Ault Global Holdings Inc

Ault Global Holdings Inc (AMEX: DPW) is a US-listed diversified holding Company. The Company is focused on acquiring disruptive technologies and undervalued assets having a global impact.

Investment Highlights - Ault Global Holdings Inc – Avoid at USD 3.15

• Despite the higher revenue in Q3 FY2021, the profitability margins remained impacted by higher expenses.
• In the last three months, the Company delivered a negative return of ~25.88% and delivered lower returns compared to the benchmark Index.
• As per valuation metrics, the EV/Sales multiple of Ault Global Holdings Inc is currently higher as compared to the corresponding multiple of the Electronic Equipment & Parts industry, reflecting overstretched valuations.
• From the technical standpoint, shares were trading below the short-term support level of 20-day (USD 5.036) simple moving average prices, which reflects a downtrend in the stock.

Key Risks

• Liquidity and interest rate risks could affect the operations of the Company.
• The recent outbreak of COVID-19 may have a significant and prolonged impact on global economic conditions.

Recent News

On 3 March 2021, Ault Global Holdings announced that it has purchased total of 683,032 shares in SunLink Health Systems Inc, constituting a 9.9% of equity interest.

Financial Highlights – Q3 and 9M FY2020 (30 September 2020) (released on 18 November 2020)

• In the third quarter and nine months of the financial year 2020, driven by higher revenue from GWW business, the revenue increased to $5,675,564 and $16,681,978, respectively.
• Due to higher other expenses, the profitability of the period declined. The Company reported a net loss of $16,734,356 in Q3 FY2020 and $24,641,437 in 9M FY2020.
• The cash balance as on 30 September 2020 increased to $1,274,408 (31 March 2020: $483,383).

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

Conclusion

The Company has shown a decline in financial performance in the third quarter and nine months period of the financial year 2021. Despite the higher revenue, the bottom-line performance declined, while profitability margins remained in the negative zone. The liquidity position for the period has improved and DPW has reported a well-positioned balance sheet. Due to the covid-19 pandemic, the global economy was severely impacted and financial investments failed to deliver returns, the Company faces a significant loss on issuance of warrants. The stock made a 52-week low and high of USD 0.53 and USD 10.94, respectively.

Based on the above rationale, we have given an “Avoid” recommendation on Ault Global Holdings Inc at the closing price of USD 3.15 (as on 4 March 2021), and with support from few catalysts needs to be evaluated at a later stage such as actions taken to preserve liquidity.

Borqs Technologies Inc

Borqs Technologies Inc (NASDAQ-CM: BRQS) is a technology Company providing embedded software and products for IOT (Internet of Things). The Company provides differentiated, scalable and customizable E2E cloud-service solutions and smart-connected mobile devices based on android.

Investment Highlights - Borqs Technologies Inc – Avoid at USD 1.27

• The Company has faced order cancellations and experienced lower demand due to the impact of the covid-19.
• In the last nine months, the Company delivered a negative return of ~21.12% and delivered lower returns compared to the benchmark Index.
• The Company has delivered a lower ROE (Return on Equity) versus the industry median in FY2019. The ROE remained in the negative zone for last 4 years.
• From the technical standpoint, shares were trading below the short-term support level of 20-day (USD 1.97) simple moving average prices, which reflects a downtrend in the stock.

Key Risks

• Failure in cybersecurity and a critical data breach could hamper the operation as well as the reputation of the company.
• The Company’s operations are impacted by risks related to market trends, political change and change in the regulatory authority.

Financial Highlights – FY2019 (31 December 2019) (released on 30 September 2020)

• In the financial year 2019, due to lower hardware revenue, the total revenue declined to $98,958 thousand.
• Driven by lower operating expenses, the net loss of the for the period declined. The Company reported a net loss of $31,583 thousand in FY2019 (FY2018:$69,058 thousand).
• The cash balance as on 31 December 2019 declined to $1,001 thousand (31 December 2018: $1,931 thousand).

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

Conclusion

The Company has shown an increase in financial performance in the financial year 2019. Despite the lower revenue, the bottom-line performance improved, while profitability margins remained in the negative zone. Borqs Technologies reported a poor balance sheet with a decline in liquidity position. The Company expects revenue for financial year 2020 to decline significantly due to restrictions related to covid-19 pandemic, which resulted uncertainties and delays on supply chain delivery schedules and securing funds to meet working capital needs. Overall, the Company expects covid-19 will have a negative impact of business and financial performance, even post pandemic. The stock made a 52-week low and high of USD 0.811 and USD 8.40, respectively.

Based on the above rationale, we have given an “Avoid” recommendation on Borqs Technologies Inc at the closing price of USD 1.27 (as on 4 March 2021), and with support from few catalysts needs to be evaluated at a later stage such as actions taken to control costs and boost supply chain.

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