Constellation Technologies Ltd

CT1 Details

Constellation Technologies Ltd (ASX: CT1) is an Internet of Things (IoT) and digital transformation solutions company that is engaged in providing IoT product development and product management services.

H1FY21 Results Performance (For the Period Ended 31 December 2020)

The company has recorded significant improvement in revenue during the period as there was an increase of 161.58% YoY to $780,506. However, it witnessed a substantial rise in the loss for the period to $1,525,196 against a loss of $757,400 in H1FY20 owing to the company’s initiatives towards expanding its operations into China as well as developing support services in India and Australia.

Consolidated Income Statement (Source: Company Reports)

Q3FY21 Update

The company’s cash receipts for the quarter rose by 260% on the previous quarter and $512k were received in Q3 FY 2021 as the payment milestones from the existing projects. This led to overall cash receipts of $1.2 million for the nine months of FY21, an increase of 292% YoY. The operating costs in Q3FY21 remained largely in line with previous quarters. From 1^st January 2021 to April end, the company issued around 99.67 million shares with respect to the exercise of $0.015 options for which the company has realised proceeds amounting to $1.495 million. CT1 has a cash reserve of $3.44 million at the end of 31 March 2021.

Outlook

In line with its group’s strategy to augment its IoT and digital solutions offerings and fast-track commercial activities in the Smart Cities sector, the company has installed its IoT platform – The MeridianCT Platform in China. The company is embarking on early business development initiatives in Australia that were built over the last six months and have provided a robust revenue pipeline with mostly expected to be recurring in nature.

Key Risks

The group is exposed to the foreign currency risk due to fluctuations in the Chinese yuan and Indian rupee against the Australian dollar. Further, the risk of the Covid-19 pandemic is hindering the movement and various opportunities in the project pipeline across geographies.

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/

The stock has been showing signs of picking up while remaining in a downtrend. In the process, it has given a higher close for the ongoing week at $0.0165. The technical indicator RSI with a reading around 37 suggests a weak trend for the stock.

Going forward, the stock may have resistance around the 61.8% retracement level of $0.0219 whereas support could be around the lower Bollinger band of $0.0107.

Stock Recommendation

Meanwhile, its net cash flow from operating activities remained negative at $2.05 million in the year to date ended 31 March 2021. The stock has increased by ~17.8% in 1 month. It has made a 52-week low and high of $0.014 and $0.042, respectively. However, the company has witnessed a fall in the current ratio.

Considering the impact of sustained higher operating expenses, along with its negative operating cash flow, negative earnings in H1FY21, current trading level, and the associated business risks, we give a “Sell” recommendation on the stock at the current market price of $0.016 per share, up by 3.125% on 1^st July 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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