Silex Systems Limited

SLX Details

Project Near Second-Stage Completion: Silex Systems Limited (ASX: SLX) is engaged in the commercialisation of the SILEX Zero-Spin Silicon (ZS-Si) project and SILEX uranium enrichment technology. Recently, SLX updated investors on approaching completion of the second stage of the Zero-Spin Silicon (ZS-Si) project and positive results from the silicon enrichment tests conducted.

• The second stage activities are expected to be completed in early 2022 after a review of results by JV partners – SQC (Silicon Quantum Computing Pty Ltd) and UNSW (UNSW Sydney).
• SLX is planning for stage-III of the project which involves industrial-scale preparation and resourcing. It includes the demonstration of the processing plant facility via SILEX Laser Isotope Separation (LIS) technology to produce initial commercial quantities of ZS-Si from 2023.

Investor Presentation Key Takeaways:

• The SILEX technology is expected to offer the GLE (Global Laser Enrichment LLC), the sole licencee of SILEX technology with multiple avenues in the production of nuclear fuel. It will help to produce natural grade uranium, enrich natural uranium to produce LEU (low enriched uranium), and enrich HALEU (high assay low enriched uranium) for use in SMRs (small modular reactors).
• It is estimated that the demand for HALEU could jump as high as 500 MTU per year in the US by 2035.

AGM Presentation Highlights:

• In September 2021, SLX raised ~$33 million equity via a share placement. In October 2021, SLX also undertook an (SPP) Share Purchase Plan and plans to deploy funds on furthering the commercialisation activities of the SILEX technology.
• SLX and Cameco Corporation (~49% JV partner on the Paducah Project) progressed on their GLE commercialisation strategy and recruited engineering teams. SLX has appointed Stephen Long as the CEO, Mr. James Dobchuk as the Chief Commercial Officer to head GLE to market.
• SLX advanced on the development of its proprietary IQepiMo™ filter product for application in the 5G mobile handsets using its cREO® platform. It is currently running tests with the project partners and customers.

Key Financial Highlights; (Analysis by Kalkine Group)

Key Risks: The company faces the risk of commercialising its proprietary technologies, failure to achieve testing results, develop IP protection, and raise adequate funds for development activities.

Outlook:

• ZS-Si project is on schedule after the completion of key milestones such as the construction of a prototype test facility. The company is positioning to complete stage- II activities by early 2022 and commencing stage III of the project.
• SLX is assessing more opportunities for the potential use of its SILEX technology such as in the treatment of front-line cancer and other diseases via the production of medical isotopes.

Technical Commentary: The stock is currently trading above the downward sloping trendline breakout level, indicating an upward trend. The price has lately begun to climb upward, and we may expect this trend to continue in the immediate future. The stock's next significant resistance level appears to be ASX 1.33, which prices may test. On the daily chart, the RSI (14-period) is at 35.21, indicating that the stock is in a oversold zone. Weekly volumes also appear to be in favour of an upward trend.

Stock Recommendation: The stock of SLX gave a negative return of ~28.82% in the past three months and a positive return of ~27.36% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $0.645 - $1.970. Considering the low trading levels, revenue growth, nil debt levels, an estimated market size and demand for HALEU in the US, expected growth in uranium demand & supply shortages, progress on the ZS-Si and cREO® projects, technical levels given below, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the current market price of $1.110, as of 16 December 2021, 10:30 AM (GMT+10), Sydney, Eastern Australia.

SLX Daily Technical Chart, Data Source: REFINITIV 

Dropsuite Limited

DSE Details

Presentation at the Online Conference: Dropsuite Limited (ASX: DSE) offers a cloud software platform to enterprises worldwide for restoring and protecting business information. It provides cloud products such as Office 365 Backup, Website Backup, Email Archiving, Google Workspace Backup. The Managing Director of DSE, Charif El Ansari, recently participated and presented a corporate overview of their contribution as a technology firm at the Market Eye’s TechOpps Conference 2021 on 10 November 2021.

Investor Presentation & Q3FY21 (30 September 2021) Highlights:

• The company estimates a growing and significant opportunity for Microsoft 365 & Google Workspace backup. The market size for these products will expand from $350 million in 2020 to ~$570 million in 2021.
• DSE had ~395 IT reseller partners (distributors) and ~575,000 end-users across SME, micro, and large businesses as of 30 September 2021.
• The company generated first-time positive normalised cash flows from operations of ~$0.09 million in Q3FY21 underpinned by revenue growth and disciplined control in operating expenditures.
• DSE held $21.4 million cash as of 30 September 2021.

Operational Cashflow Highlights; (Analysis by Kalkine Group) 

Key Risks: The company faces the risk of cyber security lapses, technological changes, technical glitches on its cloud platform. It risks dependence on the partner network for wider distribution.

