Buddy Technologies Ltd

BUD Details

Buddy Technologies Ltd. (ASX: BUD) has two core businesses, that comprised of commercial business and consumer business. Buddy Ohm and Buddy Managed Services cater to commercial offerings while consumer business trades under the LIFX. LIFX products are sold in over 100 countries, directly.

Result Performance – For the Third Quarter Ended 31 March 2021 – (Q3FY21)

• Revenues: Revenue stood at A$18.1 million containing customer revenues of A$5.0 million, government rebates and subsidies of A$187k, and other revenue (debt forgiveness) of A$13.0 million
• Customer cash receipts 50% down: Customer cash receipts stood at A$4.1 million, down 50% QOQ and 51% YOY
• EBITDA of A$10.7 million: EBITDA stood at A$10.7 million including adjusted EBITDA of negative A$2.3 million
• Cash on hand as of 31 March 2021 stood at A$1.6 million, trade receivables at A$6.8 million and inventories at A$12.9 million
• Completed debt refinancing: The company completed debt refinancing resulting in a fall in current liabilities to A$21.8 million including cash payments of A$4.7 million for accumulated interest

Key Data (Source: Company Reports)

Recent Updates:

As per the release dated 16 July 2021, the company provided a market release on Equity Capital Raisings, Debt Restructure, and Company Updates as following:

• The company completed the Equity capital raising bookbuild and firm assurance received from institutional, professional, and sophisticated investors for a placement to raise A$6.5 million (before costs)
• The company could undertake an entitlement offer to active shareholders to raise up to an additional A$10 million (before costs)
• Debt restructuring is focused to pay US$2.75 million to Eastfield in full and final settlement and PFG, Buddy's secured lender, has also agreed to restructure its existing term debt facility

As per the release dated 16 July 2021, the suspension of trading of Buddy Technologies Ltd will be lifted immediately, following BUD providing an adequate response to ASX’s queries and the release by BUD of an announcement regarding an Equity Capital Raising and Debt Restructure.

Key Risks:

The company was impacted quite significantly by the COVID-19 circumstances as smart lights were manufactured in Shenzhen, China which was impacted early and deeply when the Chinese government decided the lockdown in that region. Broadly, the company is exposed to market risk, credit risk, liquidity risk, cash flow interest rate risk, and foreign currency risk.

Outlook:

The operational strategy of the company is focused on restructuring the debt arrangements, use the finance facilities available, and increase the product distribution network. In addition, the company is focused on direct-to-consumer and online sales, seeing the high potential market in the online sphere. Meanwhile, the company has introduced new products such as LIFX Switch U.S. that are coming to market in the next half. Also, adding new retailers and SKUs.

Technical Overview

Weekly Technical Chart

Source: REFINITIV

On the weekly chart, BUD stock prices are trading above the rising trend line support level of AUD 0.020 and continuously taking support of it. The momentum oscillator RSI (14-Period) near in the oversold zone (~31.88 levels), indicating a possibility of rebound in the prices from the current level. However, the stock is trading below 21-period SMA, which may act as a crucial resistance level for the prices. An important support level for the stock, is placed at AUD 0.020, while key resistance level is placed at AUD 0.030.

Note: The purple color line in the chart shows RSI (14-period) and the orange color line represents trend line. The green color line represents 21-period SMA.

Stock Recommendation:

As per ASX, the stock of BUD is trading below the average of its 52-weeks’ levels ($0.10-$0.013) and thus provides an opportunity for consolidation. Considering the current trading levels, focused target market, and rapid expansion into global markets, technical indicators analysis, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.0245 per share (12.15 PM Sydney Time, Australia (GMT +10)). 

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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