Zoono Group Limited 

ZNO Details

Issued Shares to Convert Employee Options: Zoono Group Limited (ASX: ZNO) is engaged in the development, manufacture, and global distribution of antimicrobial solutions. Its products include hand sanitiser GermFree24, Zoono SkinClear, Zoono Foot Guard, Bathroom Microbe Shield, etc. ZNO has issued 500,000 shares at an issue price of A$0.25/share to Mr Lew Mackinnon. The shares were issued on conversion of unlisted employee options, followed by receipt of $125,000 as exercise money. ZNO has notified that the shares were issued without disclosure to investors, and there is no other “excluded Information” that needs to be disclosed by the company.   

Change in Substantial Holdings: ZNO has announced on 25 June 2021 regarding a change in substantial holdings. Regal Funds Management Pty Ltd has reduced its voting power to 10.15% on 23 June 2021 from 11.93% earlier.  On 8th June 2021, Sterling Investment Management Limited has purchased 2mn shares in the company for A$0.70 per share for a total consideration of A$1,400,000 from the founder of the company, Paul Hyslop. 

1HFY21 Financial Highlights: ZNO has registered an increase in revenue to NZ$14.42mn in 1HFY21 against NZ$1.71mn in 1HFY20 due to improvements in the US, Middle East, and African markets. The company has posted profits to NZ$1.90mn in 1HFY21 against a loss of NZ$0.72mn in 1HFY20. The cash balance has been declined to NZ$7.27mn as on 31 December 2020 against NZ$10.32mn as on 30 June 2020. The total liabilities have been increased to NZ$15.72mn as on 31 December 2020 against NZ$13.73mn as on 30 June 2020.

Revenue trend (Source: Analysis by Kalkine Group)

Key Risks: The company’s products must go through regulatory approvals. Therefore, any delay in approvals may impact the business. In addition, the company is exposed to foreign exchange risks. Therefore, any adverse change in foreign exchange prices may impact the financials of the company.  

Outlook: ZNO remain focused mainly on B2B markets in the US, UK/EU, China, and India. The company is in negotiations with potential distributors in the medical, pharmacies and facilities management sectors. The company continues to expand across Middle East/ASEAN region with a focus to ship in Sri Lanka, Qatar, Saudi Arabia, Maldives, and Vietnam regions.

Stock Recommendation: The stock of ZNO gave a return of ~-30.72% in the last three months and a return of ~-53.90% in the last six months. The current market capitalisation of ZNO stands at ~$107.57mn as of 06 July 2021. The stock is currently trading below the average 52-weeks’ price level range of ~$0.585-~$3.29. On a TTM basis, the stock of ZNO is trading at an EV/Sales multiple of 2.2x, lower than the industry (Personal & Household Products & Services) average of 4.4x, thus seems under-valued. Considering an increase in revenue and registering profits in 1HFY21, growth in business across China, Africa, and the US in 1HFY21, issued share options to employee at $0.25 per share, positive outlook, and valuation on TTM basis along with key risks associated with the business, we recommend a “Speculative Buy” rating on the stock at the current market price of $0.620, down by ~5.344%, as on Jul 6, 2021.

ZNO Daily Technical Chart, Data Source: REFINITIV

Byron Energy Limited 

BYE Details

Business Update: Byron Energy Limited (ASX: BYE) is engaged in oil and gas exploration in the shallow waters and transition zone (offshore Louisiana) in the Gulf of Mexico, the United States. BYE has completed an extensive period of negotiations with a potential lender Crescent Midstream on terms associated with the loan but cannot reach an agreement on the proposed hedging strategies. The company is reluctant to hedge volumes of nearly 100% of forecasted production or 75% of near-term future well production throughout the loan. BYE has made progress on a non-binding refinancing proposal from a potential lender, with an exclusivity period of 90 days. BYE has reported net oil & gas sales at 1,244 barrels of oil and 10,175 thousand cubic feet of gas as of 9 May 2021. 

3QFY21 Operational Highlights: BYE has reported an increase in revenue to US$11.8mn in 3QFY21 against US$9.2mn in 2QFY21. The company has recorded net sale volume of oil at 132,621 barrels and gas at 1,309,513 mmbtu in 3QFY21 against sales of 111,516 barrels of oil and 1,742,124 mmbtu gas in 2QFY21. The cash balance stood at US$3.1mn and borrowings at US$20.4mn as on 31 March 2021. 

