Stocks’ Details

Douugh Limited

A Look at September 2020 Quarter: Douugh Limited (ASX: DOU) is a purpose-led fintech and next-generation neobank. Following its strongly subscribed capital raising of $6 million, DOU (formerly, Ziptel Limited) started trading on ASX on 6^th October 2020. During September 2020 quarter, the company was focused on the activities related to the acquisition. The net cash outflow from the operating activities stood at $317k after payments of 77k and 240k for staff costs and administration and corporate costs, respectively.

Cash Flow from Operating Activities (Source: Company Reports)

FY20 Highlights: During FY20, DOU recorded total revenue amounting to $1,419,919 against $729,609 in FY19. Operating expenditure for full year amounted to $2,605,664 as compared to $2,279,894 in FY19. This was largely increased due to rise in the development costs of the product. In addition, the company recorded net loss of $1,299,600 against $1,550,285 in FY19.

Outlook: Looking forward, the company will be focused on the full market launch of the Douugh Platform in the United States. In addition, the long-term focus of the company revolves around to become a fully autonomous financial control centre for its customers. Also, the company’s strategic partnership with Mastercard would play a key role in the company’s expansion in the US.

Stock Recommendation: The company closed the September 2020 quarter with cash and cash equivalents of around $6.5 million. Current ratio of the company stood at 2.84x in FY20 as compared to the industry median of 1.96x. This indicates that the company is in a decent position to settle its short-term obligations against the broader industry. The 52-week low-high range for the stock stands at $0.010 - $0.490, respectively.  On a technical front, the stock of DOU has a support level of ~$0.231 and a resistance level of ~$0.271. Thus, considering the strategic partnership with Mastercard, long-term goal, decent liquidity position, and current trading level we give a “Hold” recommendation on the stock at the current market price of $0.255 per share, up by 4.081% on 4^th November 2020.

Lefroy Exploration Limited

Exploration Activities in September 2020 Quarter: Lefroy Exploration Limited (ASX: LEX) is engaged in the mining and exploration of minerals with a market capitalisation of $26.07 Mn as on 4^th November 2020. Recently, the company notified the market with exploration activities during September 2020 quarter, wherein, the company mentioned about the completion of the baseline exploration program in the Eastern Lefroy Project, with a total of 12,436m drilled in a 279- aircore drill hole program. In addition, the company recognized five new strong surface gold anomalies near the Hang Glider Hill prospect from a 3120-sample point auger geochemical program.

Capital Raising for Accelerating Exploration: After the quarter end, the company finished a A$4.5 million (before issue costs) oversubscribed placement to institutional and sophisticated investors. The company would use the funds raised from the placement to enhance the exploration at its Eastern Lefroy Gold Project as well as for general working capital purposes. In addition, the company is also likely to raise additional A$1.0 million via offering a Share Purchase Plan (SPP) to eligible shareholders, which would close on 19^th November 2020. For the year ended 30^th June 2020, the company reported loss amounting to $379k as compared to $740k in FY19.

Key Financial (Source: Company Reports)

Outlook: Going forward, the company is focused on the exploration at its flagship Lefroy Gold Project for the discovery of high-value gold deposits.

Stock Recommendation: As on 30^th September 2020, the cash reserves of the company stood at $0.55 million. The stock of LEX has moved up by 33.33% in the past six months. As a result, the stock is inclined towards its 52-high level of $0.340. In addition, the stock is trading at a price to book value multiple of 2.3x against the industry median (Basic Materials) of 0.9x on TTM basis. On a technical front, the stock of LEX has a support level of ~$0.199 and a resistance level of ~$0.239. Therefore, considering the loss-making business, nil revenue, and current trading levels, we advise investors to avoid the stock at the current market price of $0.210 per share, down by 4.546% on 4^th November 2020.

YPB Group Ltd

Achievement in Technical Progress: YPB Group Ltd (ASX: YPB) is involved in the development and sales of anti-counterfeiting technology. The market capitalisation of the company stood at $12.59 Mn as on 4^th November 2020. Despite the challenges posed by COVID-19, the company achieved significant growth in business and made important technical and commercial advances in Q3 FY20. The technical progress includes android phone detection of MotifMicro forensic authentication particles in real world conditions, which reflects the inhouse capabilities of the company. The company’s achievement also includes the development of COVID-19 contact tracing capability on its Connect customer engagement and serialised product authentication platform. As a result of COVID-19, the company experienced disruption in cash from operating activities.

Cash Outflow (Source: Company Reports) 

1H FY20 Financial Highlights: During 1H FY20, the company reported revenues from ordinary activities of $353k as compared to $597k in 1H FY19. In addition, the company reported an improvement of 52.3% in loss to around $1.7 million, which was mainly benefited from lower costs and the major refocus and reshaping of operations in the past two years.

Capital Raising: Subsequent to the end of September 2020 quarter, the company raised $3.6 million through the placement of 1,272,084,826 fully paid ordinary shares at an issue price of $0.00283 per share and one free attaching option to institutional, professional and sophisticated investors.

Outlook: As of now, the company is focused on the rapidly growing Australian, South-East Asian, and Chinese markets. In addition, the company anticipates revenue to stabilize in 2H FY20.

Stock Recommendation: As on 30^th September 2020, the cash and cash equivalents of the company stood at $300,000. The 52-week low-high range for the stock stands at $0.001 - $0.008, respectively. YPB has EV/Sales multiple of 17.0x as compared to the industry median (Software & IT Services) of 6.8x on TTM basis. On a technical front, the stock of YPB has an immediate support level of ~$0.001 and a resistance level of ~$0.005. Thus, considering the low market capitalisation, high leveraged balance sheet and falling topline, we advise investors to avoid the stock at the current market price of $0.002 per share, down by 33.33% on 4^th November 2020.

Zebit Inc.

A Look at Q3 FY20: Zebit Inc. (ASX: ZBT) sells products as an eCommerce merchant and provides the financing to financially underserved customers for those products. The company recently got listed on ASX on 26^th October 2020, and its IPO proved as a major milestone for the business, wherein the company raised around $35 million. For the quarter ended 30^th September 2020, the company recorded revenue amounting to US$15.35 million. ZBT recorded positive EBITDA of US$0.13 million, which happens to be the first positive EBITDA quarter since incorporation. Net loss after tax for the period amounted to US$0.33 million. During the quarter, the company was more selective in its underwriting criteria which are related to customer acquisition and taking new orders due to COVID-19.

Cash Flows (Source: Company Reports)

1H FY20 Financial Highlights: During 1H FY20, the company reported revenue amounting to US$28.1 million as compared to US$31 million. The fall in revenue was due to the pricing and down payment alterations as preventative measures taken to preserve cash. The net loss for the half-year amounted to US$4.6 million against US$5.9 million in 1H FY19. During 1H FY20, the company reported operating lease liabilities, net of current portion of US$472k and Silicon Valley Bank (SVB) debt of US$285k.

Outlook: The company stated that Q4 FY20 would be the most material quarter on the back of key sales events for consumers such as the Black Friday / Cyber Monday as well as Christmas trading.

Stock Recommendation: The company ended Q3 FY20 with cash and cash equivalents of US$7.1 million. Also, the company’s debt levels in 1H FY20 could prove as headwind for future growth prospects. In addition, the 52-week range for the stock stands at $0.930 - $1.500, respectively. Therefore, considering the expected second wave of COVID-19, debt levels, and current trading levels, we advise investors to avoid the stock at the current market price of $1.155 per share, down by 3.348%. We further suggest investors to wait for catalysts to drive the stock.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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