RPMGlobal Holdings Limited 

RUL Details 

An Update on Total Contracted Value (TCV): RPMGlobal Holdings Limited (ASX: RUL) is engaged in the provision and development of mining software solutions, advisory services, and professional development. RUL has provided an update on its Total Contracted Value (TCV) and Annual Recurring Value (ARR) obtained from software subscriptions sold during FY21. RUL has reported $40.4mn of TCV software subscriptions year to date on 18 June 2021, an increase of $9.0mn from $31.4mn as reported on 4 May 2021. The company has also reported an increase in ARR from software subscription to $21.5mn during the same period. 

Agreement to Buy ESG Company: RUL has informed on 16 June 2021 that it has agreed to acquire 100% shares of an Australian Environmental Social and Governance (ESG) services company, Nitro Solutions Pty Ltd. (Nitro). The company is looking to grow its ESG mining services capability by setting up a separate ESG mining division. On completion of the acquisition, RUL propose to issue 95,941 shares at the price of $1.667 per share to the shareholder of Nitro. The acquisition is expected to close on 30 June 2021, subject to shareholder’s approval and customary completion events. 

Release of a New Product: On 3 June 2021, RUL has informed on releasing a software solution product, Attain^TM. The product assists mine planners in maintaining an alignment between their long-term and short-term production schedules and optimise the Net Present Value of their operations. 

1HFY21 Financial Highlights: RUL has reported a decline in net revenue to $34.88mn in 1HFY21 against $36.55mn in 1HFY20 mainly due to a decline in Advisory consulting revenue. Despite a decline in net revenue, the company has posted an increase in net profit to $0.89mn in 1HFY21 against $0.45mn in 1HFY20. RUL has seen a decline in its cash balance to $32.84mn as on 31 December 2020 against $40.00mn as on 30 June 2020.

Revenue trend (Source: Analysis by Kalkine Group)

Key Risks: The company is engaged in providing mining software solutions. Thus, any change in mining technology may impact the business of the company. In addition, the company is exposed to foreign currency related risks. Therefore, any adverse movement in foreign currency rates may result in financial losses for the company. 

Outlook: RUL intends to combine the Nitro’s ESG domain knowledge with its technology division to identify software products. Furthermore, the company intends to either acquire those software products or develop within the company to provide for the growing ESG business segment. Further, the company expects that, continuous investments in its software products and its transition to cloud will position it well for future growth. 

Stock Recommendation: The stock of RUL gave a return of ~-21.91% in the last one month and a return of ~34.33% in the last three months. The current market capitalisation of RUL stands at ~$380.80mn as of 18 June 2021. The stock is currently trading above the average 52-weeks’ price level range of ~$0.920~$1.795. On the technical analysis front, the stock has a support level of ~$1.663 and a resistance of ~$1.799. On a TTM basis, the stock of RUL is trading at a P/BV multiple of 5.7x, higher than the industry (Software & IT Services) median of 4.6x, thus seems over-valued. Considering the company has reported a decline in revenue in 1HFY21, decent stock price movement over the past few months, current trading levels, and valuation on TTM basis, we suggest investors to book profit and recommend a “Sell” rating on the stock at the current market price of $1.77, up by ~6.626%, as on June 18, 2021. 

RUL Daily Technical Chart, Data Source: REFINITIV

Netlinkz Limited 

NET Details

Retail Entitlement Offer Completed: Netlinkz Limited (ASX: NET) offers NetLinkz, a technology that provides a Software-Defined Wide Area Network (SD-WAN) solution connecting any sites to any device, anywhere, on any network. The company is operating in Australia, the USA, and Europe. NET has announced on 4 June 2021 regarding completion of retail entitlement offer (Announced on 11 May 2021). The fully underwritten retail component of the entitlement offer raised ~$13.3mn before costs. The retail entitlement offer closed on 2 June 2021. 

Initial Substantial Holder: Regal Funds Management Pty Ltd (RFM) has become a substantial holder by acquiring ~273.45mn ordinary shares in the company, representing 8.75% voting power. 

3QFY21 Update: NET has registered an increase in revenue to $2.9mn in 3QFY21 against $1.6mn in 3QFY20. The company has posted a loss of $3.7mn in 3QFY21. NET has reported a cash balance of $3.1mn as on 31 March 2021. Moreover, the cash receipts for the quarter were at $2.1mn. During the quarter, NET has signed a binding agreement with Uni Systems Information Technology and a distribution agreement with Frame Communications, UK. The company has witnessed a leading revenue growth of 89% YoY coming from China.  

1HFY21 Financial Highlights: The company has registered total revenue of $9.40mn in 1HFY21 against $1.54mn in 1HFY20. The company has registered a loss of $15.61mn in 1HFY21 against a loss of $10.93mn in 1HFY20.  NET has seen an improvement in its cash balance to $4.97mn as on 31 December 2020 against $1.43mn as on 30 June 2020.

Revenue trend (Source: Analysis by Kalkine Group)

Key Risks: The company is exposed to Covid-19 uncertainties, which may result in business loss. In addition, the company is exposed to foreign currency-related risks. Therefore, any adverse movement in foreign currency rates may result in financial losses for the company. 

Outlook: NET expects revenues in a range of $15-$16mn for FY21, nearly three times of revenues in FY20. Similarly, the company expects ~$16mn of receipts from customers in FY21, representing three times of FY20 receipts. The company expects a nearly three times higher number of enterprise clients from FY20 to more than 60 enterprise clients in FY21. The company expect to lower its debt-to-equity ratio to less than 1x in FY21 from ~28x in FY20. 

Stock Recommendation: The stock of NET gave a return of ~-3.99% in the last one month and a return of ~-45.21% in the last three months. The current market capitalisation of NET stands at ~$74.98mn as of 18 June 2021. The stock is currently trading below the average 52-weeks’ price level range of ~$0.023~$0.095. On a TTM basis, the stock of NET is trading at an EV/Sales multiple of 5.9x lower than the industry (Software & IT Services) median of 6.3x, thus seems under-valued. Considering the company has registered higher revenue in 3QFY21 YoY, significant growth expected in enterprise clients for FY21, noteworthy improvement in debt-to-equity ratio in FY21, current trading level, valuation on TTM basis, and disruption in technology may impact the business significantly, we recommend a “Speculative Buy” rating on the stock at the current market price of $0.024, as on June 18, 2021.

NET 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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