Fluence Corporation Limited  

FLC Details

Recent Updates: Fluence Corporation Limited (ASX: FLC) was incorporated in 2007 and it provides wastewater treatment and packaged water solutions. On 10^th December 2021, With the recent Cambodia and China contract, FLC has surpassed the sales figure of 300 MABR plants, worldwide. The plants involved have a treatment capacity of 1.4 million in 15 countries.

• Mr Richard Cisterna has been appointed as Chief Strategy Officer (CSO) on 13^th December 2021, to focus on North American Business.
• The existing debt facility (US$10 million) for its Upwell Water LLC increased, which will be further used for its recurring revenue projects and fulfilling the working capital needs.

SPS Solutions & 3QFY21 Highlights

• The company’s Smart Products Solutions (SPS) showed strong growth in revenue, reported as US$18.9 million on a year-to-date basis, whereas 3QFY21 sales were US$7.4 million (US$20 million total) for 3QFY21.
• SPS bookings year-to-date were US$27.1, constituting US$16.2 million of backlogs, where a total of US$11.3 million of backlogs is expected to be considered as revenue in 4QFY21.
• With cash receipts of US$26.63k, the company’s operating cash outflow was low this quarter (3QFY2) at US$2.05 million versus US$5.9 million in 3QFY20 and closed the quarter with a cash balance of ~US$16.3 million.

Operating Cash Outflow Highlight (Source: Analysis by Kalkine Group)

Key Risks: The company is vulnerable to the following risks which might affect its sales and profitability:

• Stiff Competition: works in a competitive market, which might pose some operational risk.
• Foreign Exchange and Regulatory Risk: The company’s business is exposed to the fluctuations of currency and to the ever changing and complex regulatory amendments, which might affect its functionality.

Outlook: As per the revenue mix, SPS contributed ~54% to the revenue for FY20, which is anticipated to be increased to ~65% in near future. With the selling of its MABR to China and SE Asia, it aims at achieving underlying EBITDA positive for FY21, along with SPS sales of ~US$35-50 million.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

 
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: Over the last six months, the stock has provided a negative return of ~19.73% and is trading lower than the average 52-week price level band of AUD 0.150 and AUD 0.280. The stock has been valued using the EV/Sales multiple based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in % terms). After considering the negative ROIC, enhancement of debt in 3QFY21 and negative net margins, the company can trade at a slight discount to its peers. For the purpose of valuation, peers like Korvest Ltd (ASX: KOV), Amaero International Ltd (ASX: 3DA), Zicom Group Ltd (ASX: ZGL), and others have been considered. Considering the company’s SPS performance in 3QFY21, increasing revenue mix in SPS category, current trading levels, indicative upside in the valuation, and key risks associated with the business, we give a “Speculative Buy” rating on the stock at the closing market price of A$0.150, down by ~3.226% as on 31 December 2021.

FLC Daily Technical Chart, Data Source: REFINITIV 

Airtasker Limited

ART Details

A Quick Look at 1QFY22 Key Results: Airtasker Limited (ASX: ART) is involved in providing an online community marketplace platform and connects people who are in requirement of outsourcing of tasks and services and the service providers.

• ART’s International GMV (Gross Marketplace Volume) showed a growth of more than ~100% in 1QFY22, mainly owing to growth in UK market. Where overall GMV increased by ~6.2% Y-o-Y and was reported as ~$35 million during the quarter.
• Out of the budget of ~$5 million, ART has been on track to spend (unaudited) of ~$1.5 million for Product development till 30^th September 2021.
• With the increase of 2.3% in its cash receipts to ~$6.54 million, its cash outflow from operating activities increased, due to the spend on marketing, staff and administration expenses and was reported as ~$4.08 million for 1QFY22. Its cash balance at the end of 30^th September 2021 was ~$40.18 million versus ~$45.86 million at the end of 30^th June 2021.

Top & Bottom Line in FY21: ART reported a decrease in net losses from ~$10.25 million in FY20 to ~$9.70 million in FY21, with an increase in revenue to ~$26.57 million in FY21. 

