5 ASX Companies to buy Under $5

Smartpay Holdings Limited

TEAM VEYE | 28 July 2021 ASX | SMP

Smartpay Holdings Limited (ASX: SMP) is a provider of technology products, services and software to merchants and retailers. The Company designs, develops and implements payment solutions for customers in New Zealand and Australia. It offers a range of payment and data management solutions for retail, business payment and transactional processing requirements. The Company is the electronic funds transfer at point of sale (EFTPOS) terminal provider throughout Australia. It licenses its technologies to third parties. The Company is a supplier of taxi payment solutions in New Zealand. The Company offers wireless EFTPOS Machines that allow accepting a credit card onsite. Its stationary countertop solutions are capable of connecting through the Internet. Its EFTPOS terminals are available for hire for a trade show on a short-term lease. The Company has over 45,000 EFTPOS terminals throughout Australia and New Zealand, servicing the payment needs of approximately 18,000 merchants (Source: Refinitiv, Thomson Reuters)

From the Company Reports

Smartpay Full Year Results Announcement

The Board of Smartpay Holdings Limited (ASX: SMP) on 27 May 2021 announced its unaudited full year results to 31 March 2021.

Full Year Financial Highlights

  • Revenue $33.8m, a 19.7% increase on the prior year $28.3m
  • Australian acquiring transactional revenue:
  • $17.1m, an 80.0% increase on the prior year $9.5m
  • Monthly acquiring revenue grew to $2.2m / month
  • EBITDA* $7.6m, a 2.7% increase on the prior year $7.4m. Run-rate EBITDA at March 2021 $9.8m
  • Australian transacting terminals fleet grew to 6,754 at 31 March 2021
  • Continued increase in acquiring margin through the year
  • Net debt, excluding convertible notes, reduced to $4.7m, $19.4m at March 2021
  • After Tax Loss of ($15.2m), largely driven by ($12.7m) non-cash fair value adjustment of existing convertible notes – a direct result of our steep increase in share price over the period.
(Graphic Source – Company Reports)

Monthly customer acquisition continued to increase throughout the year resulting in a record month in March 2021 and reinforces the view that SMP is well placed to execute into the sizable opportunity presented in Australia.

EBITDA grew to $7.6m in the period, up slightly compared to the prior period $7.4m, which given the challenging trading conditions experienced by many of its customers through the Covid 19 impacted Q1 is a positive result.

Trading Update

The Board of Smartpay Holdings Limited on 19 April 2021 provided the following trading update following the completion of the fourth quarter to 31 March 2021 of the 2021 financial year.

Highlights

  • Australian acquiring revenue continues to show strong growth: March quarter up 97% year-onyear; 15% up on the previous quarter
  • Australian acquiring margin remains strong and continues to trend upward
  • Australian transacting terminals at record level 6,754 (end Q3: 5,775)
  • Australian lead generation and new customer acquisition continued to perform through the fourth quarter with record levels achieved for both

Value Proposition:

  • Earnings vs Market: SMP is forecast to become profitable over the next 3 years, which is considered above average market growth.
  • Revenue vs Market: SMP revenue (34.0% per year) is forecast to grow faster than the Australian market
  • High Growth Revenue: SMP revenue (34.0% per year) is forecast to grow faster than 20% per year. (Source: Refinitiv, Thomson Reuters)

Financial Metrics:

  • Debt Level: SMP debt to equity ratio (67.7%) is considered high.
  • Reducing Debt: SMP debt to equity ratio has reduced from 238% to 67.7% over the past 5 years.
  • Stable Cash Runway: Whilst unprofitable SMP has sufficient cash runway for more than 3 years if it maintains its current positive free cash flow level. (Source: Refinitiv, Thomson Reuters)

Technical Analysis:

Monthly chart: The upside rally that started in 2019 has continued till date. The all-time high at $0.985 was achieved in the month of January 2021.The stock attempted varied times to breach its all-time high but showed rejection. The current price chart pattern indicates the upside momentum and stock is expected to breach the all-time high and start a new leg of the upside rally.

Weekly Chart: The stock has been trading in a band for the past few weeks and the horizontal lines on the price chart indicate the resistance and the support areas. The trading band range was $0.720-$0.920. At the current juncture, the stock is trading in the middle of the band and near the upper band of the Bollinger. The price chart pattern along with the indicators point towards an upside rally in the near term.

