Quartix Technologies PLC

Quartix Technologies Group PLC (LON: QTX) is a FTSE AIM All-Share listed entity that provides vehicle tracking systems and services to the fleet and insurance sectors.

Investment Highlights – SPECULATIVE BUY at GBX 405.00

• Financial Outlook: FY21’s revenue, profit, and cash flow is expected to be in line with the market expectations.
• Subscription Growth: During 9M FY21, new subscription surged 22% year-on-year, primarily driven by 35% year-on-year growth in France.
• Improved Market Dynamics: The economic reopening has boosted traffic on roads leading to the increase in insurance buyers and the requirement for vehicle tracking systems.
• Technical Indicator: From a technical standpoint, 14-day RSI (~22.84) indicating an oversold scenario, while the stock has gone significantly below the lower Bollinger Band.
• Undervalued Multiples: As per valuation metrics - EV/Sales, EV/EBITDA, and Price/Earnings multiples of the QTX are currently lower as compared to the corresponding multiples of the Technology industry.

Key Risks

• Macroeconomic uncertainty: British inflation rose to its highest in 10 years, while the strengthening of US Dollar with an increase in US Treasury Yields can hinder the QTX’s growth prospects.
• Weak Insurance Market: The UK’s motor insurance premiums plunged 16% in Q3 FY21, while the mobility restrictions, subdued new car sales, and fuel crisis can keep the market volatile.

CEO Succession Update and Trading Update (as on 13 October 2021)

(Source: Company Website)

• CEO Succession: Richard Lilwall commenced his appointment as CEO (Chief Executive Officer) and joined the Board of QTX.
• Strong Recurring Revenue: The annualised recurring revenue of the fleet subscription base gained by £1.5 million since the start of FY21.
• Subscription Growth: QTX’s subscription grew significantly across all divisions.

One Year Share Price Chart

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

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

Conclusion

The new CEO has commenced its operations and sees attractive potential in the telematics market. The Company has grown its subscription base in new territories also. Despite covid led disruptions, fleet revenue (major contributor to Group’s revenue) remained strong, while the Company’s new fleet subscriptions grew by 21% in H1 FY21 year on year basis. Moreover, it projects FY21 financials to be in line with the market expectations on the back of strong subscription. As economic activities are gaining pre-Covid-19 momentum, it shall support the business prospects going forward. The stock made a 52-week high and low of GBX 580.00 and GBX 334.00, respectively.

Based on the fleet revenue increase, resilience profitability, increased subscription, with support from the valuation as done using the above method, we have given a “SPECULATIVE BUY” recommendation on Quartix Technologies Group PLC at the closing price of GBX 405.00 (as on 28 October 2021), with lower double-digit upside potential based 56.49x Price/NTM Earnings (approx.) on FY22E earnings per share (approx.).

Sensyne Health PLC

Sensyne Health PLC (LON: SENS) is a FTSE AIM All-Share listed Company that provides clinical artificial intelligence related services.

Investment Rationale – SPECULATIVE BUY at GBX 92.00

• Bright Outlook: SENS has strengthened its business development activities, launched several platforms, and looked confident of generating strong revenue growth in FY22.
• Resilient Business: Despite some significant headwinds and competitive market environment, Sensyne delivered strong growth in the past year, and it is growing dataset and revenues significantly to deliver an incremental value for its shareholders.
• Partnership: On 15 October 2021, SENS collaborated with OMNY Health to support its breakthrough research through data and advanced analytical tools.
• Technical Indicator: From a technical standpoint, 14-day RSI (~18.25) indicating an oversold scenario, while the stock has gone significantly below the lower Bollinger Band.

Key Risks

• Liquidity Risk: The Company is yet to be profitable even operationally, while it reported net cash outflows of £8.1 million in FY21 (FY20: £17.6 million). Therefore, it is exposed to a significant liquidity risk.
• Macroeconomic Uncertainties: Weak industrial date, global shortage of semiconductors, supply constraints, tightening of monetary policy can hamper early enthusiasm about demand.

Recent News:

Regulatory Certification: On 21 October 2021, SENS announced that its partner Excalibur Healthcare Services Limited received European regulatory certification for its 'Test-To-Go' COVID-19 antigen testing system, which is powered by Sensyne's MagnifEyeÔ.

Financial Highlights (for the 12 months ended 30 April 2021, as on 1 October 2021)

(Source: Company Website)

• Operational Highlights: SENS increased its patient records to 8.9 million by 30 April 2021 through significant of new Strategic Research Agreements. It also launched MagnifEye™ and collaborated with Phesi, Inc, Alexion, and Bristol Myers Squibb.
• Fundraise: In January 2021, it raised £27.5 million via equity placing and invested US$10 million into Phesi as part of strategic collaboration.
• Liquidity: At the end of FY21, the Company reported cash and cash equivalents of £23.6 million.

One Year Share Price Chart

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

Valuation Methodology: EV/Sales Approach (FY22) (Illustrative) 

Conclusion 

Sensyne demonstrated a solid growth over the past year and made some strategic collaborations and accelerate the development of new medicines. Moreover, it is progressing well to achieve 100 million patient records by December 2024. It also signed five new Strategic Research Agreements across NHS England in FY21, and thus, the Company has optimistic business prospects. The stock made a 52-week High and Low of GBX 190.00 and GBX 87.96, respectively.

Based on the revenue growth, considerable collaborations, strategic partnerships, equity placing, and support from the valuation conducted above, we have given a “SPECULATIVE BUY” recommendation on Sensyne Health PLC at the closing price of GBX 92.00 (as on 28 October 2021), with lower double-digit upside potential based on 5.54x EV/NTM Sales (approx.) on FY22E Sales (approx.).

*All forecasted figures and Industry Information have been taken from REFINITIV.

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

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

*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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