BSA Limited

BSA Details

This report is an updated version of the report published on the 6^thJune 2022 at 3:55 PM GMT.

Non-Renounceable Entitlement Offer: BSA Limited (ASX: BSA) provides contracting services to subscription TV and telecommunication companies, that require satellite and telecommunication installation services. Recently, the company raised $12.57 million through Institutional Offer by issuing 125,754,090 fully paid ordinary shares. It further raised $861k under the retail component.

Change in Registered Office Address: BSA has changed its premises of business from Macquarie Park NSW to Lidcombe NSW, effective from 1^st June 2022.

Sneak Peek of 1HFY22 Results: Though the company recorded increased gross margins due to the product mix with the backlog of higher-margin work, it had also reported a net loss of $21.97 million. The loss included $23.02 million of the total settlement costs, legal costs associated with the defence and subsequent settlement of Class Action. It will also affect the present value for amounts payable in 2023 and 2024.

Key Highlights (Source: Analysis by Kalkine Group)

Key Risks: BSA’s performance could be inefficient liquidity as it requires an ample amount to deliver the work. In addition, it is exposed to a risk arising from the uncertainties in relation to the COVID-19 pandemic, contract pricing risk, etc.

Outlook: Looking forward, the company is expecting revenue of $750 million and an EBITDA margin in the range of 6%-8% by FY24. BSA expects no further class action expenditure in the near future and is anticipating increased gross margins mainly owing to product mix with the backlog of higher-margin work.

Stock Recommendation: The stock of BSA is trading below its 52-week low-high average of $0.077 - $0.301, respectively. The stock has been corrected by ~12.08% in the past month. On a TTM basis, BSA has an EV/Sales multiple of 0.1x, compared to the industry median (Construction & Engineering) of 0.5x. Thus, it seems that the stock is undervalued at the current trading levels. Considering the undervaluation under TTM basis, rising revenue, expected gross margins, decent outlook, current trading levels, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.079, 11:00 AM (GMT+10), Sydney, Eastern Australia, as on 06 June 2022.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

BSA 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 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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