Use of Funds Highlight (Source: Analysis by Kalkine Group)

Key Risks:

• COVID-19 and Omicron: Due to the new variant Omicron of COVID19, the company is bound to face the risks associated with its impacts.
• Gap in Demand & Supply: The gap between the quantity and quality of demand and supply of the workforce might affect company’s popularity and usage, as its business is dependent on the provision of skilled workers to the people who are in need.
• Technology Risks: Running a business online has its challenges related to the technology used and their regular upgradation. Failure to which or glitches in the system could lead to operational risks, thereby affecting its revenue.

Outlook:  ART expects greater GMV and revenue growth in 2HFY22 from the Zaarly acquisition and US expansion is under process. Its Northern hemisphere marketplaces in US & UK are expected to face seasonal slowdown due to winters.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

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 the company has been corrected by ~28.13% in the past nine months. Currently, the stock is trading lower than the average of its 52-week low and high levels of $0.805 and $1.965, respectively. The stock has been valued using the EV/Sales multiple based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in % terms). After considering the seasonal impact internationally and potential lockdowns due to Omicron, the company can trade at a slight discount to its peers. For the purpose of its valuation, peers like Seek Ltd (ASX: SEK), Carsales.Com Ltd (ASX: CAR), and Domain Holdings Australia Ltd (ASX: DHG) have been considered. Considering the company’s budget on expansion expenditure and its inline spent in 1QFY22, current trading levels, indicative upside in the valuation, and key risks associated with the business, we give a “Speculative Buy” rating on the stock at the current market price of $0.830, 10:30 AM (GMT+10), Sydney, Eastern Australia, as on 31 December 2021.

ART Daily Technical Chart, Data Source: REFINITIV

Bionomics Limited

BNO Details

Resignation of Director: Bionomics Limited (ASX: BNO) is engaged in the development of innovative treatments for cancer and diseases of the central nervous system. Recently, the company announced the resignation of Mr Mitchell Kaye from the position of non-executive director, which became effective on 31 December 2021.

Key Business Developments:

• As announced on 21 December 2021, the company closed its initial public offering (IPO) in the United States of 1,622,000 American Depositary Shares. The company raised gross proceeds of ~US$20 million from the offering.
• The company has also been granted a Fast-Track designation to the BNC210 development program from the U.S. Food and Drug Administration (FDA)

Q1FY22 Financial Summary:

• During the quarter ended 30 September 2021, the company initiated a Phase 2b trial to evaluate the tablet formulation of BNC210 in patients with Post-Traumatic Stress Disorder. BNC expects topline results in 1HFY23.
• BNC recorded an of 113.7% in research & development expenditure to $3.27 million from $1.53 million in the previous quarter.
• As on 30 September 2021, the company had a cash balance of $22.17 million against $28.50 million as on 30 June 2021.

Cash Highlight (Source: Analysis by Kalkine Group)

 Key Risks:

• Clinical Trial Risk: BNO’s operational and financial health could be impacted by any failure in the clinical trial.
• Regulatory Risk: The company is exposed to a more complex regulatory environment; any failure in compliance could lead the business to fines, penalties etc.

Outlook: Looking forward, the company would continue to undertake drug and clinical development and would also seek to commercialise the outcomes. The company expect multiple potential value-driving clinical milestones in the upcoming 4 – 8 quarters.

Stock Recommendation: The stock of BNO is trading near to its 52-week low level of $0.105, offering a decent opportunity for accumulation. The stock has been corrected by ~11.99% and ~29.03% in the past one and three months, respectively. The stock is trading at a P/BV multiple of 3.2x compared to the industry median (Healthcare) of 3.6x on a TTM basis. Thus, it can be said that the stock is undervalued at the current trading levels. Considering the valuation on a TTM basis, completion of US-IPO, decent liquidity position, low debt to equity, optimistic outlook, current trading levels, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the closing price of $0.110, down by ~4.348% as on 31 December 2021.

BNO Daily Technical Chart, Data Source: REFINITIV 

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

Note 2: Investment decisions should be made depending on the investors' appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and is subject to the factors discussed above alongside support levels provided.

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 the 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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