Adveritas Limited

AV1 Details

Growth in Freemium Subscribers: Adveritas Limited (ASX: AV1) is engaged in the provisioning of comprehensive digital advertising fraud prevention services via its SaaS (software as a service) product, TrafficGuard®. The market capitalisation of the company stood at $70.66 million as on 4^th December 2020. During the September 2020 quarter, the company recorded decent growth in revenue and revenue leading indicators (Freemium subscribers and Freemium conversions). In addition, the company continues to expand its revenues towards a larger number of clients using a wider range of TrafficGuard protection products. The company witnessed a growth of around 80% in Freemium subscribers to ~1,050 and a 25% rise in customer numbers from the June 2020 quarter. AV1 reported a rise of 85% in cash receipts from customers to $241k and a reduction of 19% in operating cash outflow to $1.9 million. During FY20, the company reported revenue amounting to $1,227,213, reflecting a rise of 91% on the previous year. Further, it reported a net loss of $9,487,359 in FY20 up from the loss of $6,552,197 in FY19.

Cash Flows (Source: Company Reports)

Outlook: Looking forward, the company is focused on generating revenue growth via expansion of Freemium pipeline through increased digital marketing in multiple platforms and by executing strategic partnerships with agencies and domain name registries. The company is optimistic about converting its Freemium pipeline into fee-paying land & expand customers as well as ultimately enterprise level long-dated contracts.

Stock Recommendation: The company closed September 2020 quarter with a strong balance sheet, supported by a cash balance of $6.36 million and nil debt. In the last one and six months, the stock of AV1 has moved up by 115% and 144.31%, respectively. As a result, the stock is trading towards its 52-week high of $0.275. On a TTM basis the stock is trading at a price to book value multiple of 9.3x against the industry median of 5.3x. We have also considered 14-day RSI, and it was observed that the stock is currently in the overbought zone and may witness some correction going forward. On a technical analysis front, the stock has a support level of ~$0.1251 and a resistance level of ~$0.2204. Considering the decent returns in the past few months, current trading levels, RSI levels, and valuation, we suggest investors to book profit and give a “Sell” rating on the stock at the current market price of $0.215 per share, up by 7.499% on 4 December 2020.

AV1 Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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