Outlook:

• Based on the delivery of objectives in FY21, DSE seems well-placed for establishing and achieving new milestones for continued growth and innovation. It plans to use the recently raised funds for internal organic growth avenues and evaluate strategic accretive acquisitions.
• DSE intends to stay invested in product development, growing partner sales & distribution, and new product integrations. It aims to improve best practice solutions, better backup experience to IT resellers, and optimise their billing, provisioning, and support processes.
• With the supportive industry tailwinds within the cloud backup and archiving sector in the near term, DSE plans to position itself as the one-stop solutions provider and shop for productivity and email applications.
• The company is set to deliver a profitable operating EBITDA and higher ARR on the back of its growing partner network (including the pipeline).

Technical Commentary: On October 21, 2021, the DSE price created a double top, after which the stock saw a sharp correction, forming lower peaks and bottoms and trading in a falling channel. The stock's next significant support level is now ASX 0.173 followed by 0.159, and the stock's next major resistance level is ASX 0.225. A breakout above ASX 0.225 supported by volumes might extend the stock's buying.

Stock Recommendation: The stock of DSE gave a negative return of ~1.26% in the past three months and a positive return of ~14.70% in the past six months. The stock is currently trading slightly lower than the 52-weeks’ average price level band of $0.115 - $0.285. Considering the low trading levels, a growing data backup and recovery market, nil debt levels in 1hFY21, growth in reseller partners, end-users, technical levels mentioned below, decent outlook, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the closing market price of $0.195, down by ~4.879% as of 16 December 2021.

DSE Daily Technical Chart, Data Source: REFINITIV

LiveTiles Limited

LVT Details

Trading Policy Released: LiveTiles Limited (ASX: LVT) is a developer and marketer of Employee Experience (EX) software through its cloud-based platform. The software connects customers (employers) to interact and collaborate with their employees. On 16 December 2021, LVT released its trading policy in compliance with ASX Listing Rule 12.10 for its shareholders.

Issue of Shares: On 15 December 2021, LVT declared to issue ~3.15 million shares at $0.12 per share on 16 December 2021 to BindTuning as part of the consideration to complete a ~19.99% stake in the company.

Agreement to Acquire BindTuning: On 15 December 2021, LVT signed a binding contract to purchase 100% issued capital of a Portugal-based firm BindTuning, a leading digital workplace software enterprise over 24-months.

• As agreed, LVT will pay ~US $540,000 upfront for ~19.99% stake via 50% cash and 50% LVT shares. LVT will acquire ~80.01% stake subject to BindTuning meeting an ARR performance hurdle of ~US $4 million during the next 24-months. LVT plans to use the existing cash balance and finance facility of OneVentures for the cash component of the consideration.
• BindTuning has over 200 customers worldwide and builds technology to for a new-age, collaborative, intelligent digital workplace to enhance the employee experience.
• The acquisition supports faster development of the LiveTiles Marketplace for the EX (Employee Experience) solutions.

AGM Highlights:

• LVT reported an increase in the total contracted licences by ~48% YoY to ~2.3 million in
• The net cash outflows from operating activities declined from ~$20.27 million in FY20 to ~$4.58 million in FY21.
• LVT plans to reduce the CAC (customer acquisition costs) payback period from ~18 months to ~12 months. The CAC: LTV grew from ~2.6x in FY20 to ~3.7x (2021). LVT plans to continue growing the CAC: LTV trajectory to at least 5-6x in FY22.
• In FY21, LVT focused on business improvements, grew its operating revenue, and licence base. Through LiveTiles Reach offering, LVT secured deals with esteemed global organisations such as Nestle, United Healthcare Group, and Footlocker. Based on the recent review results, LVT has been focusing on cost control and realising operating efficiencies.

 Cash Receipts from Customers, Highlights; (Analysis by Kalkine Group)

Key Risks: The company faces the risk of technological changes, peer competition, acquisition synergies.

Outlook:

• LVT plans to leverage its LiveTiles Reach offering within the EXP market in FY22 and beyond.
• The management focuses on simplifying its business model, consolidating the product portfolio. It plans to refine its go-to-market strategy and exercise disciplined cost management based on the business review by the Board and the new strategic plan.

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 LVT gave a negative return of ~36.29% in the past three months and a negative return of ~46.24% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $0.084 - $0.303. The stock has been valued using the Enterprise Value to Sales based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at some discount than its peers’ mean EV/Sales multiple, considering the continuing trend of negative net margins, net cash outflows, and credit risk exposure of receivables to multi-geographical presence. For this purpose of valuation, few peers like Linius Technologies Limited (ASX: LNU), Skyfii Limited (ASX: SKF), Adacel Technologies Limited (ASX: ADA) have been considered. Considering the current trading levels, growth in operating revenue, improved net loss position in FY21, focus on operational improvements and efficiencies, upside in valuation, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the closing market price of $0.086, up by ~1.176% as of 16 December 2021.

LVT 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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