MICT Inc

MICT Inc (NASDAQ: MICT) is a New Jersey, United States-based Company, which operates through its subsidiaries, Global Fintech Holdings Intermediate Ltd and Micronet Ltd.

Investment Rationale for Valuation – Speculative Buy at USD 2.20

• The Company’s objective is to be a significant player in the fast-growing retail investor market in China.
• On the liquidity front, the current ratio was 4.17x in September 2020, which was higher than the industry median. Also, the liquidity position stays strong, with the confidence to increase the investment for the future.
• The debt/equity ratio was 0.02x at the end of September 2020, lower than the industry median. Hence, the Company is less leveraged as compared to the industry.
• From the technical standpoint, 14-day RSI stood at 41.56, which is supporting the upside movement.

Key Risks

• In the short-term, the Company’s financial performance is exposed to COVID-19 pandemic, which is causing an unprecedented level of disruption.
• Some additional risks include economic, investment and strategic, regulatory, management and control, operational and financial risks.
• The adverse US federal income tax regimes and fluctuating exchange rates could also affect financial performance.

Recent News

On 11 February 2021, the Company had entered into an agreement with institutional investors, which is for the purchase and sale of common stock and warrants. From this, it expects gross proceeds to be around USD 60 million.

On 10 February 2021, the Company announced that its wholly-owned subsidiary is making a partnership with Shanghai Petroleum and Natural Gas Trading Center, mainly for commodity trading and futures.

On 2 February 2021, the Company has acquired Chinese insurance brokerage company and its trading subsidiary, Beijing Fucheng Insurance Brokerage Co., Ltd, which provides a significant expansion of Insurance Business in China and secures the valuable nationwide license.

Q3 FY20 Trading Update (as on 18 November 2020)

• In Q3 FY20, the Company has generated a revenue of USD 349,000, with a gross profit of USD 2,000.
• As per the expenses, the research and development (R&D) expense stood at USD 230,000 and Selling, general and administrative (SG&A) expense was at USD 4.96 million.
• Net loss attributable to MICT increased to USD 14.15 million in Q3 FY20 as compared to USD 1.2 million in Q3 FY19.
• On 30 September 2020, MICT had cash of USD 18.6 million.

One Year Share Price Chart

 (Source: Refinitiv, chart created by Kalkine Group)

Conclusion

The Company stated that China's online insurance premiums are expected to grow 41% per annum between 2019 to 2024. By 2032, in China, the total insurance premiums are estimated to approximately USD 2.36 trillion. Therefore, it is overtaking the U.S. market by almost USD 1 trillion. Q3 was a transformational quarter, with revenues expected to start shortly after the Hong Kong Securities and Futures Commission's approval to complete the acquisition. Further, the Company added USD 60 million from securities purchase agreements with institutional investors. Overall, the Board stays confident in MICT's ability to emerge from such an unprecedented period. It also made several agreements and partnerships, which will continue to see improvements in the Company's top and bottom line. The stock made a 52-week low and high of USD 0.4387 and USD 8.45, respectively.

Based on the decent growth prospects, we have given a “Speculative Buy” recommendation on MICT Inc at the closing price of USD 2.20 (as on 12 February 2021).

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