Xero Limited - (ASX: XRO)

XRO is engaged in providing software solutions across various geographies, offering Xero, cloud-based accounting software that connects small businesses to their advisors. It also provides Xero mobile app; and accountant/bookkeeper tools, including Xero HQ, Xero Cashbook or Xero Ledger, Xero Practice Manager, Xero Workpapers, and Xero tax tools. The company serves various businesses, such as retail, e-commerce, information technology, non-profit, legal, hospitality, Amazon sellers, cafés, etc. The company was incorporated in 2006 and is based in Wellington, New Zealand. The current market capitalization is $22.70 billion, and the current price is $151.010 per share.

Financial & Operational Updates – on 12^th May 2021, the company announced its financial year results ended for the period ending on 31^st March 2021, stating the significant increase in the revenues for FY21 by 18% YoY to NZ $848.78 million. The net profit after tax increased by ~493% YoY to NZ $19.77 million in FY21. However, the company failed to declare a dividends for FY21. The Net Tangible Assets per share almost double to NZ $1.78 in FY21 from the NZ $0.56 per share in FY20.

On the operational front, the company witnessed an increase in total subscribers by 20% to 2.7 million for FY21. The free cash flows were NZ $56.9 million including the available liquid resources rising to NZ $1.3 billion

Technical Analysis:  The stock showed a strong uptrend and bounced from the recent lows of $111.22 and covertly reaching towards the initial resistance and hovering at those levels. The relative strength index is at 59.755, which is in the upper band of the zone and heading towards an overbought zone, implying more correction can come at higher levels. The 21 days simple moving average is hovering close to the stock price and placed below $148.214, implying a small bullish trend left with the stock price at current levels. The stock is heading towards the North, hence the support is placed at a higher level of $139.75, shunning those levels might bring some more pain to the stock. The resistance is plotted near the lifetime high at around $154.68.

The financials have improved and the company showed significant profits, which is reflected very well in the stock prices while the stock is trading at higher levels which may not provide the margin of safety for investors. Hence we suggest the investors to adopt a ‘Wait & Watch’ approach, for the prices to correct from the current levels and then review it for taking any actions. The recommendation is made at the closing price of $151.01, down by ~1.21%, as of 3rd September 2021. 

Daily Technical Chart – XRO

Source: REFINITIV

Galan Lithium Limited (ASX: GLN)

GLN is engaged in the acquisition and exploration of mineral projects. It primarily explores lithium, tin, and tantalum deposits. The key projects are the West lithium brine project that comprises three exploration permits, located in the Catamarca province in Argentina; and the Candelas lithium brine project located in the Catamarca Province, Argentina. The company was incorporated in 2011 and is based in West Perth, Australia. The current market capitalization is $279.38 million, and the current price is $1.090 per share.

Financial & Operational Highlights – On 19^th August 2021, the company announced the update on the Hombre Muerto West project, that it has received further rounds of drillings permits for unearthing the lithium mineralisation across that area. As per the exchange release, on  13^th August 2021, the company raised $50 million through Institutional placement to support the existing activities on the various sites and expanding further. On 29^th July the company released its quarterly activities report, stating the cash receipts from its customers reached $82k for the full-year period ending June 30, 2021 and the cash balances was reported at $15.48 million, slightly higher than the figures of $14.9 million ending on 31^st March 2021.

Technical Analysis- The stock gave a breakout from the lows of $0.13 and continued in its uptrend rally till it printed the recent highs of $1.34 and hovering those levels. The relative strength index is at 52.138 which is rotating in the middle range before giving any trend formation or continuation from the current readings. The 21 days simple moving average is placed above the stock price at $1.117, implying further upside for the stock. For the prices to sustain the higher levels, the support is placed at $0.885. To continue the journey towards the North, the resistance of $1.315 needs to be breached with strong levels, to print new highs. 

Though the company received cash receipts from its customer, while soaring stock prices with the given financials, take away the comfort of investing at such levels. Hence we give the stock a rating of ‘Expensive’ and can look to wait for the prices to retrace from highs, before taking any actions. The rating is given at the closing price of $1.090, up by ~5.83%, as of 3rd September 2021.

Daily Technical Chart – GLN

Source: REFINITIV

XTEK Limited (ASX: XTE)

XTE is a provider of tailored solutions to the government, law enforcement, military, space and commercial sector. The main focus of the company is on leveraging its distribution network to develop and commercialise its technology, e.g. XTclave and XTatlas. The current market capitalization is $25.57 million, and the current price is $0.360 per share.

Financial & Operational Updates – As per the unaudited report, there is a significant decline in the revenue for FY21 by 34% YoY to $28.33 million. Reported a net loss of $3.975 million in FY21 as compared to a net profit of $0.30 million in FY20. Delay in commissioning and production ramp of Adelaide Manufacturing Centre (AMC) and impact of COVID-19 on supply chain, production and business development activities are some of the factors that contributed to losses. Nevertheless, the cash and cash equivalents surged to $5.9 million in FY21,  as comapred to $3.1 million in FY20, led by proceeds from the share issuance totalling $12.06 million.

Technical Analysis: The stock has declined for some time which can be coming to a halt in near term levels.  The relative strength index is at 39.73, which is in heading towards the oversold zone and becoming a candidate for a fresh pull back the more RSI sinks. The 21 days simple moving average is hovering slightly above the stock price of $0.391, implying a further downward trend and price movement from current levels, indicating some more bearish signal to the stock price, but Moving Averages are lagging indicators that can not be used in the isolation. After a continuous decline, the price gives a slight push up in September, which gives a support level around $0.30, from where some bargain hunting can be witnessed for a short duration. The resistance is placed at $0.47 where we might see some tussle for the prices to cross those levels.

Though the revenues and profits have declined, along with the stock prices, the leading technical indicator, ‘RSI’, is indicating a pullback around the current levels. Hence we give the rating for ‘Speculative Buy’, taking the support and resistance into consideration. The rating is given a the closing price of $0.36, as of 3rd September 2021.

Daily Technical Chart –  XTE

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 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 the uptrend may take a pause due to profit booking or selling interest. 

The Green colour line reflects the 21-period moving average. SMA helps to identify existing price trend. If the prices are trading above the 21-period, then it shows prices are currently trading in a bullish trend, (Vice – Versa).

The Purple colour line in the chart’s lower segment reflects the Relative Strength Index (14-Period) which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status while a reading of 30 or below suggests an oversold status.

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