Buddy Technologies Ltd.

BUD Details

Buddy Technologies Ltd. (ASX: BUD) is an IoT and cloud-based solutions provider and has two core businesses that include commercial business and consumer business. Buddy Ohm and Buddy Managed Services cater to its core commercial offerings while consumer business trades under the LIFX brand and is a leading market player in delivering smart lighting solutions.

Q4FY21 Result Performance (For the Quarter Ended June 2021)

• Revenues at A$6.7 million: The company’s revenue during the quarter stood at A$6.7 million whereby customer revenues grew by 32% QoQ and 21% YoY to $6.5 million.   The revenue also includes  government rebates and subsidies of A$158k.
• Reported Customer Receipts of A$9.1 million: BUD has witnessed robust growth in customer receipts, up by 117% QoQ and 29% YoY to A$9.1 million.
• Adjusted EBITDA stood at Negative A$1.9 million: The company has reported a negative adjusted EBITDA of A$1.9 million compared to the negative A$2.3 million in Q3FY21 and negative A$688k in Q4FY20.

Key Data (Source: Company Reports)

Key Appointments

The company, on 19 August 2021,  appointed Mr. Stephan Gates to its board in the capacity of non-executive director. Besides, it has announced the leaving of Mr. Richard Jacroux from the post of chief financial officer and chief operating officer in October 2021. It has appointed Mr. Travis Gerber as the chief operating officer.

Extended the Timeline for its Entitlement Offer

As per the press release dated 18 August 2021, the company declared the extension of the entitlement offer to 27 August 2021. Earlier, in July 2021, the company has announced the entitlement offer to its existing shareholders with the closing date on 23 August 2021.

Key Risks:

The company is exposed to supply chain disruptions owing to the COVID-19 pandemic and restrictions implemented by the government worldwide. It operates in a competitive environment with sustained changes in technology and consumer preferences. Failure in its part to address developments and competitive pressures would adversely impact its revenue and profitability. Further, it generates a majority of its revenue from the US, thus, it led to the risk of changes in the exchange rate.

Outlook

Raising Funds: In order to pay its certain existing debt as well as strengthen its balance sheet, the company recently undertook a placement and entitlement offer. The company has managed to raise A$6.5 million (less costs) from the placement to sophisticated and institutional investors. It will utilise the proceeds to pay US$ 1million of the Eastfield Payment and also towards meeting its working capital requirements.

With regards to the entitlement offer, the entitlement offer would be seeking to garner up to A$10 Mn from the existing shareholders. The funds garnered would first be utilised to pay the remainder of the Eastfield Payment as well as PFG Payment (up to US$4.25 Mn) with any remaining funds used towards increasing the working capital.

Strategy: In Q4 FY 2021, the company maintained its strategy of launching newly repackaged products globally and has also launched the brand new LIFX Switch product in the US. The benefits of launching new and upgraded products along with its new products to be introduced in H1FY22 will aid in strengthening its retail and partner relationships and will also benefit from the high-margin products.  Besides, the company will continue to focus on achieving improved sales and margin targets and reduce costs.

Technical Overview:

Chart:

Source: REFINITIV

Note: Purple Color Line Reflects RSI (14-Period)

Stock Recommendation

Notably, the company has achieved a net cash flow positive in Q4FY21 and in particular cash flow positive from operations. Resultantly, the company’s cash in hand rose to A$2.1 million in Q4FY21, up by 31% QoQ.

Considering its operational strategy towards achieving improved sales and margin targets and reduce costs along with its sustained strides towards launching new and upgraded products, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.017 per share on 26^th August 2021. 

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

Note 2: Investment decisions 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 analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined:-

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices

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