Envirosuite Limited

EVS Details

Envirosuite Limited (ASX: EVS) is an environmental technology company offering the industry with Software as a Service (SaaS) and solutions in managing and mitigating their environmental impacts on communities concerning noise, vibration, odour, dust, air quality, and water quality.

Result Performance – For the first half ended 31 December 2020 – (H1FY21)

For the first half ended 31 December 2020, the company reported record revenue of $23.6 million from $3.7 million in H1FY20 as the current period being the first full half-year period with the EMS business. However, non-recurring revenue fell to $3.4 million from $4.4 million as the company offered temporary discounts to Airport customers due to COVID-19 and realized the negative impact of an appreciating AUD against the USD on overseas revenue. The operating expenses for the period increased to $17.29 million from $7.3 million in the pcp which contributed to a reported operating loss of $8.09 million against a loss of $6.41 million in the pcp. Further, net loss after tax for the period was reported at $7.80 million against a loss of $6.48 million in the pcp.

Key Data (Source: Company Reports)

Key Risks:

The company is exposed to a variety of financial risks, mainly related to credit, liquidity, and foreign currency risk. The time horizon and severity of Covid-19 pandemic primarily in the airport industry also remains a challenge.

Outlook:

The company is diversified across multiple sectors offering compliance, engagement, and operations solutions. Despite the persistent challenges of COVID-19, the company’s solutions continued to provide critical business value to all sectors including those in the Airport sector. Meanwhile, the company completed acquisition of AqMB Pty. Ltd, a water modelling R&D technology software company and launched EVS Water. These offerings are expected to significantly improve the economics and environmental outcomes for water asset operators. Overall, the adjusted EBITDA for H2FY21 is expected to improve on H1FY21. In addition, adjusted EBITDA is expected to be positive in Q4FY21 primarily dependent on the timing of non-recurring revenue.

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

Technical Overview:

Weekly Chart –

Source: REFINITIV

Note: Purple colour lines are Bollinger Bands® with the upper band suggesting overbought status while the lower band oversold status, and yellow lines are Fibonacci retracement lines which measure price rebound and backtrack. https://www.bollingerbands.com/

In a volatile week, the stock has given a softer close at $0.098 while remaining in a downtrend. The technical indicator RSI with a reading around 37 and a flattish curve at the end, suggests a flattish momentum for the stock.

Going forward, the stock may have resistance around a 23.6% retracement level of $0.144 whereas support could be around the lower Bollinger band of $0.083.

Stock Recommendation:

The stock has witnessed a fall of ~52.8% in 9 months and a fall of ~29.1% in 1 year. The stock has a 52-week low and high of $0.091 and $0.252, respectively, and is currently trading below the average of 52-week high-low range.

Considering the aforesaid facts, we have valued the stock using an EV/Sales multiple-based illustrative relative valuation and have arrived at a target price that reflects a rise of low double-digit (in % terms). We believe the company can trade at a slight premium to its peer average EV/Sales (NTM Trading multiple) considering decent outlook as well as its diversification throughout several sectors.

Considering the aforesaid facts, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.098 per share on 15^th June 2021.

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions 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 analysis has been achieved and subject to the factors discussed above alongside support levels provided.

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.

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