Adveritas Limited 

AV1 Details

Growth in SaaS Subscribers in Q3FY21: Advertias Limited (ASX: AV1) is a developer of new software solutions using big data. It has developed TrafficGuard, an ad fraud prevention software offered as SaaS to enterprises. As of 20 May 2021, the market capitalisation of AV1 stood at ~$41.04 million. On 18 May 2021, AV1 reported that MC Management Group Pty Limited held 15.19 million fully paid ordinary shares and 2.25 million listed options (exercisable at $0.10 on or before 25 October 2021). The company reported 63% YoY growth in its cash receipts for Q3FY21.

AV1 witnessed strong sales momentum, a 61% increase from 31 December 2020 in Freemium subscribers totalling over 2,300 at the end of Q3FY21. TrafficGuard was reported to be used by 170 paying customers, up by 42% from 31 December 2020. The conversion rate of Freemium to paying customers averaged ~15% in Q3FY21, much higher than the global average of 2%-5%. AV1 witnessed new enterprise clients signing up during the quarter from Asia, North America, and Europe (first client). It held a cash reserve of $5.6 million, 55.5 million options exercisable at $0.10 (expiry in October 2021), and was debt-free as of 31 March 2021.

Q3FY21 Sign Ups from Jun20-Apr21 (Source: Company Reports)

Key Risks: The company faces competition from peers and growth in enterprise-level SaaS customers and subscribers. It is exposed to technological disruptions and technical glitches in the smooth functioning of its platform.

Outlook: The company intends to establish global scale foundations by investing in marketing and sales initiatives to set up and grow an end-to-end enterprise sales process. AV1 plans to increase its sales pipeline across cryptocurrency, insurance, gaming, and online retail verticals. It is in negotiations worldwide with multiple enterprise-level clients currently for TrafficGuard’s trial demonstration. AV1 expects that the new clientele signed in 1HFY21 will provide revenue in 2HFY21. It plans new Pay-Per-Click (PPC) integrations with multiple most visited sites and expects to increase the entire addressable market significantly.

Stock Recommendation: The stock of AV1 gave a negative return of 38.46% in the past three months and a negative return of 11.11% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level of $0.075-$0.225. The stock of AV1 has a support level of ~$0.106 and a resistance level of ~$0.136. On a TTM basis, the stock of AV1 is trading at a price to book value multiple of 7.2x lower than the industry (Technology) average of 7.7x. Considering the current trading levels, growth in cash receipts, increase in Freemium customers and subscribers, strategic partnerships generating client pipeline, more PPC integrations planned for FY21, revenue for 2HFY21, valuation on a TTM basis, and associated risks of technological disruption, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.120, up by 4.347% on 20 May 2021.

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

Respiri Limited

RSH Details

Takeover Bid Offer Rejected: Respiri Limited (ASX: RSH) is engaged in the research, development, and marketing of medical devices. It also develops mobile health applications. As of 20 May 2021, the market capitalisation of RSH stood at ~$72.28 million. On 30 April 2021, RSH submitted a Bidder’s Statement to Adherium Limited (ASX: ADR), which included an unsolicited off-market takeover bid by Respiri Limited for Adherium shares. On 10 May 2021, the management of Adherium Limited (ASX: ADR) responded to the offer after review by its Board. ADR recommended its shareholders reject the unsolicited takeover bid by RSH by taking no action. The decision has been taken after discussion with a significant majority of Adherium shareholders.

Results of March Quarter (Q3FY21): During Q3FY21, RSH reported improved operating cash outflows of $1.6 million, up by 35% on a pcp basis. RSH reported the grant of the USFDA clearance for wheezo™, as a class II medical device during Q3FY21. At the close of the quarter, RSH had eight banner groups onboard to drive sales across ~1,000 stores. It appointed Dr Mark Levy as an advisor in the UK and Dr Andrew Weekes as a strategic advisor to the company Board during the quarter. During Q3FY21, RSH formalised service contracts with both a local 3PL and a global freight forwarding company to streamline its supply chain processes. During the quarter, RSH developed a telehealth/remote patient monitoring program to service patients with mild-severe asthma by providing ambulatory care services. This program will be charged a premium monthly Product as a Service (PaaS) fee. RSH held cash and cash equivalents of $9.9 million as of 31 March 2021.

Cash Flow from Operations, Q3FY21 (Source: Company Reports)

Key Risks: The company faces the risk of COVID-19 environment and shortage in the procurement of components (chips) for the wheezo device. It experienced delays in certain commercial activities and exposed to changes in the production levels. 

Outlook: RSH forecasts a production capacity of 12,500 wheezo devices every month from mid-2021. Cipla had ordered 1,000 wheezo units in April, and further orders are anticipated in May to meet the pharmacy demand. The company is on track to achieve its initial sales target of wheezo through its network of ~2,000 pharmacy stores before 30 June 2021. RSH plans to market wheezo device along with the App in the US in Q3FY22.  It also plans to launch an in-pharmacy program across the network of Pharmacy Platform (co-developer of the program) and later to other banner groups.

Stock Recommendation: The stock of RSH gave a negative return of 34.48% in the past three months and a negative return of 42.42% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level of $0.061-$0.250. The stock of RSH has a support level of ~$0.085 and a resistance level of ~$0.108. Considering the current trading levels, expectation of meeting the target for wheezo sales before June end, expansion of pharmacy network, launch plans for wheezo device and App in the US, and associated risks of the pandemic and delay in the commercial activities, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.095, down by 5.001% on 20 May 2021.

RSH 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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