MICT Inc

MICT Inc (Nasdaq: MICT) manufactures, develops, and integrates computing systems for its application in the commercial, defense, and aerospace markets.

Investment Rationale – SELL at USD 2.40

• Due to higher operating and financial costs combined with the acquisition costs, net loss aggravated to US$4,461,000 in Q1 FY21 from US$1,635,000 in Q1 FY20.
• MICT is going through business transformations, while its operations can be adversely impacted by Covid-19 induced restrictions.
• From a technical standpoint, the stock price is hovering around the upper standard deviation of the Bollinger Bands, while the momentum oscillator 14-day RSI (62.56) indicates the overbought stance at the current levels.
• In terms of valuation multiples, EV/Sales and EV/EBITDA metrics of MICT are significantly higher than the Technology industry.

Risk Assessments

• Subdued economic activity amid the Covid-19 pandemic induced restrictions can impact the Company’s ability to generate revenue and conduct operations effectively.
• It is a lossmaking entity, and its growth trajectory depends on external financial resources.

Recent News

Capital Change: On 7 June 2021, MICT approved a US$60 million capital injection for Magpie Securities (MICT’s wholly owned subsidiary) to manage its stock trading platform from Hong Kong.

Financial Highlights (for the quarterly period ended 31 March 2021, as on 24 May 2021)

 (Source: Company Website)

• As of 31 March 2021, MICT consolidated the operations of Micronet in its financial statement.
• Due to the consolidation of the MRM Segment (Micronet) results, MICT reported revenues of US$8,935,000 in Q1 FY21 against nil revenue in Q1 FY20.
• The cost of revenues also surged with consolidation; however, gross profit represented 22% of revenues.
• As of 31 March 2021, MICT reported cash and cash equivalents of US$123,403,000 against US$29,049,000 as of 31 December 2020.

Share Price Chart

 (Analysis done by Kalkine Group)

Valuation Methodology: EV/Sales Approach (FY21) (Illustrative) 

Conclusion

MICT is a penny stock with a small market capitalization that is prone to significant volatility amid uncertain market conditions and state of operating losses. Although the Company has commenced its trading and insurance platform operations, its financial availability is yet to be tested. The stock has already yielded a stellar return of ~77.78% in the past year and giving a lucrative opportunity to book profit and reinvest the capital plus gain when there are significant market drivers to support the growth. The stock made a 52 week High and Low of USD 8.45 and USD 1.20, respectively.

Based on the uncertain outlook, history of operating losses, challenging market conditions, with support from unfavourable valuation conducted above, we have given a “SELL” stance on MICT Inc at the closing price of USD 2.40 (as on 23 June 2021).  

*All forecasted figures and Industry Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.

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