1HFY21 Financial Highlights: BYE has registered an increase in revenue to US$17.23mn in 1HFY21 against US$15.86mn in 1HFY20. Similarly, the company has posted an increase in profit to US$0.73mn in 1HFY21 against US$0.50mn in 1HFY20. The cash balance has been declined significantly to US$1.49mn as on 31 December 2020 against US$16.64mn as on 30 June 2020. Moreover, total non-current liabilities have been increased to US$21.25mn as on 31 December 2020 against US$20.18mn as on 30 June 2020.

Revenue trend (Source: Analysis by Kalkine Group)

Key Risks: The company is exposed to foreign exchange risks. Therefore, any adverse change in foreign currency prices may impact the financials of the company. In addition, the company holds interest bearing liabilities. Therefore, any severe change in interest rates may impact the financials of the company.  

Outlook: BYE expects its SM69 E2 well to be drilled in August 2021 as scheduled on obtaining the permissions required for the drilling process. The company continues to follow defensive hedging strategy to smoothen the volatility in the oil price. 

Stock Recommendation: The stock of BYE gave a return of ~-31.03% in the last three months and a return of ~-35.48% in the last six months. The current market capitalisation of BYE stands at ~$104.02mn as of 06 July 2021. The stock is currently trading below the average 52-weeks’ price level range of ~$0.097-~$0.315. On a TTM basis, the stock of BYE is trading at a P/BV multiple of 1.0x, lower than the industry (Oil & Gas) median of 2.2x, thus seems under-valued. Considering the company has registered an increase in revenue and profits in 1HFY21, increased sales volume for oil in 3QFY21, current trading levels, valuation on TTM basis, and key risks like Oil & Gas price fluctuations, we recommend a “Speculative Buy” rating on the stock at the current market price of $0.100, (as on July 6, 2021, 10.38 AM (GMT+10), Sydney, Eastern Australia).

BYE Daily Technical Chart, Data Source: REFINITIV

BluGlass Limited 

BLG Details

Placement of Shares: BluGlass Limited (ASX: BLG) is engaged in the research and development of Group III nitrides to develop new processes and equipment to manufacture high-efficiency devices, such as light-emitting diodes (LEDs) and solar cells. BLG has completed the placement of shares on 9 June 2021 for a value of $2.0mn. The issue price for the shares were placed at $0.03 per share. The company has plans to utilise the funds for research and development of the laser diode product. Moreover, the proceeds will be utilised towards sales and marketing expenditure for laser diode product launch. In addition, funds will be utilised for general working capital requirements.

Other Recent Update: BLG has announced on 21 June 2021 regarding an initial substantial holder. As a result, Regal Funds Management Pty Ltd has become a substantial holder in the company with 8.43% of the voting power.

3QFY21 Business Highlights: BLG has reported customer revenue of $117,000 during 3QFY21. The revenue of $84k was contributed from microLED and LED foundry services and revenue of $33k was contributed from laser diode. The company has witnessed high customer engagement during the quarter. The cash position stood at $2.5mn as on 31 March 2021.  

1HFY21 Financial Highlights: BLG has reported a decline in revenue to $0.21mn in 1HFY21 against $0.47mn in 1HFY20. The company has registered a loss of $3.68mn in 1HFY21. The cash balance declined to $4.29mn as of 31 December 2020 against $5.43mn as of 30 June 2020. In addition, the total liabilities have been declined to $3.97mn as on 31 December 2020 against $4.03mn as on 30 June 2020.

Revenue trend (Source: Analysis by Kalkine Group)

Key Risks: The company is exposed to supply chain disruptions. Therefore, any such situation may impact the business. In addition, the company is exposed to credit risk. Therefore, the company requires sufficient liquidity to repay its loan.  

Outlook: BLG expects to launch its first laser diode commercial product in 2021. At the same time, the company is expecting to receive an R&D rebate of $2.5mn to $3.0mn following the end of FY21.

Stock Recommendation: The stock of BLG gave a return of ~-58.92% in the last three months and a return of ~-63.38% in the last six months. The current market capitalisation of BLG stands at ~$26.04mn as of 06 July 2021. The stock is currently trading below the average 52-weeks’ price level range of ~$0.028-~$0.128. On a TTM basis, the stock of BLG is trading at an EV/Sales multiple of 8.3x, lower than the industry (Semi-Conductors $ Semi-Conductor Equipment) median of 17.7x, thus seems under-valued. Considering the company has raised funds to invest in R&D of its product, new product launches, decline in price levels from past few months, current trading level, and valuation on TTM basis as well as key risks associated with the business, we recommend a “Speculative Buy” rating on the stock at the current market price of $0.032, down by ~3.031%, as on July 6, 2021.

BLG Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision 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 Valuation has been achieved and subject to the factors discussed above.

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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