Senetas Corporation Limited

SEN Details

Senetas Corporation Limited (ASX: SEN) was founded in 1999 and headquartered in South Melbourne, Australia. The company along with its subsidiaries provides network data security solutions to the government and business globally. A few of the key products are used in cloud services, data protection, CCTV networks and post-quantum encryption security services.  

Enhancing Capability in Cybersecurity: Upon the rights issue by Votiro Cybersec Global Pty Ltd, a subsidiary of SEN, Senetas able to increase its investments to ramp up its capabilities in cybersecurity. Votiro had showcased several proof-of-concept trials, with the one conducted to the US Department of Defence remains the largest. The criminal enterprise business is expecting to reach US $265 billion by the end of 2031. Votiro is expected to report strong billing growth in CY2021 from new customers contracts and from existing customers.

Financial Highlights for 1HFY21: The Group witnessed a staggering growth in the Revenue from ordinary activities of +34.56% ($14.27 million in 1HFY21 vs $10.60 million in 1HFY20). The company achieved a similar set of growth in its gross profit of close to 35% by recording ~$12.16 million for the 1HFY21. The EBITDA growth was manifolds in 1HFY21 of $1.6 million as compared to the $0.1 million for 1H FY21, giving a strong boost to this bottom line.

Debt and Cash Balances- As of 1HFY 21, the company stood firmly with $13.8 million of cash on hand and with no debt balances on its books.

Financial Performance (Source: Company Report)

Key Risks:

SEN is exposed to foreign exchange volatility which off late the company provisioned ($1.4 million) for the 1HFY21 for the foreign currency translation reserves which contributed 36.10% in the total comprehensive loss for the period net of tax.

Outlook:

Votiro’s (a subsidiary of Senetas) share of revenue was close to $1.5 million and released a strong promising outlook on the same for the coming quarters. The overall segment revenues of SEN are expected to grow over 30% along with the EBITDA to grow above 170%, which is a very promising number to be recorded in coming times.

Stock Recommendation:

The stock of SEN gave a return of ~+14.58% in the last one month and a return of ~+12.24% in the last three months. The stock is trading below the average of the 52-week low price of $0.046 and the 52-week high price of $0.079. We recommended the stock on 1^st July 2021 at $0.048, reflecting a resistance level of $0.053. Considering the stock has breached its first resistance level and has rallied more than 15%, we suggest investors book profit. Hence, we give a “Sell” rating on the stock at a price of $0.056 as of 2.15pm (GMT+10) Sydney, Eastern Australia Time as of 2^nd July 2021.

Technical Overview

On the weekly chart, SEN prices recovered from lower levels of $0.046 made on April 2021. Prices are now facing the resistance of the downward sloping trend line as well as from 21-period SMA on the weekly chart. RSI (14-Period) is trading at ~56.95, indicating moderate bullish momentum for the stock prices. Immediate support levels are $0.050 and $0.046, while immediate resistance appears to be at $0.058 and $0.062.  

SEN Weekly Technical Chart, Data Source: REFINITIV

Note: Note: The yellow color line in the chart shows the trend line and the purple color line represents RSI (14-period).

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.

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine do not hold interests in any of the securities or other financial products covered on the Kalkine website.