Daily Chart: The stock after remaining bearish from past few days has finally closed the daily trading session with the formation of the “Bullish Engulfing”. The price chart pattern is further supported by the indicators.

With all the three charts confirming an upside potential in the stock, the stock is expected to witness bullish momentum in the near term.

(Chart source: TradingView)
(Chart source: TradingView)
(Chart source: TradingView)

Veye’s Take

FY21 demonstrated the resilience of SMP’s New Zealand business and validated its successful go to market strategy in the Australian market. Whilst the Company is still in the early stages of its growth phase in Australia the business is scaling quickly, and it now has a well-established marketing and sales capability. FY22 will see Smartpay continue to develop its payments offering in both countries, broaden awareness of its brand and competitive product offering in Australia and further scaling its Australian revenue which is expected to deliver operating leverage and EBITDA growth.  

Korvest Limited

TEAM VEYE | 28 July 2021 ASX | KOV

Korvest Ltd (ASX: KOV) is engaged in hot dip galvanizing; sheet metal fabrication; manufacture of cable and pipe support systems and fittings; design and assembly of access systems for mobile equipment, and sale, repair and rental of high torque tools. The Company operates through two segments: Industrial Products and Production. The Industrial Products segment includes the manufacture of electrical and cable support systems, steel fabrication and access systems. It also includes the sale, hire and repair of high torque tools. It includes the businesses trading under the EzyStrut Pte. Ltd, Power Step (Australia) Pty Ltd, Power Step (Chile) SpA and Titan Technologies (SE Asia) Pty Ltd names. The Production segment represents the Korvest Galvanising business, which provides hot dip galvanizing services. Its businesses service a range of markets, including infrastructure, commercial, utilities, mining, food processing, oil and gas, power stations, health and industrial. (Source: Refinitiv, Thomson Reuters)

From the Company Reports

Trading Update

Korvest Ltd (ASX: KOV), in its January 2021 outlook statement had expected that the second half trading would be similar to the conditions experienced during the first half.

On 6 May 2021, it announced that during the second half the volume supplied to the major project will exceed the first half and activity in the small project and day-to-day market had also improved due to increased confidence and investment in the construction sector.

As a result of these improvements, Korvest’s second half profit before tax was expected to be in the range of $3.3 – 3.8 million compared to the first half’s $2.2 million (excluding the impact of JobKeeper in the first half)

Korvest First Half FY2021 results

The Chairman of Korvest Ltd, Mr. Graeme Billings, on 22 January 2021 announced the following operating results for the 6 months ended 31st December 2020 for Korvest Ltd.

Mr. Billings said that revenue from trading operations for the half-year decreased by 9.7% to $32.6 million with less Industrial Products project work undertaken during the period compared to the prior comparative period (PCP). From July to September the Group was eligible to receive the Federal Government’s JobKeeper subsidy and as a result $1.86 million of income from this subsidy is included in the FY21 first half result. 

Industrial Products

The EzyStrut business was quieter during the first half compared to the PCP. In the current year, one major infrastructure project was supplied compared to two during the PCP and this was responsible for a large portion of the reduction in revenue in the Industrial Products segment.

The Power Step and Titan Technologies businesses had a small decline in revenue compared to the PCP. Margins remained at the higher levels that have been achieved for the past year which meant that the reduction in profitability was minor and in line with the reduced revenue.

Production

The Galvanising business had another strong half with overall plant volumes eclipsing the PCP to be the highest since the first half of FY14. Compared to the PCP, a reduction in external customer work was more than offset by an increase in EzyStrut tonnes, due to EzyStrut product mix.

