Brainchip Holdings Limited

BRN Details

Upcoming AGM and Nominations for Directors: Brainchip Holdings Limited (ASX: BRN) is a developer of hardware and software solutions for machine learning (ML) and artificial intelligence (“AI”) applications. It primarily focuses on developing its Akida Neuromorphic System-on-Chip (NSoC) and network for requirements in gaming, civil surveillance, financial technology, and other advanced vision systems. As on 24 March 2021, the market capitalisation of the company stood at ~$1.18 billion. The company announced to hold its upcoming Annual General Meeting (AGM) on 26 May 2021 and mandated the receipt of Director nominations for elections by the close of the business on 6 April 2021. BRN has also mandated nominations in writing along with the nominated individual’s consent.

Termination of MD& CEO: Recently, BRN announced Mr Louis DiNardo’s termination, its current MD and CEO without cause, effective immediately. BRN has appointed its current CTO and Executive Director, Mr Peter van der Made, the interim CEO.

A Look at the FY20 Financials: BRN earned revenue of US$120k, up by 60% YoY for FY20. This increase was a result of EAP (Early Access Programs) product sales, revenue from engineering support and development. BRN incurred a net loss of US$26.82 million for FY20. During the year, BRN launched EAP, entered several “EAP” with selected customers to assess the application of the Akida NSoC. It started shipments of NSoC in November 2020, contracted with NASA to supply its EAP Evaluation Kits and with a Japanese subsidiary for an Intellectual Property license (IPL) agreement. BRN has also developed the Akida Development Environment (ADE), a development environment allowing potential customers to design a neural network. BRN inked its maiden commercial agreement for an Akida IPL in late December 2020. During FY20, BRN signed an equity financing facility with LDA Capital and raised ~US15.1 million at a premium to the share price. This facility also enabled access to a further $34 million to BRN. It held a cash and cash equivalents balance of US$19.13 million as of 31 December 2020.

FY20 Financial Highlights (Source: Company Reports)

Key Risks: The company runs the risk of delay in co-developing new products with partners, technology integration with III party providers, risk of developing IP or addressing IP claims, and changes in the government regulatory framework for AI-related products.  

Outlook: BRN has started preparing for a production version of the chip pursuant to the launch of EAP and multi-project Wafer. The company received the proceeds of its maiden IPL order post-FY20. BRN anticipates commencing manufacturing production devices in FY21 and keeps IP licencing in key focus.

Stock Recommendation: The stock of BRN gave a positive return of ~101.53% in the past three months and a positive return of ~28.57% in the past one month. The stock is currently trading above the 52-weeks’ average price level of $0.032-$0.97. The stock of BRN has a support level of ~$0.608 and a resistance level of ~$0.686. Considering decent returns in the past one month, increase in the top line for FY20, the commencement of business contracts in FY20, and plans of chip production in FY21, we give a ‘Hold’ rating on the stock at the current market price of $0.655, down by 10.274% on 24 March 2021, owing to the news of termination of its MD and CEO, Mr Louis DiNardo.

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

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