D4t4 Solutions PLC

D4t4 Solutions PLC (LON: D4T4) is a FTSE AIM All-Share index listed data solutions provider, assisting global enterprises derive value from their data assets.

Rationale for Valuation – SPECULATIVE BUY at GBX 280.50

• New Launches: The launch of Celebrus Fraud Data Platform is expected to open an entirely new market opportunity. Moreover, the release of new Celebrus CDP 9.4 incorporating functionality is presently unrivalled in the market.
• Dividend: The interim dividend increased by 4.9% year-on-year in H1 FY22, as a result of strong cash position.
• Technical Indicator: From a technical standpoint, D4T4’s stock price is approaching towards the lower Bollinger Bands, reflecting an oversold scenario. Meanwhile, 14-day RSI (~26.34) is also reiterating the same.
• Valuation Multiples: On a forward 12-month basis, valuation metrics – EV/Sales, and Price/Cash Flow are quite undervalued against the average of the Technology sector.

Key Risks

• Interest Rate Hike: The Bank of England has raised interest rates for the first time since the pandemic started.
• Inflationary Pressure: British consumer price inflation surged to its highest in more than 10 years in November, jumping to 5.1% from October's 4.2%.

Financial Highlights (for the six months ended 31 September 2021, as on 1 December 2021)

 (Source: Company Website)

• Top-line Growth: During H1 FY22, revenue grew to £7.6 million (H1 FY21: £5.1 million), as there was a solid growth in new license revenue.
• Margin Growth: The gross margin surged to 53.2% in H1 FY22 against 48.6% in H1 FY21.
• Liquidity: At the end of H1 FY22, it reported a robust cash position of £16.1 million (H1 FY21: £12.1 million) with no debt.

One Year Share Price Chart

 (Data Source: Refinitiv, Analysis done by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY22) (Illustrative) 

 Conclusion 

D4T4 expects to drive incremental value in annual recurring revenue with the high visibility of opportunities in H1 FY22, and significant contract wins. Moreover, the acquisition of Prickly Cactus is likely to improve customer engagement and direct sales capacity. Going forward, the Group strategy would be to increase revenue from the Celebrus family of products, drive international expansion, and invest in next generation of Celebrus products. The stock made a 52-week High and Low of GBX 410.00 and GBX 230.00, respectively.

Based on the top-line growth, strong cash position, dividend growth, recent acquisition, new product release and favourable valuation conducted above, we have given a “SPECULATIVE BUY” stance on D4t4 Solutions PLC at the current price of GBX 280.50 (as on 17 December 2021, at 8:08 AM GMT), with lower double-digit upside potential based on 53.73x Price/NTM Earnings (approx.) on FY22E Earnings Per Share (approx.).

Altus Strategies PLC

Altus Strategies PLC (LON: ALS) is a FTSE AIM All-Share listed mining royalty entity, managing diversified portfolio of metal assets.

Investment Rationale – SPECULATIVE BUY at GBX 57.30

• Transformational Acquisition: The acquisition of a portfolio of up to 24 royalties from Newcrest Mining Ltd shall boost immediate cash flows, bolster portfolio, strengthen global footprint, and accelerate the pace of strong trading momentum.
• Long-term Growth: The long-term market fundamentals of copper seems excellent, with anticipated growth in demand for renewable energy.
• Growth Drivers: Altus has become a revenue generating business, while the Company is progressing well with gold programmes in Mali and Egypt.
• Technical Indicator: From a technical standpoint, 14-day RSI (~18.97) indicating an oversold scenario, while the stock has gone significantly below the lower Bollinger Band.

Key Risks

• Economic Slowdown: Fall in the UK Composite Purchasing Managers' Index in December 2021, weak industrial date, global shortage of semiconductors, supply constraints, tightening of monetary policy can hamper early enthusiasm about demand.
• Pandemic Induced Restrictions: Due to the concerns induced by Omicron variant, travel restrictions can have an impact on new business and pipeline opportunities.

Recent News:

Fundraising: On 14 December 2021, ALS raised £19.8 million through equity placing to fund the acquisition of around 24 royalties from Newcrest Mining Limited and for general corporate purpose.

Financial Highlights (for the three-month periods ended 30 September 2021, as on 12 November 2021)

 (Source: Company Website)

• Cash Balance: ALS ended Q3 FY21 with a cash balance of £5.9 million, following the cash outflow for operating activities of £3.1 million.
• Holdings: As of 30 September 2021, the Group held listed equity holdings of £1.6 million.
• Acquisition: The acquisition of 0.418% net smelter return royalty on the Caserones copper mine is likely to generate annual cash flow of US$3.2 million to Altus.

One Year Share Price Chart

 (Data Source: REFINITIV, Analysis done by Kalkine Group) 

Conclusion 

ALS is high risk-reward stock, which is presently trading with a small market capitalization, which makes it a quite speculative counter. Therefore, investors should punt on this stock post accessing their respective risk-return profile.

Notwithstanding, last quarter remained quite productive for the Company, especially with the landmark acquisition of the cash paying Caserones copper royalty in Chile. This acquisition has turned Altus into a revenue generating business. The stock made a 52-week High and Low of GBX 94.60 and GBX 51.00, respectively.

Based on the excellent results from the portfolio of projects, commitment to the long-term growth of Altus Strategies, and accretive royalty acquisition, we have given a “SPECULATIVE BUY” recommendation on Altus Strategies PLC at the current price of GBX 57.30 (as on 17 December 2021 at 9:50 AM GMT).

*All forecasted figures and Peer information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.

*Dividend Yield may vary as per the stock price movement.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached or if the price closes below the support level (indicative stop-loss price).

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