Stocks’ Details

Yojee Limited

Strengthening Expertise to Boost Growth: Yojee Limited (ASX: YOJ) is a logistics company that handles cloud-based software as a service (SaaS) logistics platform. The company recently appointed two members to the Advisory Board to strengthen its enterprise software and finance know-how. The company made the appointments as a step towards building the requisite expertise as part of its pathway to growth. Rob van Es and Graeme Halder are the two new members appointed to the Board.

June Quarter Highlights: During the quarter ended 30^th June 2020, the company signed a global enterprise level 3-year services agreement with Kuehne + Nagel, to launch its SaaS logistics platform in the Philippines. The platform went live in late June. Revenue for the quarter amounted to $115k and FY20 revenue came in at $650k. Cash receipts for the quarter came in at $144k, up from $121k in the previous quarter. The company reported a reduction of 42% in net operating costs, with cash at bank at the end of the period amounting to $4.32 million.

Revenue & Cash Receipts (Source: Company Reports)

Outlook: Digitisation in the SME sector has boosted the demand for the company’s platform, opening enormous opportunities for growth. Given the above scenario, the company is confident about the revenue upside of its current clients and pipeline. Moreover, the company is looking forward to announcing further new contract wins along with additional business from existing clients in the coming quarters. 

Key Risks: The company is mainly exposed to cash flow interest rate risk from its cash and cash equivalents and financial assets and liabilities like trade receivables and trade payables. The company’s exposure to market interest rates relates to the short-term deposits with a floating interest rate. Moreover, the company is required to maintain a sufficient cash balance to meet its debt requirements. Any event of a shortfall in funds can impact operations. In addition to the above risks, the business bears the risk of technological obsolescence and the threat of new entrants in a continuously evolving tech landscape. 

Stock Recommendation: The stock of the company gave positive returns of 279.31% and 129.17% in the last 3 months and 6 months, respectively. Currently, the stock is trading close to its 52-week high of $0.150. Despite an uncertain economic environment, the company expects demand for its product to grow with increased digitization. The company announced a new agreement for its launch in the Philippines and is looking forward to new contract wins in the quarter ahead. As on 31^st December 2019, cash and short-term investments of the company stood at $4.02 million, and total debt stood at $0.26 million. Considering the performance in the June quarter, optimistic outlook, price movements, and current trading levels, we give a “Hold” rating on the stock at the current market price of $0.120, up 9.091% on 6^th August 2020, possibly on the announcement regarding new appointments to the advisory board.

DroneShield Limited

Capital Raising: DroneShield Limited (ASX: DRO) is a worldwide leader in drone security technology. The company recently received commitments worth $7.5 million through a placement of 60 million fully-paid ordinary shares at an issue price of $0.125 per Share. Share under the Placement are expected to be issued on 13^th August 2020. In addition, the company is also seeking applications for its Share Purchase Plan to raise $1.5 million, at $0.125 per share. Full terms of the SPP will be announced on 11^th August 2020. The company will use the funds to scale the sales and marketing resources to support momentum in the US, Europe and other locations, scaling up of the Australian engineering team, repayment of R&D Tax Incentive Loan worth $600,000, etc.

Business Update: The company reported a record June 2020 quarter, with over $2 million in customer and grant cash receipts. In response to increased demand for its products, the company released several new products during FY19 and FY20, including DroneGun MKIII^TM, RfZeroTM drone detector, DroneSentry-X^TM, etc. At the end of June 2020, the company had ~$4 million in cash, with 2Q20 being the first quarter of positive cash flows. In July 2020, the company completed a trial deployment of DroneSentinel^TM system at a mid-tier European airport which is expected to be a material contributor. In the same month, the company received an order for its RadarZero^TM portable counterdrone system from a significant European military and a contract worth ~ US$200,000 from the United States Air Force to deploy its DroneSentry^TM integrated detect-and-defeat counterdrone (C-UAS) system. Net cash used in operating activities during the June quarter stood at $51.6 million.

Operating Cash Flow (Source: Company Reports)

Outlook: The company has an order book of ~$3.4 million, with a high conviction pipeline estimated at over $85 million. Moreover, the company is participating in a number of additional tenders and procurements processes. Going forward, the company expects cash flows from new orders and the customer orders already placed.

Key Risks: The company holds financial instruments in the form of deposits with banks, accounts receivable and payable and inter-entity loans, exposing it to credit risk, liquidity risk, and foreign exchange risk. 

