Mach7 Technologies Limited

M7T Details

AGM & 1QFY22 Update: Mach7 Technologies Limited (ASX: M7T) develops solutions that offer a comprehensive view of the patient to inform on diagnosis, lessen care delivery delays and expenses, and enhance patient outcomes.

• In FY21, the company achieved $25.6 million of sales orders, depicting a rise of 95% year over year and the highest in M7T’s history.
• ARR during the period went up by ~80%, whereas contracted annual recurring revenue (CARR) increased to $15.8 million, with annualised ARR at $13.4 million.
• Coming to 1QFY22, the company reported sales orders of $16.2 million (TCV), up a whopping ~368% from the previous quarter.
• CARR during the quarter stood at $16.8 million, up by ~6% on Q4FY21.
• The company exited 1QFY22 with a cash balance of $17.2 million and nil debt.

Key Achievements FY21 (Source: Analysis by Kalkine Group)

Key Risks: The company's line of business makes it prone to patent infringement claims by related peers, which, if proven guilty, might impact the reputation and goodwill of the company in the long run. The company is also exposed to technology risk and should invest in innovation to mitigate the risk of competition.

Outlook: The company has updated that the ~$27 million revenue target for CY21 is on track and has expected minimum revenue of $23.1 million in FY22. It also anticipates delivering a positive EBITDA for FY22.

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: Over the last six months, the stock has corrected by ~20.95% and is currently trading lower than the 52-weeks’ average price level band of $0.795 -$1.590. The stock has been valued using an Enterprise Value to Sales-based illustrative relative valuation method and has arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount than its peers, considering the uncertainty in business conditions, litigation case, and muted bottom-line performance. For the purpose of valuation, few peers like Nanosonics Ltd (ASX: NAN), Adherium Ltd (ASX: ADR), Resmed Inc (ASX: RMD), and others have been considered. Considering the current trading levels, indicative upside in valuation, contract wins, rise in sales orders, decent outlook, and key risks associated with the business, we give a ‘Speculative Buy’ rating on the stock at the closing price of $0.82, down by ~1.205% as on 5 January 2022.

M7T Daily Technical Chart, Data Source: REFINITIV  

New Zealand King Salmon Investments Limited

NZK Details

Director’s Appointment: New Zealand King Salmon Investments Limited (ASX: NZK) is engaged in the farming, processing, and selling premium salmon products. Recently, the company appointed Carol Chen as its new director, who will assist the company in further development of the China market.

A Quick Look at 1HFY22 Results:

• Rise in Revenues: During the period, the company recorded revenue amounting to NZ$80.1 million, up from NZ$60.1 million reported in the year-ago period, owing to clearance of excess inventory and recovery in sales. Notably, the company’s sales volume stood at 3,629 tonnes, up from 2,745 tonnes recorded in 1HFY21.
• Declining EBITDA: Lower margins and additional COVID-related expenses during the year impacted the Pro Forma Operating EBITDA, which amounted to NZ$3.3 million in 1HFY22 against NZ$7.1 million in 1HFY21.
• Bottom Line: NZK reported a statutory net loss after tax of NZ$5.6 million in line with the year-ago period.
• Balance Sheet Details: The company reported cash and cash equivalents of NZ$2.9 million at the end of 31 July 2021. Notably, net cash inflow from operating activities stood at NZ$8.97 million in 1HFY22, up from NZ$4.61 million reported in the year-ago period.

Cash Flow Highlight (Source: Analysis by Kalkine Group)

Key Risks: The company is exposed to COVID-19 uncertainties, which could impact its business in the upcoming times. Also, the business is exposed to supply chain risk, elevated freight costs and inflationary pressure on raw materials.

Outlook: For FY22, the company is likely to report Pro-forma EBITDA is in the ambit of NZ$10.5 million to NZ$12.5 million (compared to the previously provided view of NZ$8.0 million to NZ$10.0 million). The company is expecting harvest volumes of around 4,000 metric tonnes in 2HFY22.

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: Over the last six months, the stock has corrected by ~13.36% and is currently trading lower than the 52-weeks’ average price level band of A$1.18 -$1.595. The stock has been valued using an Enterprise Value to Sales-based illustrative relative valuation method and has arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight premium than its peers, considering clearance of excess inventory, recovery in sales, and decent outlook, etc. For the purpose of valuation, few peers like Tassal Group Ltd (ASX: TGR), Australian Agricultural Company (ASX: AAC), Costa Group Holdings Ltd (ASX: CGC), and others have been considered. Considering the current trading levels, indicative upside in valuation, increase in cash flow from operations, recovery in sales, encouraging outlook, and key risks associated with the business, we give a ‘Speculative Buy’ rating on the stock at the closing price of A$1.20, as on 5 January 2022.

NZK 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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