D4T4 Solutions PLC

D4T4 Solutions PLC (LON: D4T4) is an FTSE AIM All-Share listed provider of data solutions. Established in 1985, the Company has global sales and delivery in 26 countries.

D4T4 will pay an interim dividend of 0.85 pence per share on 10 January 2022, while the ex-dividend date was 09 December 2021.

Investment Rationale for Valuation – Sell at GBX 347.00

• Drop in Annual Recurring Revenue: D4T4 had reported a decline in the annual recurring revenue from £10.6 million as of 31 March 2021 to £10.4 million as of 30 September 2021.
• Weak Profitability: The Company’s profitability margins such as the operating margin and the net margin remained in the negative territory during H1 FY22, while the industry median remained positive.
• Target Price Breached: The Company had breached the target levels provided in the last coverage. Thus, it is a decent opportunity for the investors to book profit at current levels.
• Technical Indicators: From a technical standpoint, D4T4 is hovering around the upper Bollinger band, indicating a bearish price pattern. Furthermore, the 14-days RSI of ~65.83 approaches overbought territory and indicates a correction in the stock price.

Key Risks

• Interest Rate Hike: The recent interest rate hike of 0.15% to curb inflation may keep investors’ away from UK Equities.
• Federal Reserve Meeting: The Fed would accelerate the tapering of asset purchases to USD 30 billion per month from USD 15 billion per month. Meanwhile, the interest rate hike would likely happen thrice in 2022.

H1 FY22 Financial Highlights (for the six months ended 30 September 2021, as of 01 December 2021)

 (Source: LSE Website)

• Loss-Making Entity: The Company’s net loss remained negative £0.28 million during H1 FY22.
• Cash Position: The Company had a strong cash position of £16.1 million as of 30 September 2021.
• Dividend Growth: The interim dividend rose by around 4.9% during H1 FY22.

One Year Share Price Chart

 (Source: REFINITIV; Analysis done by Kalkine Group)

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

Conclusion

The Company slipped into interim losses during H1 FY22, while it was a profitable entity for FY21. Furthermore, the surprise rise in interest rates by the Bank of England and record Covid-19 cases in the UK may dent the growth prospects. Meanwhile, the stock price had managed to breach the target levels provided in the last coverage. Thus, it would be prudent for the clients to book profit at the current levels on this loss-making Company. The stock made a 52-week low and high of GBX 264.00 and GBX 410.00, respectively.

Based on the weak profitability, increase in interest rates, and unfavourable valuation as done using the above method, we have given a “SELL” recommendation on D4T4 Solutions PLC at the current market price of GBX 347.00 (as on 30 December 2021 at 09:25 AM GMT).

AfriTin Mining Limited

AfriTin Mining Limited (LON: ATM) is an FTSE AIM All-Share listed Guernsey-based mining company. The Company is focused on mineral development with a portfolio of vanadium, tin, coal assets and other interests in Southern Africa.

Investment Rationale for Valuation – Sell at GBX 6.00

• Weak Profitability: The Company has been consistently reporting a net loss from the last five years (FY17 to FY21).
• Omicron Variant: The spread of Omicron variant worldwide and economic slowdown in China may adversely impact the global tin price.
• Profit-Booking Opportunity: The stock price had breached the target levels provided in the last coverage, indicating a reasonable profit booking opportunity for the clients.
• Technical Indicators: From a technical standpoint, ATM is hovering around the upper Bollinger band, indicating a bearish price pattern. Furthermore, the 14-days RSI of ~76.59 approaches overbought territory and indicates a correction in the stock price.

Key Risks

• Environmental Compliance: The failure to adopt or apply ethical standards and environmental compliance may affect the reputation of ATM.
• UK GDP: The UK economy witnessed a disappointing GDP growth of around 1.1% during Q3 FY21, less than the estimates of 1.3%.

Q3 FY22 Production Update (for three months ended 30 November 2021 as of 15 December 2021)

(Source: LSE Website)

• Tin Production: The tin production rose quarter-on-quarter by around 20% to 136 tonnes for Q3 FY22.
• AISC: The All-in sustaining cost ("AISC") for the Uis operation had witnessed a significant improvement of around 22% QoQ.

One Year Share Price Chart

 (Source: REFINITIV; Analysis done by Kalkine Group)

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

Conclusion

Despite showing a tremendous jump in top-line business, ATM had reported a net loss during H1 FY22. Furthermore, the Company’s stock price had breached the target levels provided in the last coverage. Thus, it would be prudent for the clients to book profit at the current levels on this loss-making entity. The stock made a 52-week low and high of GBX 2.30 and GBX 7.40, respectively.

Based on the decent profit-booking opportunity, weak profitability and unfavourable valuation as done using the above method, we have given a “SELL” recommendation on AfriTin Mining Limited at the current market price of GBX 6.00 (as on 30 December 2021 at 08:00 AM GMT).

MyHealthChecked PLC

MyHealthChecked PLC (LON: MHC) is an FTSE AIM All-Share index listed Company offering at-home testing brands including MyHealthChecked and Mylo.

MHC will provide a further update on year-end trading in mid-January 2022.

Investment Rationale for Valuation – SELL at GBX 2.64

• Weak Liquidity Levels: The current ratio of 1.90x remained lower than the industry median of 2.09x during H1 FY21.
• Loss-Making Entity: MHC remained a loss-making entity from the last five years (FY16 to FY20).
• Profit Booking Opportunity: MHC’s stock price came very close to the target levels provided in the last coverage. Thus, it would be a decent opportunity to book profit at the current level.
• Penny Nature: The stock price may undergo sizeable correction considering the low market capitalization.
• Technical Indicator: From a technical standpoint, MHC is hovering around the upper Bollinger band, indicating a correction in the stock price.

Key Risks

• UK GDP: The UK economy witnessed a slowdown as the GDP grew quarter-on-quarter by around 1.1% during Q3 FY21, which remained merely lower-than-expected growth of around 1.30%.
• Rise in Interest Rates: The recent interest rate hike of 15 basis points announced by the Bank of England may keep investors’ away from the UK Equities.

Pre-Close FY21 Trading Update (for the twelve months ending 31 December 2021, as of 13 December 2021)

• Financial Performance: MHC had anticipated FY21 revenue to remain around £16 million and expected an adjusted EBITDA profit of at least £2.1 million.
• Cash Position: MHC anticipates business to remain cash generative at the end of FY21 and the Board expects cash balances to be at least £4.6 million (31 Dec 2020: £0.47 million).

One Year Share Price Chart

 (Source: REFINITIV; Analysis done by Kalkine Group)

Conclusion

The Company had highlighted of a lower travel volume for Q4 FY21. Moreover, MHC has a weak liquidity and history of reporting a net loss. Furthermore, the sluggish macroeconomic outlook for the UK and increase in interest rates by the Bank of England may adversely impact the UK Equities. Thus, it would be prudent for the clients to book profit at the current levels on this Company based on their risk appetite. The stock made a 52-week low and high of GBX 1.41 and GBX 7.45, respectively. 

Based on the weak liquidity, loss-making nature, and unfavourable technical indicators, we have given a “SELL” recommendation on MyHealthChecked PLC at the current market price of GBX 2.64 (as on 30 December 2021 at 11:13 AM GMT). 

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

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

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

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