Silex System Limited

SLX Details

This report is an updated version of the report published on 19 April 2022 at 3:55 PM GMT.

H1FY22 Financial Summary: Silex Systems Limited (ASX: SLX) is mainly engaged in the research, development, and commercialization of the SILEX Uranium Enrichment Project and US-based Global Laser Enrichment (GLE).

• Surged Operating Revenue: The top line advanced by $2.0 million from ordinary activities, primarily attributed to the completed restructuring of GLE on 31 January 2021. Recoverable project costs stood at $2.1 million in the reported period.
• Dwindled Bottom-line: EBITDA from continuing operations stood at a loss of $4.3 million, comprised of $4.5 million from continuing operations. Net loss from ordinary activities increased by $0.7 million PcP due to increased GLE activities.
• Financial Position: Cash and term deposits balance as of 31 December 2021 stood at $49.2 million, up by $35.1 million during the period. SLX completed an equity raise via placement, followed by a share purchase plan, collecting a net $38.4 million.

H1FY22 Financial Snapshot; Analysis by Kalkine Group

Key Risks and Challenges

SLX may witness the risk of continuous technological changes, stiff competition, integration challenges, volatile forex movements, and the inability to compete efficiently. The company reported $4.4 million in loss after tax, substantially high at current operating levels.

Outlook

The commercialisation and development program for the SILEX uranium enrichment technology is being managed jointly by Global Laser Enrichment LLC (GLE) and SLX. The company completed an equity raising program in 1HFY22 through placement and Share Purchase Plan and expects to utilise the net proceeds of $38.4 million on advancing the commercial pilot presentation of the SLX uranium enrichment technology, scale-up of Zero-Spin Silicon production capacity & general working capital requirements.

Stock Recommendation: The stock of SLX gave a positive return of ~40.678% in the past year. The stock is currently trading higher than the 52-weeks average price level band of $0.860 - $1.970. The stock has a support level of ~$1.24 and a resistance level of ~$1.740. On a TTM basis, the stock of SLX is trading at a price to book value of 6.3x, higher than the industry (Semiconductors & Semiconductor Equipment) average of 5.9x, thus seems overvalued. Given the trend of significant losses, high volatility in semiconductor stocks, current trading levels, valuation on TTM basis, and key risks associated with the business, we suggest investors to book profit and give a “Sell” recommendation on the stock at the current market price of $1.690, as of 19 April 2022, 12:30 PM (GMT+10), Sydney, Eastern Australia.

SLX Daily Technical Chart, Data Source: REFINITIV

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

Note 2: Investment decisions should depend on the investors’ appetite for upside potential, risks, holding duration, and previous holdings. Investors can consider exiting the stock if the Target Price mentioned as per the Valuation has been achieved and is subject to the factors discussed above.

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