RPMGlobal Holdings Limited

RUL Details

Enhancements of SOT: RPMGlobal Holdings Limited (ASX: RUL) develops and provides mining software solutions, advisory services, and professional development solutions to the mining industry. In July 2020, the company had acquired Schedule Optimisation Tool (SOT ^TM), as part of its acquisition of Revolution Mining Software Inc. to further improve its existing suite of innovative design, scheduling, and optimisation products. On 3^rd May 2021, RUL announced the scheduled release of a number of significant improvements to its SOT ^TM. Notably, the latest release of SOT has introduced the open pit functionality, which can now unlock greater levels of productivity and profitability. Moreover, it also includes other important features, including an assessment of the economic schedule after completion of the initial schedule optimisation.

H1FY21 Result Highlights: For H1FY21, the company reported net profit after tax (NPAT) of $0.9 million, up by $2.1 million on H2FY20. During the period, the company increased its investment in software development by $0.4 million to accelerate the transition of its software products to the cloud. Cash outflow from operations for H1FY21 stood at $4.7 million.

H1 FY21 Results (Source: Company Reports)

Update on TCV for Subscription Software Sales: As on 30 March 2021, the company’s total contracted value (TCV) for subscription software sales stood at $27.8 million. Further, the company’s Annual Recurring Revenue (ARR) from software subscriptions stood at $19.4 million per annum.

Key Risks: The company is exposed to the risks of COVID-19 pandemic as it could create logistical challenges for the company’s Advisory team due to the curtailment of international travel. Further, the company is exposed to the risks related to the changes the mining technology.

Outlook: The company’s AMT product and its newly acquired IMAFS inventory optimiser, both have decent second-half sales pipelines. The company expects to conclude several important deals in H2FY21. The company is of the view that its continued heavy investment in its software products and its transition to the cloud will position it well for strong market share growth in the medium term.

Stock Recommendation: Over the last six months, the stock has provided a return of ~44.12%. The stock is currently inclined towards its 52-week’s high price of $1.50. On the technical analysis front, the stock has a support level of ~$1.297 and a resistance of ~$1.50. On a TTM basis, the stock is trading at a Price to Book multiple of 5.0x, lower than the industry average (Software & IT Services) of 8.4x. Considering the company’s decent performance in H1FY21, the release of a number of significant improvements to SOT, decent sales pipeline for H2FY21, modest outlook, and valuation on a TTM basis, we give a “Hold” rating on the stock at the current market price of $1.470, as on 3 May 2021.

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

Constellation Technologies Limited

CT1 Details

Decent Growth in Q3FY21 Cash Receipts: Constellation Technologies Limited (ASX: CT1) is a IoT and digital solutions company that designs, engineers, builds and integrates systems, combining comprehensive software expertise with custom hardware development. For March 2021 quarter, the company reported cash receipts of $512k, up 260% on the previous quarter, taking the total year to date (YTD) cash receipts to ~$1.2 million. During the quarter, the company deployed its MeridianCT Platform (MCT) in China, to support growth in the Smart Cities and Industrial IoT sectors. The company also deployed its Cold Chain solution at Barwon Health’s University Hospital Geelong to monitor the temperature integrity of Pfizer vaccine doses. As of 31 March 2021, the company had a cash balance of ~$3.44 million.

Cash Flow from Operating Activities (Source: Company Reports)

Key Risks: The company is exposed to the risk of COVID-19 pandemic as it could impact the movement and number of opportunities in the project pipeline in all regions. The company’s operations in India and China expose it to foreign exchange risk.

Outlook: Looking ahead, the company is focused on capitalising on successful early start in China and move to larger contracts and applications in multiple smart-city sector verticals. The company plans to form strategic relationships with major technology companies to integrate the MeridianCT Core into their market offerings. Further, it intends to pursue acquisition opportunities to complement growth objectives.

Stock Recommendation: Over the last three months, the stock has corrected by 37.49% and is trading lower than the average 52-week price level band of $0.016-$0.045, offering investors a decent opportunity for accumulation. On the technical analysis front, the stock has a support level of ~$0.017 and a resistance level of ~$0.027. On a TTM basis, the stock is trading at a Price to Book multiple of 9.1x, slightly lower than the industry (Technology) average of 9.5x. Considering the company’s rising cash receipts, deployment of MCT in China, current trading level, valuation on TTM basis, and associated key risks, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.020, as on 3 May 2021.

CT1 Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Note: 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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