Netlinkz Ltd. (ASX: NET)

NET provides cloud-based networking solution. The company’s VSN solutions is a ‘Network as a Services’ (NaaS) catered to enterprises of all sizes. NET enables secured and personalized connections for users regardless of their locations. NET was listed in ASX on January 13, 2011. It holds a market capitalization of AUD 50.37 million.

Financial and Operational Updates: On December 28, 2021, NET announced that Mr Matthew Ryan has resigned as CFO with immediate effect. In the meanwhile, Mr Guy Robertson, Company Secretary, will be acting CFO until further notice. As per the S&P Dow Jones announcement on December 03, 2021, NET has been removed from the ASX Technology Index.

In Q1FY22, NET witnessed a surge in recurring revenues by over 1.4x to reach $3 million. In contrast, the overall revenues dropped from $4.4 million to $3.7 million in Q1FY22. There is a shift in product mix from lower margin hardware sales to recurring revenues in its VSN 2.0 and NaaS product suite. Cash receipts dipped to $4.8 million as compared to $5.8 million in PcP. NET posted operating cash outflows of $2.24 million in Q1FY22 owing to product manufacturing costs and higher administrative expenses. This was related to a one-off payment towards ANREO. It had realized $520k proceeds from the exercise of stock options. The company closed the period with a cash balance of $9.148 million as compared to $10.84 million in the preceding quarter. As per the annual report, NET continues to operate in losses. Its FY21 witnessed a loss of $23.75 million as compared to a loss of $23.97 million in FY20.

Technical Analysis: NET's prices recently broke a crucial support level of AUD 0.020 by the downside, indicating the possibility of further downside direction in the stock. On the weekly chart, the leading indicator RSI (14-period) is trading around an oversold zone at 32.07 levels and supporting the negative bias. The trend-following indicator 21-period SMA and 50-period SMA is trading above the CMP and may act as resistance levels for the stock. Now an immediate support level for the stock is placed at AUD 0.0130 while resistance is at AUD 0.0180 level.

Given the uncertainties surrounding the resignation of the CFO, removal from ASX Technology Index, substantial losses, declining cash balance, and the current technical levels, investing in this stock at such uncertain levels should be taken with a calculated approach, hence a ‘Watch’ stance is suggested. The stock was analyzed as per the closing price of AUD 0.015 per share, as of 29^th December 2021.

Weekly Technical Chart – NET

Source: REFINITIV

Note:  The purple color line in the chart depicts RSI (14-period), while the yellow color line represents the trend line. The sky-blue and red-color lines show 21-Period SMA and 50-Period SMA, respectively. The green-color histogram at the bottom of the charts represents volumes

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 for 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.

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 the uptrend may take a pause due to profit booking or selling interest. 

The Green colour line reflects the 21-period moving average. SMA helps to identify existing price trend. If the prices are trading above the 21-period, then it shows prices are currently trading in a bullish trend, (Vice – Versa).

The Blue colour line reflects the 50-period moving average. SMA helps to identify existing price trend. If the prices are trading above the 50-period, then it shows prices are currently trading in a bullish trend, (Vice – Versa).

The Yellow colour line represents the Trendline.

The Purple colour line in the chart’s lower segment reflects the Relative Strength Index (14-Period) which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status while a reading of 30 or below suggests an oversold status.

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