Dividend

The Directors announced a fully franked interim dividend of 15.0 cents per share

Value Proposition:

  • PE vs Industry: KOV is good value based on its PE Ratio (11.62x) compared to the Australian Machinery industry average (16.4x).
  • PE vs Market: KOV is good value based on its PE Ratio (11.62x) compared to the Australian market (20.3x).
  • PB vs Industry: KOV is good value based on its PB Ratio (1.38x) compared to the AU Machinery industry average (2x).
  • Revenue vs Market: KOV’s revenue (6.81% per year) is forecast to grow faster than the Australian market (5.3% per year).
  • Quality Earnings: KOV has high quality earnings. (Source: Refinitiv, Thomson Reuters)
(Source: Refinitiv, Thomson Reuters)

Peer Analysis:

(Source: Refinitiv, Thomson Reuters)

Financial Metrics:

  • Growing Profit Margin: KOV’s current net profit margins (7.6%) are higher than last year (5.7%).
  • Earnings Trend: KOV’s earnings have grown significantly by 49% per year over the past 5 years.
  • Short Term Liabilities: KOV short term assets at$28.6M exceed its short term liabilities at$9.9M.
  • Long Term Liabilities: KOV short term assets at $28.6M) exceed its long term liabilities $5.1M
  • Debt Level: KOV is debt free.
  • Reducing Debt: KOV has no debt compared to 5 years ago
  • Debt Coverage: KOV has no debt, therefore it does not need to be covered by operating cash flow.
  • Interest Coverage: KOV has no debt; therefore, coverage of interest payments is not a concern.
  • Notable Dividend: KOV’s dividend (5.81%) is higher than the bottom 25% of dividend payers in the Australian market (2.01%).
  • High Dividend: KOV’s dividend (5.81%) is in the top 25% of dividend payers in the Australian market (5.14%)
  • Dividend Coverage: With its reasonable payout ratio (66.32%), KOV’s dividend payments are covered by earnings. (Source: Refinitiv, Thomson Reuters)

Market Risk Analysis

The forecast is based on expected delivery requirements for a number of larger EzyStrut projects. These delivery schedules can change at short notice resulting in accelerated or delayed deliveries to suit the construction process. Any lockdown can affect production and increase overtime.

Technical Analysis

Monthly Chart: The EMA (Exponential Moving Average) crossover (indicated on charts) started in April 2020. The 14 day EMA crossover with the 50/200 day EMA indicates the beginning of the bullish trend. The stock price has rejected the downside move consecutively in March and April with the formation of the “Doji candle. It is trading above the 14 day EMA. The MACD Moving Average Convergence and Divergence) positive crossover (indicated on charts) further supports the upside move.

Weekly Charts: The horizontal line (indicated on charts) represents the support zone. The support zone is at $4.42-4.46. The stock has rejected the downside movement and is trading above the 14 day EMA. The indicators further support the upside move. With both the Weekly and the monthly charts confirming the downside rejection, the upside movement is expected to continue in the near to medium term.

(Chart Source: Trading View)
(Chart Source: Trading View)

Veye’s Take

The Company has strong sales volume and an increased project mix. During the second half, the volume supplied to the major project is expected to exceed the first half. Activity in the small project and the day-to-day market has also improved due to increased confidence and investment in the construction sector. Korvest continues to operate profitably while maintaining the improved margin. Day-to-day and small project markets expected to remain at 1H levels throughout 2H. The infrastructure pipeline for the next 3-5 years remains strong. Improvements continue to be made to the Kilburn factory to be able to take advantage of opportunities as they arise.  

Plenti Group Limited (ASX: PLT)

TEAM VEYE | 28 July 2021 ASX | PLT

Plenti Lending Platform: June 2021 quarterly data report.

Plenti Group Limited (ASX: PLT) (Plenti or the Company) on 20 July 2021 provided its quarterly data report in relation to the Plenti Lending Platform (PLP) loan book.

Shareholders in Plenti should be aware that the data provided in this report only relates to the PLP and does not provide a complete picture of Plenti’s total loan portfolio. In particular, it does not include data on loans funded via the Company’s warehouse facilities and the Plenti Wholesale Lending Platform.

(Chart source: TradingView) Technical Chart- Weekly Candlestick Price Chart Pattern

Plenti delivers another record quarter; reaches $1 billion loan originations run-rate in June

Plenti Group Limited on 13 July 2021 provided a trading update for the quarter ended 30 June 2021 (Q1 FY22). Highlights