Stock Recommendation: The stock of the company gave positive returns of 42.86% in the last 3 months. Currently, the stock is trading close to its 52-week low of $0.084. As on 31^st December 2019, cash and short-term investments of the company stood at $5.49 million and total debt stood at $0.48 million. On a trailing twelve months (TTM) basis, the stock has an EV/Sales multiple of 9.1x, as compared to the industry average of 27.3x. Considering the performance in the June quarter, new contracts secured, decent outlook, and current trading levels, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.135, down 10% on 6^th August 2020.

Harris Technology Group Limited

Significant Increase in Q4 Revenue: Harris Technology Group Limited (ASX: HT8) operated its e-commerce business, Harris Technology, which is a well-known brand with a 30+ year history in IT/CE retail market covering a very wide range of IT products for small and medium businesses in Australia.

June Quarter Highlights: During the quarter ended 30^th June 2020, the company generated revenue amounting to $6.594 million, representing a whopping increase of 295% on the June 2019 quarter and 199% on a sequential basis. Total revenue for FY20 came in at $14.08 million, up 56% on FY19 revenue of $9 million. Profit for the year amounted to $1.089 million, representing a turn around from a $732k in the previous year. The company has established a new Pro-Hygiene division which is contributing additional revenue and profit through expanded product coverage. During the June quarter, revenue contribution from the division came in at $1.4 million. Customer receipts during the quarter came in at $6.8 million.

Operating Cash Flow (Source: Company Reports)

Outlook: The company is experiencing high demand for its PPE products amid the current environment. Notably, the company has experienced an increase in face mask sales in Victoria recently.

Key Risks: The company is exposed to interest rate risk, currency risk, credit risk, and liquidity risk through its financial instruments, including cash, receivables, and payables. In addition, the company operates in a segment, wherein it is exposed to stiff competition from large and established businesses, which can slow down the process of growth.

Stock Recommendation: The stock of the company gave positive returns of 148.48% in the last 3 months. Currently, the stock is trading close to its 52-week high of $0.140. As on 31^st December 2019, cash and short-term investments of the company stood at $0.57 million and total debt stood at $5.06 million. In 1HFY20, the company had a gross margin of 18.6%, up from pcp gross margin of 13.1%. Considering the performance in the June quarter, price movement in the last 3 months, current trading levels, and decent demand outlook, we have a wait and watch stance on the stock at the current market price of $0.115, up 40.244% on 6^th August 2020, on account of a significant rise in revenue and profitability since March 2020 and establishment of the Pro-hygiene division.

Pacifico Minerals Limited

Update on OPFS: Pacifico Minerals Limited (ASX: PMY) is a Western Australian based exploration company with interests in Australia and Colombia. In a recent update, the company notified about the progress of the Optimised Pre-Feasibility Study (OPFS) for its Sorby Hills Joint Venture Project. All work related to the Resource, Mining, Metallurgy and Process Plant has been completed, with final capital and estimated operating cost being ascertained for non-plant infrastructure. The company expects to complete the study in the current month, with work on the Definitive Feasibility Study expected to commence in Q3 2020.

Quarterly Highlights: During the quarter, the company updated its Mineral Resource Estimate for Sorby Hills, which entails a 9% overall increase in Global MRE contained lead to 44Mt at 4.5% Pb equivalent and a 20% increase in contained lead in the Measured & Indicated resource category to 20.8Mt at 4.9% Pb equivalent. In addition, the company acquired the Eight Mile Creek land package, which has the potential to become a new mining district. Cash balance at the end of the quarter stood at $3 million.

Mineral Resource Estimate (Source: Company Reports)

Key Risks: The company undertakes certain transactions in foreign currency which expose it to exchange rate risks. The company is exposed to commodity price risk as it is currently in the exploration phase. Price movements in gold, copper and silver can affect the company’s ability to access capital markets. In addition, the company is also exposed to credit risk, liquidity risk, and interest rate risk.

Stock Recommendation: The stock of the company gave positive returns of 300% in the last 3 months. Currently, the stock is trading close to its 52-week high of $0.023. As on 31^st December 2019, cash and short-term investments of the company stood at $3.83 million, with no debt. On a trailing twelve months (TTM) basis, the stock has a price to book value multiple of 6.7x, as compared to the industry median of 2.2x. Considering the ongoing Optimised Pre-Feasibility Study (OPFS), price movement in the last 3 months, and current trading levels, we suggest investors to wait for the better entry level, and thus, have a watch stance on the stock at the current market price of $0.022, up 10% on 6th August 2020.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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