4DS Memory Limited (ASX: 4DS)

4DS is a semiconductor company developing interface switching resistive random-access memory (ReRAM) for gigabyte storage class memory. It conducts its R&D located in Fremont in Silicon Valley, the United States. 4DS was listed in ASX on 9 December 2010. It has a market capitalization of AUD 144.70 million as of 31 December 2021.

Financial and Operational Updates: On December 20, 2021, 4DS completed its Share Purchase Plan (SPP). The SPP was oversubscribed, and the company decided to retain proceeds of $3.5 million against the original target of $2.5 million. Trading on new shares commenced on December 21, 2021. The funds mobilized will develop ReRAM technology with imec and maintenance of IP and towards working capital requirements.

4DS has been jointly developing the memory RAM technology with imec since 2017. So far, it has conducted two tests in 2021 on imec wafers demonstrating speed, endurance and retention. Since August 2021, 4DS has been analyzing additional information from the third non-platform lot testing on the endurance of its memory cells. Processing of third platform lot is likely to kick in H1FY22. Meanwhile, 4DS has extended the testing agreement with imec by an additional one year from December 31, 2021. Under the new deal, the royalty paid to imec is capped at ~EUR 5 million.

The company has nil receipts from its customers. It had posted operating cash outflows of $1.25 million in Q1FY22 owing to R&D expenses totalling $1.05 million. It had closed the quarter with a cash balance of $2.86 million, down from $4.29 million posted in the preceding quarter.

Technical Analysis:

Daily Price Chart

Note: The purple color line in the chart depicts RSI (14-period), while the yellow color line represents the trend line.

4DS' prices recently broke a downward sloping trend line by the upside, indicating the possibility of an upside reversal. Prices also broke a horizontal resistance level of AUD 0.086 and are trading above the breakout level, further supporting a positive bias. On the daily chart, the leading indicator RSI (14-period) is trading in the positive territory at ~66.16 levels. The trend-following indicator 21-period SMA and 50-period SMA are sustaining below the CMP and may act as support levels for the stock. Now an immediate support level for the is placed at AUD 0.1000 while resistance is at AUD 0.0790 level.

Stock Recommendation

Given the overwhelming response for the company’s recent SPP, ongoing developments with imec on testing of memory wafers, decent cash balance, and current trading levels, the investors with a high-risk appetite might consider a “Speculative Buy” position, incorporating the support and resistance as one of the tools while analysing the investment opportunity. The stock was analysed as per the current price of AUD 0.089, as of 31^st December 2021, 11:47 AM (GMT+10), Sydney, Eastern Australia. However, the risk levels are extremely high in view of the substantial losses and delays in testing.

Damstra Holdings Limited (ASX: DTC)

DTC is a leading provider of integrated workplace management solutions globally. The company caters to industries where compliance and safety are a must. Its clientele includes blue-chip companies across the mining and construction, manufacturing, energy & utilities, government, and various other sectors.

Financial and Operational Update: The company recently has completed its institutional placement and the institutional component of the entitlement offer. The company is expected to raise around $20 million from the placement and the offer, which will be utilised to drive growth in sales capability and resources, particularly in the North American market. On 15 October 2021, DTC announced the completion of the acquisition of TIKS Solutions Pty Ltd (TIKS). The company is already witnessing substantial growth and cross-selling opportunities with TIKS business.

On the financial front, the company has reported a 20% YoY growth in revenue for the first quarter ended 30 September 2021. However, this was below the company’s expectations. Its annual recurring revenue rose to $29.3 million, up by 55% YoY, and the cash receipts increased by 8% YoY to $7.7 million.

Technical Analysis

Weekly Price Chart

Note: The purple color line in the chart depicts RSI (14-period). The sky-blue and green color lines represent 50-Period SMA and 21-Period SMA respectively.

On the weekly chart, DTC prices are trading below the horizontal trend line breakout level and facing resistance of the same. Moreover, the prices are trading below the trend-following indicator 21-period SMA and 50-period SMA, which may act as a resistance level for the stock. However, However, the momentum oscillator RSI (14-period) is trading an oversold zone at ~25.20 level, indicating the possibility of rebound in the price. An important support level for the stock, is placed at AUD 0.31 while the key resistance level is placed at AUD 0.41.

Stock Recommendation

The company is witnessing accelerated growth in its construction vertical, and the pipeline of opportunities remains strong in North America. Further, the company has updated its revenue to be in the range of $35.9-$38.9 million for FY22, including the TIKS acquisition and considering the performance in Q1FY22.

Therefore, considering the facts above and the current trading levels, we give a “Watch” recommendation on the stock at the closing market price of A$0.34, down 1.45% as of 31^st December 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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