Dotz Nano Limited

DTZ Details

Recent Updates: Dotz Nano Limited (ASX: DTZ) is a manufacturer, developer, and marketer of advanced materials for tracing, tagging, diagnostics solutions, and verification solutions. It offers solutions for various applications in the oil and gas industry, anti-counterfeiting, brand protection, bioimaging, lubricants, and polymers tagging. On 9 February 2022, DTZ updated regarding the sixth issue of ~375,000 unlisted options (ASX: DTZAAC) issued as part of an agreement declared on 11 May 2020.

• The company issued ~5.10 million shares at $0.44 per share on 11 January 2022. These shares were unquoted partly paid securities which have been now fully paid up and will now become listed as fully paid shares.
• On 15 December 2021, ~10.0 million shares were fully paid up and DTZ issued ~10 million fully paid shares at $0.09 per share on 20 December 2021.
• The company lodged a Prospectus with ASIC on 20 December 2021 and offered to issue a maximum of 100 shares on 22 December 2021 at $0.40 per share to raise cash for its working capital needs and to repay the costs of the offer.

Highlights of Q4FY21 (Ended 31 December 2021):

• New Distribution Partners in Southeast Asia: DTZ now has four distributor partners covering Malaysia, Thailand, UAE, Paraguay, and Sudan for the distribution of its test kits. It had signed a three-year distribution contract with a Malaysia-based ScienceVision Sdn Bhd and granted distribution rights to World Siam Company Limited (WSG) for sale in Thailand in Q4FY21.
• Large TAM: DTZ has a large total addressable market (TAM) for its advanced materials technology targeting the diagnostics and authentication markets.
• Divisional Update:
• In the diagnostics segment, DTZ is advancing the clinical trials and business development activities to expedite local approvals and access new jurisdictions for the probable sale of the test kits (virus detection technology).
• DTZ continues to pursue with its authentication customers and distributors (‘Secured by Dotz’) for a few orders which were delayed due to COVID-19 led factors. It expects customers to honour their contractual agreements.  
• Liquidity Status: DTZ held a cash and equivalents balance of US$4.1 million as of 31 December 2021 and incurred a net operating cash outflow of ~US$924,000 for Q4FY21.

Liquidity & Total Debt Status; (Analysis by Kalkine Group)

Key Risks: The company faces the risk of increasing its geographical reach and successful product testing and development for advanced material sales. COVID-19 caused delays in delivery of the orders, breach of customer and partner agreements also pose considerable risk to revenue generation.

Outlook:

• DTZ is seeking regulatory approval to expand the sale of virus detection test kits in new markets. It is advancing on the US FDA authorisation application (for emergency use) lodged for the nasopharyngeal swab and saliva samples.
• The company has a growing sales pipeline and is in negotiation talks with potential authentication customers for culminating contracts and driving sales revenue.
• DTZ is currently in the last stages of completing the quality assurance process for test kits. It plans to complete the purchase order of ~US$2.1 million received from Hygiene Links for Egypt, Sudan, and the UAE. It also intends to meet another purchase order of ~US$220,000 of El Alamo in Paraguay.
• It is committed to growing the distributor network for its diagnostic and authentication solutions.

Technical Commentary: On a daily chart, DTZ stock prices are trading above the trend line support level at AUD 0.345 and taking the support of the same. The momentum oscillator RSI (14-period) is trading near an oversold territory at ~35.53 level, which might indicate the possibility of a rebound from the lower levels. However, prices are trading below the trend-following indicators 21-period SMA and 50-period SMA, which may act as a resistance zone. An important support level for the stock is placed at AUD 0.345 while the key resistance level is placed at AUD 0.44.

Stock Recommendation: The stock of DTZ gave a negative return of ~12.64% in the past month and a negative return of ~4.99% in the past three months. The stock is currently trading slightly above the 52-weeks’ average price level band of $0.210 - $0.470. Considering the technical analysis given above, a strong sales pipeline, and new distributors for the sale of test kits in Southeast Asia, ongoing product development activities, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the closing market price of $0.380, down by ~1.29% as of 9 February 2022.

DTZ Daily Technical Chart, Data Source: REFINITIV  

Ai-Media Technologies Limited

AIM Details

Latest Updates: Ai-Media Technologies Limited (ASX: AIM) provides transcription, translation, and live and recorded captioning services through technology. It serves education, broadcast, government, and corporate industries.

• AIM issued ~420,658 ordinary shares on 1 February 2022 due to the exercise of ~420,658 RSUs (Restricted Share Units) under section 708A(5)(e) of the Corporations Act 2001.
• On 31 December 2021, AIM cancelled 718,338 shares for $517,402.60 following an on-market redemption of shares conducted from 30 Nov 2021 to 31 Dec 2021.

Financial Performance in Q2FY22 (30 ended 31 December 2021):

• The revenue increased to ~$14.7 million, up by ~25% YoY in Q2FY22. The gross margins stood above 50% (compared to 39% on pcp) fuelled by delivery upgrades and the accelerated growth in the proportion of SaaS products.
• The volumes of Lexi and Smart Lexi products rose ~32% on QoQ with the increased adoption of the automated (Lexi) SaaS products.
• AIM won new customers during Q2FY22 including SaaS sales of Lexi, Falcon, Alta, Smart Lexi, and iCap.
• The company generated positive net operating cashflows of $1.85 million in Q2FY22 versus negative cash outgoings of $25K in Q1FY22 (30 September 2021).
• AIM closed the quarter with a $15.9 million cash balance as of 31 December 2021.

Key Financial, Highlights; (Analysis by Kalkine Group)

Key Risks: The company faces the risk of technological improvements, margin growth, competition from new players, and regulatory changes.

Outlook:

AIM is making endeavours to shift from being one of the leading captioning service providers to a SaaS technology business. It has a robust sales pipeline in the current and new markets. It expects further expansion of SaaS revenue and margin growth in the next quarters.

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 AIM gave a negative return of ~41.99% in the past three months and a negative return of ~41.99% in the past six months. The stock is currently trading below the 52-weeks’ average price level band of $0.545 - $1.150. 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’ average EV/Sales multiple, considering the trend of negative net margins, a rise in cash cycle days, and a slight uptick in the debt-to-equity ratio in 1HFY22. For this purpose of valuation, a few peers like Nine Entertainment Co Holdings Ltd (ASX: NEC), Ooh!Media Ltd (ASX: OML), HT&E Ltd (ASX: HT1), and others have been considered. Considering the current trading levels, the launch of Lexi and Smart Lexi products on the platform of new & existing customers, rise in the monetised minutes on the iCap platform, a robust sales pipeline globally, an indicative upside in valuation, we give a ‘Speculative Buy’ rating on the stock at the closing market price of $0.580, down by ~1.695%, as of 9 February 2022,

AIM 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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