Bluglass Limited

BLG Details

Developed New RPVCD Prototypes: Bluglass Limited (ASX: BLG) undertakes the R&D of compound-semiconductor materials, equipment, and processes. BLG manufactures advanced electronics such as light-emitting diodes (LEDs), laser diodes, and solar cells via its RPCVD (Remote Plasma Chemical Vapour Deposition) technology. On 9 August 2021, BLG exhibited a proof-of-concept milestone by demonstrating its newly developed laser diodes (tunnel junction) prototypes. The company deployed its unique RPCVD (remote plasma chemical vapour deposition) technology to develop these new prototypes.

• MVP will continue to maximise development on the design, epitaxy, and fabrication of the new prototypes to optimise the laser performance.

Key Takeaways of Q4FY21:

• Capital Raise: The company raised $8.42 million in June and July 2021 via an Entitlement Offer to current shareholders and two distinct Placements. BLG raised $5.92 million (before costs) via the non-renounceable entitlement rights issue and $2.5 million via Placements under the same terms as the Entitlement Offer.
• Use of Funds: BLG will use the funds to accelerate the delivery of BLG’s direct-to-market laser diode (gallium nitride, GaN) products, expansion of sales, distribution, and marketing channels, product enhancements, and working capital.
• Leadership Changes: Mr Giles Bourne stepped down as the CEO and MD of BLG in Q4FY21. Hence, Mr James Walker, the current Chair, was appointed as the Interim Executive Chair. Mr Jean-Michel Pelaprat has joined the Board as a Non-Executive Director during Q4FY21.
• Cash Receipts & Balance: BLG reported $26,000 of cash receipts from the customers during Q4FY21. As of 30 June 2021, BLG held a cash balance of $4.176 million.

Revenue & Net Loss After Tax from FY18-FY20; (Analysis by Kalkine Group)

Key Risks:

• Supply Chain Disruptions: The company faces supply chain issues, due to the COVID-19 environment, which may impact the production of laser products.
• Financial Risks: BLG faces various financial risks such as changes in interest rate, forex rate, liquidity crunch, commodity, and equity price risk, thereby impacting revenue and profitability.

Outlook:

• BLG continues to pursue improvement in its laser diodes and products’ reliability, which is currently in the advanced stage of the manufacturing supply chain.
• The company estimates to obtain ~$3.0 million of rebate in R&D in September 2021.

Stock Recommendation: The stock of BLG gave a positive return of ~23.33% in the past week and ~8.82% in the past month. The stock is currently trading lower than the 52-weeks’ average price level band of $0.028 - $0.128. On a TTM basis, the stock of BLG is trading at an EV/Sales value multiple of 7.1x, higher than the industry (Technology) median of 6.0x, thus seems overvalued. Considering the current trading levels, decent returns in the past week and the past month, valuation on a TTM basis, muted bottom-line performance and the key risks associated with the business, we suggest investors to book profit and give a ‘Sell’ rating on the stock at the current market price of $0.049, as on 10 August 2021, 10.27 AM (GMT+10), Sydney, Eastern Australia.

BLG Daily Technical Chart, Data Source: REFINITIV

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

Note 2: Investment decision 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 Valuation has been achieved and subject to the factors discussed above.

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