Stocks’ Details

Digital Wine Ventures Limited

Decent Growth in Revenue: Digital Wine Ventures Limited (ASX: DW8) identifies and invests in early-stage technology-driven ventures. The market capitalisation of the company stood at ~$66.21 million as on 22^nd December 2020. Recently, the company provided an update on its WINEDEPOT business, wherein, it stated that its principal operating business has zero exposure to Australian wine exports to China. This follows the decision of Government of China to impose tariffs of between 107% and 212% on Australian wine. During the September 2020 quarter (Q1 FY21), the company processed a total of 12,230 orders, reflecting a rise of 58% over 7,754 orders in Q4 FY20. DW8 shipped 22,470 cases, reflecting a rise of 63% over the June 2020 quarter. During the quarter, WINEDEPOT business recorded total revenue of $400,277, indicating a rise of 48% over Q4 FY20.

Revenue (Source: Company Reports)

Outlook: Looking forward, WINEDEPOT would be expanding its addressable market by providing wineries with the ability to not only list their products for sale on the Direct-to-Trade Marketplace.

Stock Recommendation: During Q1 FY21, DW8 successfully raised $6 million through a placement of $5 million and a Share Purchase Plan (SPP) of $1 million. Over the span of the last two years (2019 and 2020), the company has maintained nil debt to equity.  In the last one and three months, the stock of DW8 has corrected 8.51% and 20.37%, respectively. The 52-week low-high range for the stock stands at $0.004 - $0.066, respectively. On a technical analysis front, the stock has a support level of ~$0.039 and resistance level of ~$0.048. Thus, considering the decent growth in revenue and rising number of orders, and key risk associated with the business, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.043 per share on 22^nd December 2020.

Angel Seafood Holdings Ltd

Successful Capital Raising via Placement: Angel Seafood Holdings Ltd (ASX: AS1) is engaged in the production of fresh, clean, and consistently high-quality oysters. The market capitalisation of the company stood at ~$21.77 million as on 22^nd December 2020. Recently, the company has initiated a trial of ‘summer oysters’ which are farmed using spawnless triploid spat. In the event of a successful trial, the ‘summer oysters’ will be available for sale. These additional sales are likely to increase the company’s sales by 10-15% per annum. Also, the company has finished capital raising of $4 million through a placement of 23.5 million new fully paid ordinary shares. The company would use these funds mainly to acquire additional premium water leases to increase scale, invest in the adoption of innovative farming to increase productivity. The company would also use funds for investment in biological assets (spat) for future sales growth as well as optimising the funding structure and strengthen the financial position.

Record Growth in Oysters Sales: During the quarter ended 30^th September 2020 (Q1 FY21), the company sold 2.7 million oysters, reflecting a rise of 78% over pcp. This happens to be the record level in the company’s history generated by the company’s multi-bay strategy and retail sales momentum. During FY20, the company reported a rise of 25% in oysters’ sales to 6.6 million, fueled by underlying growth in the business through increased water holdings and a strong stock profile. In spite of challenging trading conditions and steady underlying oyster prices over the year, the company recorded revenue amounting to $5.0 million, up by 16% over FY19.

Sales (Source: Company Reports)

Outlook: The company has recently rolled out a 3-pillar growth strategy in order to improve production and profitability through scale, innovation and price. In addition, the company is well-placed for demand recovery and continued penetration of the retail channel.

Stock Recommendation: During Q1 FY21, the company recorded a positive operating cash flow of $408k. At the end of the quarter, the cash and cash equivalents of the company stood at $1.7 million. The stock of AS1 has corrected 15.78% in the last one month. As a result, the stock is trading below its 52-week low-high average of $0.182. AS1 has an EV/Sales multiple of 6.6x against the industry average (Food & Tobacco) of 8.6x on TTM basis. In addition, the stock is trading at a price to book value multiple of 1.7x as compared to the industry average (Food & Tobacco) of 2.3x on TTM basis. Thus, it seems that the stock is undervalued at the current trading levels. On a technical analysis front, the stock has a support level of ~$0.135 and resistance level of ~$0.195. Therefore, considering the record sales growth, capital raising to increase profitability, current trading level and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.155 per share, down by 6.061% on 22^nd December 2020.

Spacetalk Ltd

Launch of Smartphone Watch: Spacetalk Ltd (ASX: SPA) is engaged in the development and sales of wearables, which include the market-leading SPACETALK all-in-one mobile phone smartwatch and GPS. The market capitalisation of the company stood at $18.18 million as on 22^nd December 2020. Recently, the company has rolled out a new Spacetalk Adventurer smartphone watch for children, and the new Spacetalk App for the whole family. During Q1 FY21, the company recorded a rise of 22% in revenue from ANZ. With respect to the UK, the initiatives by the company include launch on Amazon.co.uk, investment in the team and increasing brand awareness. During FY20, the company reported revenue amounting to $2.7 million, reflecting a rise of 25% over pcp. In addition, EBITDA contribution for the year soared by 58% to $1.9 million.

Revenue by Geography (Source: Company Reports)

Outlook: In order to attain future business growth, SPA is actively pursuing significant opportunities to increase revenues, which include new product development and alliances with other companies.

Stock Recommendation: The company closed FY20 with a rise of 93% in cash and cash equivalents to $3,165,065 as compared to $1,635,872 in FY19. The stock of SPA has corrected 15.78% in the last one month. Currently, the stock is trading towards its 52-week low of $0.069, offering decent opportunities for accumulation. On a TTM basis, SPA has an EV/Sales multiple of 1.4x, which is lower than the industry median (Telecommunications Services) of 2.6x on TTM basis. In addition, the stock is trading at a price to book value multiple of 2.2x as compared to the industry median (Telecommunications Services) of 5.2x on TTM basis. On a technical analysis front, the stock has a support level of ~$0.068 and resistance level of ~$0.141. Thus, considering the rising revenue, growth in cash position and outlook, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.105 per share, down by 4.546% on 22^nd December 2020.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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