Nearmap Limited

NEA Details

Latest Developments: Nearmap Limited (ASX: NEA) is a location intelligence provider of cloud-based geospatial information services. It caters to construction, insurance, government, telecommunication, transportation, solar, etc. On 1 March 2022, Director, Helen Jessica Souness purchased ~24,450 shares at ~$1.225 per share in an on-market trade for a consideration of ~$29,951.25.

Key Takeaways of 1HFY22 (ended 31 December 2021):

• The net incremental Annual Contract Value (ACV) grew to ~$17.30 million as of 31 December 2021 compared to ~$10.30 million as of 31 December 2020 because of record growth in North American business verticals.
• The average revenue per subscription (ARPS) grew by ~21% Y-o-Y to ~$12,621 in 1HFY22 from ~$11,391 in 2HFY21 reflecting the increasing utility customers experience from the wider basket of higher-value products and content types.
• The portfolio lifetime value (LTV) rose by ~25% Y-o-Y from ~$1,416.0 million in 1HFY21 to ~$1,767.0 million in 1HFY22.
• Sales team contribution ratio (STCR) registered a growth of ~97% in 1HFY22, up from ~91% in 2HFY21 due to successful implementation and investment in the go-to-market strategy.

Growth Trend of Subscriptions; (Analysis by Kalkine Group)

Key Risks: The company faces the risk of changes in the foreign exchange rate, technological advancements, geographical expansion, and data security breaches.

Outlook:

• NEA plans to optimise the implementation of its North American go-to-market strategy, expand industry specialists, and target marketing programs in FY22.
• It plans to finish the prototype testing of HyperCamera3 and begin the initial HyperCamera3 system manufacturing in Q4FY22.
• NEA provides portfolio ACV guidance between ~$150 - ~$160 million (estimated towards the upper end of the range) versus ~$128.2 million delivered in FY21.

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 NEA gave a negative return of ~18.05% in the past three months and a negative return of ~45.95% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $1.130 - $2.380.  The stock has been valued using the Enterprise Value to Sales based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount than its peers’ mean EV/Sales multiple, considering the continuing trend of negative net margin, negative ROE, and a decline in the current ratio, etc. For this purpose of valuation, a few peers like Hansen Technologies Ltd (ASX: HSN), Infomedia Ltd (ASX: IFM), Vista Group International Ltd (ASX: VGL), and others have been considered. Considering the low trading levels, decent financial performance, a scalable subscription model, a growing addressable market, higher expected ACV in FY22, indicative upside in valuation, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the closing market price of $1.135, down by ~4.220%, as of 7 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.

NEA Daily Technical Chart, Data Source: REFINITIV  

Dotz Nano Limited

DTZ Details

Financial Highlights of FY21 (Ended 31 December 2021): Dotz Nano Limited (ASX: DTZ) is a developer, manufacturer, and marketer of anti-counterfeiting, authentication, and tracing solutions in Europe, North America, China, Japan, and Australia.

• The revenue from contract with customers declined from ~US$375,811 to ~US$304,595 in FY20, down by ~19% Y-o-Y. The gross profit increased to ~US$182,405 in FY21 from ~US$110,930 in FY20 due to lower costs of sales incurred.
• The net loss doubled from ~US$3.96 million as of 31 December 2020 versus ~US$7.93 million as of 31 December 2021, due to an increase in operating expenses and other costs.
• The net assets decreased from ~US$5.20 million as of 31 December 2020 to ~US$4.06 million as of 31 December 2021.
  

Comparative Position of Earnings from FY20 to FY21; (Analysis by Kalkine Group)

Key Risks: The company faces the risk of technological changes, clinical trial results from product testing, negative bottom line, and the COVID-19 impact on customers and their order fulfilment.

Outlook:

• The company started manufacturing its virus detection technology in FY21. It is producing and refining authentication and active surface sanitisation solutions. DTZ is engaging with its ‘Secured by Dotz’ authentication distributors and customers, such as UEG, V2 Tech, TT Medical. It anticipates obtaining more orders under current contracts in 1HFY22.
• In the diagnostic domain, DTZ is working with many potential customers to undertake product testing and commercialisation of in-product solutions for applications across textiles, high-value bulk materials, and documents.
• DTZ plans to grow its distributor partner network for the sale of SARS-CoV-2 virus detection technology (the Dotz test kits) in Asia, the Middle East.

Stock Recommendation: The stock of DTZ gave a negative return of ~21.24% in the past three months and a negative return of ~18.18% in the past six months. The stock is currently trading slightly below the average of its 52-weeks’ low and high levels of $0.210 and $0.470, respectively. Considering the current trading levels, technical levels mentioned below, expansion in the distributor network & agreements, ramp up of business development activities, plans to expand in the US and other geographies, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.315, as of 7 March 2022, 1:34 PM (GMT+10), Sydney, Eastern Australia. 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.

Technical Commentary:

On the daily chart, DTZ prices are trading above the horizontal trend line support level and taking support of the same. Moreover, the momentum oscillator RSI (14-period) trading in an oversold zone at ~28.07 level, which might indicate the possibility of a rebound in the stock. However, the prices are trading above the trend-following indicator 21-period SMA, which may act as a resistance level. An important support level for the stock, is placed at AUD 0.28 while the key resistance level is placed at AUD 0.38.

DTZ 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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