Stocks’ Details

Netlinkz Limited

Rising Cash Receipts to Support Business Growth:  Netlinkz Limited (ASX: NET) provides virtualized network services through a Virtual Services Platform. The market capitalisation of the company stood at $124.40 million as on 21^st January 2021. On 29^th December 2020, the company has redeemed 4,515,429 of the September 2020 Convertible Notes with a face value of A$4,515,429. The redemption was financed through proceeds received under the recent placement, wherein, it raised around $7.914 million.  For the quarter ended 30^th September 2020 (Q1 FY21), the company reported a rise of 89% in cash receipts from customers to $5.8 million over June 2020 quarter. The company reached agreements with partners to offer numerous different services, which included ImageDeep and Cognian technologies. NET inked significant contracts with a value of $1.5 million.

Receipts from Customers (Source: Company Reports)

Outlook: For December 2020 quarter, the company expects cash receipts from customers of ~$17 million. In addition, the company has shifted its focus from developing a market-leading product to now driving sales and distribution.

Stock Recommendation: NET stated that the market is continuing to focus on network security and enabling disparate work forces, which can be seen in the rising momentum of the business. The company ended the September 2020 quarter with the cash and cash equivalents of $2.4 million. The stock of NET has corrected 7.27% and 40.69% in the last one and three months, respectively. Currently, the stock is trading towards its 52-week low level of $0.035, offering decent opportunity for accumulation. On a technical analysis front, the stock has a support level of ~$0.034 and a resistance level of ~$0.099. Therefore, considering the rising cash receipts, signing of contracts, decent outlook, current trading level and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.050 per share with on 21^st January 2021.

Raiz Invest Limited

Growth in FUM and Active Customers: Raiz Invest Limited (ASX: RZI) provides financial services and products via its mobile first micro-investing platform. The market capitalisation of the company stood at $89.94 million as on 21^st January 2021. Recently, the company notified the market with an update for December 2020, wherein it experienced growth in both Funds under management (FUM) and Active Customers. Total FUM for December 2020 stood at $605.59 million, reflecting a rise of 4.2% and active customers for the month rose by 8.1% to 343,573. In addition, growth in Indonesia and Malaysia has surpassed its targets.

Key Financials (Source: Company Reports)

Quarterly Highlights: During Q1 FY21, the company recorded total normalised revenue amounting to $2.2 million, indicating a rise of 19.7% over Q1 FY20. The company experienced growth in all revenue drivers, which included Maintenance, Account, Advertising and Netting fees. FUM for the quarter has surpassed a toll of $500 million and reached to $500.6 million.

Outlook: The company is optimistic that it will surpass the toll of $1 billion milestone for FUM during CY21. With respect to Asia, the company’s growth strategy revolves around growing active customers in Raiz Indonesia & Raiz Malaysia.

Stock Recommendation: The quality of the company’s core products and services are being aided by continued growth in revenue and FUM. In the last six and nine months, the stock of RZI has surged 82.35% and 166.66%, respectively. Currently, the stock is inclined towards its 52-week high of $1.250. On a technical analysis front, the stock has a support level of ~$0.688 and a resistance level of ~$1.502. Therefore, considering the aforesaid facts and steep price movement in the past few months, we are of the view that most of the positive factors have been discounted at the current trading level and give an “Expensive” rating on the stock at the current market price of $1.250 per share, up by 4.166% on 21^st January 2021. We further suggest investors to wait for a better entry-level.

Pharmaust Limited

Signing of Service Agreement: Pharmaust Limited (ASX: PAA) is primarily involved in the development of its own drug discovery intellectual property for the treatment of different types of cancers in humans and animals. The market capitalisation of the company stood at $30.72 million as on 21^st January 2021. On 8^th January 2021, the company notified the market that it is working closely with Dr Martijn van Hemert at Leiden University Medical Centre (LUMC) to increase the solubility of MPL, as a precursor to MPL demonstrating applicability against coronavirus. During the quarter ended 30^th September 2020, the company has received funding of $881,085 from FightMND for Phase I clinical trial in humans with Motor Neurone Disease. During the quarter, the company reached a Service Agreement with researchers in the Netherlands in order to test the effects of monepantel and monepantel sulfone on the replication of SARS-CoV-2 in cell lines. The company recorded net cash outflow from operating and investing activities of $290k and $22k, respectively.

Cash Flow (Source: Company Reports)

Outlook: During Q3 2021, the company is planning to finish the manufacturing of 10 kg of MPL for use in Human Clinical Trials. In addition, the company has scheduled to commence FightMND Phase I/II trial in Q4 2021.

Stock Recommendation: As on 30^th September 2020, the bank balance of the company stood at around $4 million, which is allowing the pursuit of various preclinical and clinical commitments. During FY20, the company recorded a current ratio of 3.85x as compared to the industry median of 1.57x, which reflects that the company is well- placed to address its short-term obligations against the broader industry. In the past three months, the stock of PAA has corrected 25.38%. On a TTM basis, PAA has EV/Sales multiple of 7.2x, which is lower than the industry median (Pharmaceuticals) of 19.1x. In addition, the stock is trading at a price to book value multiple of 3.6x against the industry median (Pharmaceuticals) of 5.2x on TTM basis. On a technical analysis front, the stock has a support level of ~$0.089 and a resistance level of ~$0.125. Hence, considering the signing of service agreement, planned activities for the upcoming quarter, valuation on TTM basis, current trading level and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.098 per share, up by 1.030% on 21^st January 2021.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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