Dotz Nano Limited

DTZ Details

DTZ Inks Distribution Deal: Dotz Nano Limited (ASX: DTZ) is involved in graphene quantum dots’ research, production, and marketing. On 15 September 2021, DTZ inked a two-year distribution deal with Paraguay-based El Alamo S.A (“El Alamo”) for an initial purchase order of US$220,000. The deal underpins the promotion, selling and distribution of DTZ’s SARS-CoV-2 virus detection technology (the “Dotz Test Kits”) in Paraguay by El Alamo.

A Quick Look at 1HFY21 Key Aspects:

• Agreement with Caerus Therapeutics & Zohar Dalia: DTZ inked an amended service deal with Caerus Therapeutics Inc to develop and commercialise its “Dotz Test Kit”. The company also entered into a distribution deal with Zohar Dalia Professional LP to supply the latter with its non-toxic molecular markers and detectors and sell Zohar Dalia’s Active V-SRD® solution across numerous markets.
• Top and Bottom-line Details: In 1HFY21, the company’s revenue from the contract with customers soared 684% on pcp and came in at US$258,124. Net loss after tax increased from US$1.25 million in FY20 to US$4.3 million in FY21.
• Gained Approval: The company acquired CE mark approval for the “Dotz Test Kit” sale pertaining to nasopharyngeal swab samples in the European Union in early 2021.
• Rise in R&D Costs: In 1HFY21, the company’s research and development expenses rose from US$365,627 in FY20 to US$617,919 in FY21, owing to the commercialisation of its graphene quantum dots.

Cash Highlight; Analysis by Kalkine Group

Risk Analysis:

• DTZ’s net loss is increasing on a year-over-year basis. Hence, these mounting losses may throw tough challenges at the company’s overall functioning and may dampen margins in the future.
• The clinical trial process is designed to assess the safety and efficacy of a medical device before commercialisation. A failure to achieve the desired results may hamper the company’s financial 
• The company is exposed to a complex regulatory landscape and forex headwinds.
  

Outlook: DTZ is well placed to commercialise its efforts across diagnostics, authentication, and surface sanitisation solutions, owing to its strong sales, development, and marketing activities. Further, the company’s differentiated SARS-CoV-2 virus detection technology aims to increase its global addressable market across various industries and geographies. The company’s decent liquidity position, and a longstanding relationship with commercial partners, are likely to aid growth momentum in years ahead.

Stock Recommendation: The company had a cash balance of US$4.64 million at the end of the period, with total debt amounting to ~US$0.71 million. The stock of the company went up by ~11.1% in the past six months. Currently, the stock is trading above the average of its 52-week high and low levels of A$0.44 and A$0.20, respectively. Considering robust product pipeline, rise in revenues in 1HFY21, FDA approvals, planned distribution deal, obtaining CE mark authorisation, decent outlook, technical levels as mentioned below, current trading levels, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of A$0.400, as on 11 October 2021.

Technical Commentary:

On the daily chart, DTZ stock witnessed a breakout of an ascending triangle pattern at AUD 0.389 level on August 30, 2021, and prices are continuously sustaining above the upper band of the triangle pattern. The leading indicator RSI (14-Period) is trading at ~48.55 levels and indicating positive momentum in the counter. An important support level for the stock is placed at AUD 0.32, while the key resistance level is placed at AUD 0.485.

DTZ Daily Technical Chart, Data Source: REFINITIV 

Note: The purple color line in the chart depicts RSI (14-period).

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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