end of the period, the company had cash and cash equivalents of $1.597 million.

Operating Cash Flow (Source: Company Reports)

Outlook: The company’s core strategy involves providing personalised TV solutions and achieving significant commercial wins. Currently, the company is focused on generating significant near-term revenue growth through its technology solutions. The video conferencing sector represents an attractive opportunity, with Microsoft Teams having 75 million daily active users and Zoom having 300 million daily meeting participants. 

Key Risks: The company is exposed to a variety of financial risks, including interest rate risk, liquidity risk, and credit risk. In addition, competition from other technology players having a diverse set of offerings and better financial flexibility can impact its operations.

Stock Recommendation: The stock of the company gave positive returns of 116.67% in the last 3 months and a return of 73.33% in the last one month. On the technical analysis front, the stock has a support level of ~0.011 and a resistance level of ~$0.03.  In 1HFY20, the company had a current ratio of 7.38x, as compared to the industry median of 1.96x.  On a trailing twelve months (TTM) basis, the stock has a P/BV multiple of 5.6x, as compared to the industry median of 4.3x. Considering the business developments, price movements, and valuation on TTM basis, we have a wait and watch stance on the stock at the current market price of $0.025, down by 3.846% as on 26^th August 2020. 

Hydrix Limited

Significant Improvement in Losses: Hydrix Limited (ASX: HYD) is a product innovation company, with offerings in the form of Hydrix Services, Hydrix Ventures, and Hydrix Medical.

FY20 Financial Results: During the year ended 30^th June 2020, the company reported total revenue amounting to $15.9 million, up 12% on the previous year. Services revenue stood at $14.9 million, representing an increase of 12% on prior year revenue of $13.3 million. Cash operating loss for the period improved significantly and stood at $79k, as compared to $1.95 million in FY19. Monthly costs were reduced by ~20% as a result of cost reduction initiatives in response to the pandemic.

P&L Statement (Source: Company Reports)

Details on Key Distribution Agreement: During the year, the company signed an exclusive distribution agreement to distribute the AngelMed Guardian device. The device is the first FDA approved implantable heart attack warning system and will be distributed across 8 APAC countries under the agreement. The top 4 Asia Pacific countries being targeted represent a large addressable market, potentially translating into more than $35 million in annual Guardian revenue.

Outlook: The company is under discussions in Australia for implants under TGA’s Special Access Scheme, with first implants expected in Q2FY21. The progress, however, is subject to the necessary commercial, medical, and regulatory arrangements, and COVID-19 disruptions. With its cost initiatives in place, the company expects to generate a positive cash operating profit in FY21. 

Key Risks: The company is exposed to credit risk due to the possibility of default on part of counterparties in paying contractual obligations. HYD’s long-term borrowings at variable rates expose it to interest rate risk. In addition, it is also exposed to equity securities price risk arising from its investments.

Stock Recommendation: The stock of the company gave positive returns of 342.11% in the last one month. On the technical analysis front, the stock has a support level of ~0.07 and a resistance level of ~$0.55. During FY20, the company reported $4.2 million of proforma cash, including a capital raise of $2.75 million in July 2020. Total debt stood at ~$9.92 million, at the end of the period. On a trailing twelve months (TTM) basis, the stock has an EV/Sales multiple of 3.1x, as compared to the industry median of 2.6x. Considering the price movements in the recent past, softer market condition due to COVID-19 Pandemic, and leveraged balance sheet, we recommend investors to keep an eye on the business activities and suggest a watch stance on the stock at the current market price of $0.420 as on 26th August 2020.

Sabre Resources Limited 

Completion of Aeromagnetic Survey: Sabre Resources Limited (ASX: SBR) is primarily engaged in mineral exploration. The company recently announced the completion of the detailed airborne magnetic survey on Exploration License E57/1125 at its Bonanza Gold Project near the Penny West Gold Mine. The company will identify the highest priority drilling targets and will initiate the planning for a drilling program.

June Quarter Updates: During the quarter, the company continued to plan for the detailed aeromagnetic survey for the Bonanza Gold Project. In addition, the company also notified that the West Australian Department of Mines, Industry Regulation and Safety (DMIRS) had granted a 5-year exemption from expenditure for M47/567 covering the Sherlock Bay Nickel Deposit in the Pilbara Region of Western Australia. Notably, the company holds a 70% interest in the Sherlock Bay Project, with the M47/567 mining lease containing a resource of 24.6Mt grading 0.4% nickel, 0.09% copper and 0.02% cobalt. As on 30^th June 2020, the company had cash reserves amounting to $449k. Cash used in operating activities stood at $1k.

Operating Cash Flow (Source: Company Reports)

Outlook: The company progressed on the development of the Sherlock Bay Project and seems to be well-positioned to take advantage of the recovery in nickel prices in the future. In addition, the company is also planning to devise a drilling program for the Bonanza Gold Project. 

Key Risks: The business is exposed to risks related to additional funding requirements, metal prices, exploration, development and operating risks, competition, production risks, and regulatory restrictions. 

Stock Recommendation: The stock of the company gave positive returns of 140% in the last three months and is currently trading above the average of its 52-week trading range of $0.001 - $0.008. On the technical analysis front, the stock has an immediate support level of ~0.003 and a resistance level of ~$0.008. As on 31^st December 2019, the company had cash and short-term investments of $0.67 million and total debt amounting to $0.36 million. Considering the current business scenario, key risks exposure, price movements, and current trading levels, we have a wait and watch stance on the stock at the current market price of $0.005, down 16.667% on 26^th August 2020.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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