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Should Investors Speculate on these 2 Small-cap Stocks- ASB, VHT

Mar 25, 2022 | Team Kalkine
Should Investors Speculate on these 2 Small-cap Stocks- ASB, VHT

 

Should Investors Speculate on these 2 Small-cap Stocks- ASB, VHT

Austal Limited

ASB Details

 

Key Business Updates: Austal Limited (ASX: ASB) is involved in the designing, manufacturing, and support of high-performance vessels for commercial and defence customers globally. The company provided some valuable updates related to business as depicted by the below picture:

Business Updates (Source: Analysis by Kalkine Group)

Insights of 1HFY22: During 1HFY22, the company recorded decent financial performance, which signals an ability to continuously improve its shipbuilding processes to efficiently achieve milestones and successfully deliver shipbuilding and sustainment programs in US and Australasia.

Financial Summary (Source: Analysis by Kalkine Group)

Key Risks: ASB’s operational performance is exposed to a more complex regulatory environment; any failure in the compliances could lead the business to fines, penalties, etc. In addition, the company is exposed to foreign currency risk as it has operations in multiple geographies.

Outlook: The company expects a baseline revenue of $1.4 billion for FY22, on the back of increased operational efficiencies and risk mitigation in USA shipbuilding.

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of ASB is trading below its 52-week low-high average of $1.610 - $2.580, respectively. The stock has been corrected by ~8.05% in the past one month. The stock has been valued using a P/E multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company can trade at a slight discount to its peers’ median P/E multiple, considering macroeconomic uncertainties, forex headwinds, etc. For the purpose of valuation, peers such as Electro Optic Systems Holdings Ltd (ASX: EOS), PTB Group Ltd (ASX: PTB), and Quickstep Holdings Ltd (ASX: QHL) have been considered. Considering the expected upside in valuation, recent delivery of vessels, growing earnings, optimistic outlook, current trading levels, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the closing price of $1.815, up by ~2.253% as on 24 March 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.

ASB Daily Technical Chart, Data Source: REFINITIV 

 

Volpara Health Technologies Limited

VHT Details

Insights of Q3FY22: Volpara Health Technologies Limited (ASX: VHT) is involved in the development of digital health solutions to enable personalised breast cancer screening software applications. Q3FY22 proved as another strong quarter commercially, which can be seen in the below picture:

Financial Summary (Source: Analysis by Kalkine Group)

Key Risks: VHT’s operational and financial performance could be impacted by the rising market share of peers in the industry in which it operates. In addition, the business is also exposed to a more complex regulatory environment; any failure in the compliances could lead the business to fines, penalties etc.

Outlook: The company is on track to meet revenue guidance of NZ$25.0 million for FY22. The company is targeting to maintain strong growth while driving down net operating and investing cash outflow.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks. 

Stock Recommendation: The stock of VHT is trading below its 52-week low-high range of $0.660 - $1.460, respectively. The stock has been corrected by ~28.43% in the past three months. The stock has been valued using an EV/Sales multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company can trade at a slight discount to its peers’ average EV/Sales multiple, considering the COVID-19 led uncertainties and business losses, etc. For the purpose of valuation, peers such as Mach7 Technologies Ltd (ASX: M7T), Alcidion Group Ltd (ASX: ALC), and PainChek Ltd (ASX: PCK), and others have been considered. Considering the expected upside in valuation, growing ARR, optimistic outlook, current trading levels and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the closing price of $0.730, down by ~2.667% as on 24 March 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.

VHT 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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