Vection Technologies Ltd

VR1 Details

Update on TCV & Enterprise Sales: Vection Technologies Ltd (ASX: VR1) develops real-time software for industrial companies with the use of 3D, virtual reality, and CAD solutions. As per a recent update, the company has provided an update on its enterprise sales and Total Contract Value (TCV) as of 6 August 2021.

• The company has added ~$2.2 million in TCV for FY22, aided by expanded adoption across multiple verticals and industries.
• It has updated its Enterprise Sales TCV to ~$4 million for the FY22 period.
• Impact of ~122% in TCV growth in the month of August 2021, compared to the prior month driven by organic sales and acquisitions.
• VR1 reported a cash balance of $6.3 million as of end of Q4FY21 period.

Increasing Trend in Revenue (Source: Analysis by Kalkine Group)

Key Risks: The company has operations in multiple geographies, and as such it is exposed to foreign currency risks.

Outlook: The company believes that it is well placed to leverage on the trend of digital transformation and will look for continued growth in its XR technology suite.  The Group will also look to increase its overall sales performance across EMEA, AMER and APAC regions going forward.

Technical Overview:

Daily Price Chart

Source: REFINITIV, Note: The purple color line reflects RSI-14 Period

VR1's prices have witnessed significant gains from the lower levels of AUD 0.053 made on 30th June 2021. Prices are now getting resistance of 50-period SMA on a weekly chart indicating the possibility of a downside correction. Considering AUD 0.105 is the near the resistance level and from this level the stock gave negative closing on a daily chart which also increases the possibility of a downside correction. RSI (14-period) is trading near an overbought zone at ~67 levels, further supporting a bearish stance. Now an immediate resistance levels for the stock appears at AUD 0.115 and AUD 0.145, while the support levels are at AUD 0.088 and AUD 0.081 level.

Stock Recommendation: The company has reported ~215% rise in cash receipts in Q4FY21, over the prior quarter. As per ASX, the stock of VR1 is trading below its average 52-weeks’ levels of $0.035-$0.240.   The stock of VR1 gave a positive return of ~157.89% in the past one year and a positive return of ~63.33% in the past three months. On a TTM basis, the stock of VR1 is trading at a P/BV multiple of 7.9x, higher than the industry median (Technology) of 4.6x. Considering the valuation on TTM basis, the recent rally in the stock price, muted profitability, and the key risks associated with the business, we suggest investors to book profit and give a 'Sell' rating on the stock at the current market price of $0.1050, as on 10 August 2021, 10:41 AM (GMT+10), Sydney, Eastern Australia).

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.

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