  • Record quarterly loan originations of $216.4 million, 260% above PCP and 26% above the prior quarter
  • Record monthly loan originations of $83.4 million in June, representing a $1 billion annual run-rate
  • Loan portfolio increased to $757 million, 96% above PCP and 23% above the prior quarter
(Graphic Source – Company Reports)
  • Prime loan portfolio continued to demonstrate a strong credit performance, with annualised credit losses below 75 basis points and 90+ day arrears remaining low at 35 basis points
  • Automotive warehouse facility increased yesterday by $100 million to $450 million
  • Automotive warehouse equity requirement materially reduced, releasing funds to support ongoing growth
  • Renewable energy and personal loan warehouse facilities increased by $100 million to $200 million
  • Commercial automotive loan offering successfully launched with selected referral partners, approximately doubling Plenti’s addressable market in automotive finance

Veye’s Take

Plenti reaching a one-billion-dollar loan origination run-rate in June showed that it was successfully taking market share and accelerating towards its ambition of achieving a one-billion-dollar loan book during this financial year. As Plenti continued on its mission to build Australia’s best lender, the exceptional momentum across its business reflects the strength of its offering in each of the Company’s verticals. The additional $200m in funding capacity across its three verticals is another important step towards executing its growth priorities. The upside breakout in the stock was noticed in the month of June 2021. The stock breached the trading band between $1.00-$1.245 and formed a “Higher High” pattern on a weekly chart. The indicators holding strongly in the positive territory further support the upside trend and it is expected to continue in the near term.

Fertoz Limited (ASX: FTZ)

TEAM VEYE | 28 July 2021 ASX | FTZ

New Partnerships to Accelerate Development of Fertoz Carbon

The Carbon Division of organic phosphate development company, Fertoz Ltd (“Fertoz” or the “Company”, ASX: FTZ) on 12 July 2021 provided an update on recent partnerships that will enhance the Company’s abilities and profile in the Carbon Market.

Highlights

  • Memorandum of Understanding executed between Fertoz and Trimble Inc. to facilitate carbon offset trading
  • Memorandum of Understanding executed between Fertoz and DataPLP to quantify carbon sequestration through satellite and drone imagery and field testing
  • Engagement of Brightspot Climate Inc. as a consultant to assist with the development of an emission reduction methodology and registration with a recognised Offsets Registry
  • Collaboration with two drone companies will enable Fertoz to ensure rapid reforestation on forest rehabilitation projects
  • Draft contract prepared for first sale of carbon credits to offset emissions in a blast furnace
  • Increased demand for low-carbon grains and inputs associated with regenerative agriculture.
(Chart source: TradingView) Technical Chart- Daily Candlestick Price Chart Pattern

Fernie Operations to Start Up in July on Promising Orders.

Fertoz Ltd is the largest supplier of organic rock phosphate in North America, with mining permits in place to access large phosphate resources at Fernie (British Columbia) alone. On 30 June 2021, the Company announced that it will commence mining operations at Fernie, British Colombia, Canada in July 2021 due to contracts and/or orders exceeding 10,000 tonnes in North America

Highlights

  • Following on from a record first quarter orders (ASX 25th March 2021) 2Q contracts and orders have again been very strong and now necessitate Fernie operations to start
  • Contracts and orders now exceeding 10,000 tonnes require filling and delivery into Q321 and Q421 hence cashflows to follow thereon after
  • Fernie deposit is also a key area to test and expand our reforestation and reclamation efforts under Fertoz Carbon operations
  • Solid contracts and orders in place from our manufacturing and distribution partners across the Prairies

Veye’s Take

To ensure that Fertoz’s Carbon Division continues to gather momentum, the Company had prepared a draft contract for the sale of a small trial of carbon credits to offset CO2 emissions in a blast furnace. The carbon market has a complex regulatory environment, so it expects the partnerships to really assist it. Fertoz’s Fernie lease is a great asset with high phosphate and low metals. It has solid infrastructure with processing facilities, highway, and rail nearby, and is close to many customers. Fertoz has strategy to open and use Canadian mines to supply Canada, and focus on Montana and Mexico mines for the US market. These improved volumes will allow opening and long term mining of its leases in the Fernie area. The EMA (Exponential Moving Average) crossovers between 14/200 day on a weekly t/f has just started, signalling the upside momentum. The price chart pattern with downside rejection and trading above the EMA’s well supported by the indicators, signals the upside trend to continue in the near term.

