1. Vection Technologies Limited (Recommendation: Speculative Buy, Market Cap: ~$115.88 Mn)

Accelerating Recurring Revenue Sales: Vection Technologies Ltd (ASX: VR1) is a multinational software company that provides real-time technologies to companies and organisations to innovate, collaborate and create value.

• During FY20, the company reported YoY revenue growth of 131%, despite COVID-19 lockdowns commenced in Q3 FY20. Over the year, the company’s underlying EBITDA grew by 120% to $173,078. The company’s net loss after tax stood at $1.16 million in FY20, representing an improvement of 74% on the loss of $4.5 million incurred in FY19. For Q1FY21, the company reported cash inflows from client activities of ~$0.5 million, representing decent operational consolidation in the challenging COVID-19 global environment.
• Overview of Financials/Fundamentals: As at 30 September 2020, the company had cash balance of $3.36 million and no material debt. For FY20, the company’s gross margin stood at 99.9%, higher than the industry median of 80.8%. The company has a favourable capital structure with a debt to equity ratio of 0.03x in FY20, compared to the industry median of 0.04x.

A Pictorial Presentation of Key Financials:

SWOT Analysis:

Stock Recommendation:

• The stock of the company has corrected by 17.85% in the last one month.
• On the technical analysis front, the stock has a support level of ~$0.010 and a resistance level of ~$0.13.
• The company is focused on accelerating its strategic core-business operations, research and development activities and its strong progression towards sustained recurring revenue generation activities.
• Risks Exposure: COVID-19 Uncertainties, Stiff Competition, and Technology disruption.
• Considering the company’s decent cash balance, its strategic partnerships with key technology and industrial partners, and strong revenue growth, we give a “Speculative Buy” recommendation on the stock at the current price of $0.115, down by 4.167% on 27 November 2020.

Decent Growth in FM Licence Fee and Total Revenue: Urbanise.com Limited (ASX: UBN) is involved in the provision of industry-specific cloud-based SaaS platforms to strata and facilities managers.

• During Q1FY20, the company’s recurring licence revenue stood at $2.07 million, up 12.6% on pcp, driven by a 24.1% increase in Facilities Management (FM) licence fees and 9.1% increase in Strata licence fees. Over the quarter, the company received total cash receipts of $2.56 million, slightly lower than $2.67 million in pcp, impacted by $283k in late receipts, due by 30 September 2020 but collected after reporting date. Net cash outflow for the quarter stood at $1,184k and the average monthly cash used for the quarter was $395k.
• Overview of Financials/Fundamentals: As on 30th June 2020, the company had no debt, with a cash balance of $15.7 million. In FY20, the company had a gross margin of 86.9%, as compared to industry median of 29.6%.

A Pictorial Presentation of Key Financials:

SWOT Analysis:

Stock Recommendation:

• The stock of the company has corrected by 5.95% in the last one month.
• On the technical analysis front, the stock has a support level of ~$0.070 and a resistance level of ~$0.089.
• The company is focused on increasing its investment in sales and marketing to drive new customer growth.
• Key Risks: Changes in the customer behaviours and preferred interactions, COVID-19 Uncertainties.
• Considering the company’s decent performance in Q1FY21, recently completed placement of $6.8 million, and large addressable market, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.079, down by 1.251% on 27 November 2020.

Continued Growth in 100Gbps Encryptor Sales: Senetas Corporation Limited (ASX: SEN) is primarily involved in the development and manufacturing of certified, high-assurance encryption hardware, virtualised network encryption and advanced encrypted file sharing application.

• During FY20, the company reported operating revenue of $22.6 million, up 6.1% on the previous year, despite a slowdown in hardware sales to US commercial customers during the second half. Further, the company reported a gross margin of ~87%, higher than 78% reported in FY19. This included Votiro business gross margin of 96% and the depletion of hardware inventory for the year. The underlying Senetas segment net profit before tax for the year stood at $4.1 million, up 4.8% on the previous year, underpinned by decent sales to government customers and strong recurring maintenance revenue streams.
• Overview of Financials/Fundamentals: As on 30th June 2020, the company had no debt, with a cash balance of $15.7 million. In FY20, the company had a gross margin of 86.9%, as compared to industry median of 29.6%. The company has a favourable capital structure with a debt to equity ratio of 0.08x in FY20, compared to the industry median of 0.14x.

A Pictorial Presentation of Key Financials:

SWOT Analysis: 

Stock Recommendation:

• The stock of the company has corrected by 3.63% in the last one month.
• On the technical analysis front, the stock has a support level of ~$0.049 and a resistance level of ~$0.062.
• FY21 has commenced strongly for the business and despite the COVID-19 uncertainty the company expects decent sales growth over the year.
• The company is exposed to the risks related to COVID-19 pandemic and rising competition.
• Considering the company’s decent performance in FY20, continued growth in 100Gbps encryptor sales, debt-free balance sheet, and positive growth outlook for Votiro’s CDR technology, we give a “Speculative Buy” recommendation on the stock at the current price of $0.055, down 1.786% on 27 November 2020.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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