Stocks’ Details

Buddy Technologies Ltd

LIFX to Sell in Target U.S. Stores: Buddy Technologies Ltd (ASX: BUD) is engaged in designing, developing, and marketing of a global data exchange. As on 25 November 2020, the market capitalization of the company stood at $146.78 million. The company has recently announced that Target Corporation will stock BUD’s LIFX brand of smart lights in its online e-commerce and bricks and mortar retail stores and has placed initial orders for 2020 holiday online assortment. Target is also likely to place additional orders to meet the needs of bricks and mortar assortment in its U.S.-wide ~1,900 stores in 2021. The company has also completed a placement to institutional shareholders to raise $13 million, wherein it issued ~271 million fully paid ordinary shares at a price of $0.048 per share.

Quarterly Highlights (For the Period Ended 30 September 2020): During the 1QFY21, the company reported a quarterly increase of 43% in customer revenues to $7.7 million and a positive adjusted EBITDA of $32k. As on 30 September 2020, the company reported a cash balance of $2.6 million.

Quarterly Highlights (Source: Company Reports)

Stock Recommendation: The company retains a multi-faceted strength and is likely to pass $200 million in gross revenues in 2QFY21. The company is rapidly expanding into global markets. As per ASX, the stock of BUD is trading on the average of its 52-weeks’ levels. The stock of BUD gave a negative return of 10.3% in the past three months and a negative return of 13.33% in the last one month. On a technical front, the stock of BUD has support level of ~$0.048 and a resistance level of ~$0.073. Considering the current trading levels, decent increase in revenue, correction in prices in the past three months, decent long term outlook and key investment risks, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.051 on 25 November 2020.

ReadCloud Limited

Completion of Acquisition: ReadCloud Limited (ASX: RCL) provides digital eLearning solutions to Australian schools with a market capitalisation of $58.93 Mn as on 25^th November 2020. Recently, the company has wrapped up the acquisition of PKY Media Pty Ltd and paid the initial cash consideration of $1,050,000 from existing cash reserves. In addition, the company would pay further tranches of consideration comprising up to $400,000 of RCL shares on the achievement of defined revenue targets for FY21 and FY22. The acquisition supports the company in enhancing its product offering and market presence in the Vocational Education and Training in the school market.

During September 2020 quarter, the company witnessed decent momentum in sales, supported by winning of new school customers in key segments. For the same quarter, the company recorded cash receipts from customers of $0.3 million and cost of sales of $0.1 million. For FY20, the company reported revenue amounting to $7.46 million as compared to $4.80 million in FY19. The growth was mainly supported by a rise of 30% in school customers to 360 secondary schools located throughout Australia.

Quarterly Receipts from Customers (Source: Company Reports)

Outlook: The company possesses a record sales pipeline leading into 2021 school year. In addition, the company seems well-positioned for strong growth in FY21 through organic growth within existing school customers and new customer (school) acquisitions.

Valuation Methodology: Price to Cash Flow Multiple Based Relative Valuation (Illustrative)

Price to Cash Flow Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The company closed September quarter with a cash balance of $2.9 million and nil debt. The stock of RCL has moved up by 61.64% and 110.71% in the last one and six months, respectively. As a result, the stock is inclined towards its 52-week high level of $0.620.  On a technical analysis front, the stock of RCL has a support level of ~$0.427 and a resistance level of ~$0.61. We have valued the stock using the price to cash flow multiple based relative valuation method and arrived at a target price with the correction of low single-digit (in percentage terms). For the purpose, we have taken peers such as IDP Education Ltd (ASX: IEL), rhipe Ltd (ASX: RHP) and Class Ltd (ASX: CL1). Considering the current trading levels, steep price movement in the past months and higher valuation, we suggest investors to wait for better entry levels and give an ‘Expensive’ rating on the stock at the current market price of $0.600 per share, up by 10.091% on 25^th November 2020.

Lepidico Ltd

Acquisition of Bright Minz:  Lepidico Ltd (ASX: LPD) is engaged in mineral exploration and development with a market capitalisation of $46.67 Mn as on 25^th November 2020. Recently, the company has completed the acquisition of Bright Minz Pty Ltd, which was announced on 29^th October 2020. Bright Minz owns the LOH-Max® process technology which was developed to produce high purity lithium hydroxide monohydrate from a lithium sulphate intermediate. The acquisition consideration includes cash reimbursement of $10,000 and trailing royalty for third party LOH-Max® licences entered by Lepidico.

During September 2020 quarter, the company has been presented an Environmental Compliance Certificate for the statutory three-year period based on the Phase 1 Project mine plan. The company reported net cash outflow from operating activities of $485k and $253k from investing activities. For the year ended 30^th June 2020, LPD posted a net loss of $9,816,667 against $5,011,955 in FY19.

Cash Flow (Source: Company Reports)

Outlook: Going forward, the focus of the company revolves around transitioning its business to development by securing the requisite permits in Abu Dhabi. In addition, the company will focus on binding offtake agreements for the major products and a full funding package.

Stock Recommendation: As on 30^th September 2020, the cash and cash equivalents of the company stood at $4.0 million. In the past nine months, the stock of LPD has corrected 26.35%, and as a result, the stock is trading towards its 52-week low level of $0.004, offering decent opportunities for accumulation. On a technical analysis front, the stock of LPD has a support level of ~$0.006 and a resistance level of ~$0.012. Considering the recent acquisition of Bright Minz,  nil debt to equity, current trading levels, and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.008 per share, down by 11.112% on 25^th November 2020.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

Disclaimer  

The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as personalised advice.