Imugene Ltd (ASX: IMU)

TEAM VEYE | 28 July 2021 ASX | IMU

Imugene Ltd (ASX: IMU) is a clinical stage immuno-oncology company developing a range of new and novel immunotherapies that seek to activate the immune system of cancer patients to treat and eradicate tumours. Its unique platform technologies seek to harness the body’s immune system against tumours, potentially achieving a similar or greater effect than synthetically manufactured monoclonal antibody and other immunotherapies.

(Chart source: TradingView)

Imugene Ltd (ASX: IMU), an immuno-oncology company and City of Hope®, a worldrenowned independent cancer research and treatment center near Los Angeles, announced on 18 May 2021 that they have entered into a licensing agreement for the patents covering a novel combination immunotherapy. The therapy unleashes a CD19 expressing oncolytic virus to enable CD19 directed chimeric antigen receptor (CAR) T cell therapies to target solid tumours, which are currently otherwise difficult to treat with CAR T cell therapy alone.

  • Imugene enhances portfolio with novel CD19 expressing oncolytic virus from City of Hope, a Comprehensive Cancer Center in Los Angeles, California, to be developed in combination with CD19 CAR T cell therapy
  • Worldwide exclusive licence to combine the oncolytic virus and cell therapy technology
  • Long patent life
  • Phase 1 clinical trial anticipated to commence in 2022
  • Builds on Imugene’s deep oncolytic virus expertise
  • Four-year Sponsored Research Agreement with City of Hope to further develop the technology
(Graphic Source – Company Reports)

The worldwide exclusive licence of the patents covering the cell therapy technology, which includes CF33-CD19, known as onCARlytics™, or an agent that tags cancer cells for CAR T cell destruction, was developed at the City of Hope.

 

City of Hope scientists led by Saul Priceman, Ph.D., has combined two potent immunotherapies. Imugene’s CD19 oncolytic virus and CD19 CAR T cell therapy, with the goal of targeting and eradicating solid tumours that are otherwise difficult to treat with CAR T cell therapy alone. (Data Source – Company Reports)

Veye’s Take

CD19 CAR T cell therapy is approved by the U.S. Food and Drug Administration to treat certain types of blood cancers, namely B cell lymphomas and acute lymphoblastic leukaemia. This platform opens up the entire field of use to cellular therapy for the CF33 OV. Supercharging CF33 with CD19 is a revolutionary new paradigm in combination therapy with any CD19 binding therapies to include bispecifics, antibody drug conjugates and CAR T, cell therapy for solid tumours. The CAR T cell field currently only treats ~10% of all cancers such as blood or liquid tumours, whereas this technology has the potential to open up the solid tumour market. It offers Imugene numerous partnering or collaboration opportunities for both approved and in-development CARTs, bispecific, ADC’s, etc. The stock after taking support at $0.20 between March 2020-April 2020, made a strong upside move. The stock took support at 9 day EMA and managed to trade above it. It is showing strong rejection to the downside and maintaining the upside trend. The stock is quite bullish on long term charts.

 Disclaimer

Veye Pty Ltd(ABN 58 623 120 865), holds (AFSL No. 523157 ). All information provided by Veye Pty Ltd through its website, reports, and newsletters is general financial product advice only and should not be considered a personal recommendation to buy or sell any asset or security. Before acting on the advice, you should consider whether it’s appropriate to you, in light of your objectives, financial situation, or needs. You should look at the Product Disclosure Statement or other offer document associated with the security or product before making a decision on acquiring the security or product. You can refer to our Terms & Conditions and Financial Services Guide for more information. Any recommendation contained herein may not be suitable for all investors as it does not take into account your personal financial needs or investment objectives. Although Veye takes the utmost care to ensure accuracy of the content and that the information is gathered and processed from reliable resources, we strongly recommend that you seek professional advice from your financial advisor or stockbroker before making any investment decision based on any of our recommendations. All the information we share represents our views on the date of publishing as stocks are subject to real time changes and therefore may change without notice. Please remember that investments can go up and down and past performance is not necessarily indicative of future returns. We request our readers not to interpret our reports as direct recommendations. To the extent permitted by law, Veye Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss, or data corruption) (as mentioned on the website www.veye.com.au), and confirms that the employees and/or associates of Veye Pty Ltd do not hold positions in any of the financial products covered on the website on the date of publishing this report. Veye Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services.

ACN 623 120 865 | ABN 58 623 120 865
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