Deepverge Plc

Deepverge Plc (LON: DVRG) is a FTSE AIM All-Share index listed vertically integrated  company founded in 2016 and headquartered in Malahide, Ireland. With operations in the UK and internationally, the Company collaborates technology platforms in AI, clinical research, medical device etc. and runs two divisions namely life science division and environmental health division.

Investment Rationale – Avoid at GBX 33.0266

• The Company confirmed Q4 FY2020 to be its first EBITDA profitable quarter excluding Modern Water acquisition costs. However, overall, its FY2020 bottom line would be in negative zone due to negative earnings in prior quarters.
• The Company made an acquisition in November 2020. If it fails to integrate the operations successfully, it could cause losses in future.
• In the last six months, the Company delivered a lower return (22.86%) compared to the benchmark index ie FTSE AIM All-Share Index (34.51%).

Key Risks

• There could be integration issue from the recent acquisition.
• Given its nature of business, the Company needs to evolve its technology infrastructure.
• Given the Company’s global operations, the foreign exchange fluctuations could impact the financial performance.
• With negative bottom line in FY2020, the Company could face liquidity issue in future.

Recent News

JV with China Resources: Deepverge Plc, on April 28, 2021, provided an update that it had signed an MoU with China Resources Group for a JV regarding the manufacture, assembly and sale of environmental monitoring equipment.

App Going Live: Deepverge Plc, on April 26, 2021, announced the availability of Skin Trust Club, iOS Apple app which offers personalised beauty experience.

Trading Update (Released on January 11, 2021 for Q4 FY2020 and FY2020)

• Driven by strong sales in Q4 FY2020, partially improved by fulfilment of backlog orders, the Company delivered its first EBITDA profitable quarter excluding Modern Water acquisition costs.
• This led to good liquidity position at year end with £1.47 million cash and cash equivalents at FY2020 end.
• The Company also got access to £1.5m flexible loan facility, which could provide liquidity support in taking key initiatives and technology innovations in future. 

One Year Share Price Char

(Source: Refinitiv, Thomson Reuters)

Conclusion

The Company has a strong balance sheet and solid liquidity despite significant challenges. The management expects strong incoming demand for both the Environmental Health and Life sciences divisions with substantially improved revenue guidance for FY2021. However, the true potential of the recent acquisition is yet to be realized. The stock made a 52-week low and high of GBX 13.000 and GBX 75.365, respectively.

Based on the above factors we have given an “Avoid” recommendation on Deepverge Plc at the current market price of GBX 33.0266 (as on 29 April 2021 at 8.30 AM GMT), while we look forward to reinvesting when there is more clarity regarding revenue or cost synergies and further improvement in the Company’s operations and financials.

Great Western Mining Corporation Plc

Great Western Mining Corporation Plc (LON: GWMO) is a FTSE AIM All-Share index listed mining company founded in 2004 and headquartered in Dublin, Ireland. The Company is involved in exploration and mining of gold, silver, copper and other minerals the United States, the Republic of Ireland and the United Kingdom.

Investment Rationale – Avoid at GBX 0.230

• The Company, being in exploration and development phase, still does not report any revenues. Hence, its return on equity remains in negative zone as compared to the positive industry median.
• The Company has reported a higher net loss in FY2020 than in FY2019.
• It is currently dependent on share based funding to raise capital for its exploration activities.
• In the last six months, the Company delivered a significantly lower return (11.16%) compared to the benchmark index ie FTSE AIM All-Share Index (34.51%).
• The 20 Day EMA (GBX 0.239) is at a higher level than the stock price (GBX 0.230). It signifies the downside potential in the stock.

Key Risks

• There could be issues in raising equity funds in a continuous basis to fund operations.
• The Company is running significant losses and it is going up. Hence, liquidity issues could emerge in the future.
• Operational risk pertinent to Covid-19 led restrictions, transition risk of climate change, water crisis and technological disruption could be concerns for the Company and the mining industry.
• Uncertainties regarding change in a government legislation could also pose a threat.

Recent News

Olympic Gold Project: Great Western Mining Corporation Plc, on April 28, 2021, provided a drilling update on its ongoing drilling programme in Mineral County, Nevada. It mentioned that its drilling outcomes had been encouraging with the activity progressing rapidly.

Operations Update: Great Western Mining Corporation Plc, on April 16, 2021, announced that it had started drilling activity at the Olympic Gold Project in Mineral County Nevada.

Financial Highlights (for the year ended 31 December 2020 (FY2020), released on 28 April 2021)

(Source: LSE Website)

• The Company is still in the exploration, appraisal and development phase and hence, it reports no revenues yet.
• Partially due to Covid-19 induced situations, admin expenses rose by ~4.3% YoY.
• This led to net loss rising ~4.4% YoY to €852,042.
• However, driven by fresh equity issuance, the cash position surged by ~633% to €2.2 million.
• The Company offers no dividends to its shareholders..

One Year Share Price Chart

(Source: Refinitiv, Thomson Reuters)

Conclusion

The Company has started drilling activity in Olympic Gold Project in April 2021 and outcomes are encouraging. However, the Company is yet to report any revenues and its operations has been impacted by the Covid pandemic amid disruption in supply chain. It is dependent on equity funding to run its operations. The stock made a 52-week low and high of GBX 0.090 and GBX 0.420, respectively.

Based on the above factors, we have given an “Avoid” recommendation on Great Western Mining Corporation Plc at the current market price of GBX 0.230 (as on 29 April 2021 at 8.03 AM GMT), while we would monitor the outcome of the Company’s drilling operations and subsequent findings and revisit our stance accordingly.

Disclaimer

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