Apex Technology Acquisition Corporation

Apex Technology Acquisition Corporation (NASDAQ: APXT) identifies a target company for a Business Combination within the software and internet technology industries. The group was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase etc.

Key Updates:

• Collaboration with AvePoint: On November 23, 2020, APXT announced that it has entered into a definitive business combination agreement with AvePoint, Inc., a leading global Microsoft strategic cloud partner, which offers solutions and services required for the digital transformation journey in the Microsoft cloud. Upon closing the transaction, it is expected that the combined company will be named AvePoint and will remain a publicly traded company listed on the Nasdaq Stock Market under a new ticker symbol, “AVPT”.
• Improved ARR to support topline: AvePoint, Inc. reported an impressive growth in the Average Recurring Revenue (ARR) which has further supported the company’s topline in the recent past, which is a key positive. During FY19 to FY22E, the group expects its top line to grow at ~30% CAGR, supported by strong momentum in recurring revenue. Moreover, AvePoint expects to generate approximately USD 148 million of total revenue for FY20, reflecting an increase of ~26% over FY19.                         

                               
Source: Company Presentation

• New Product Launch: Recently, AvePoint, Inc. launched another a SaaS solution which would provide sensitivity-based security insights and automated policy enforcement to prevent risky oversharing in Microsoft 365. The above product is expected to provide security for the consumers using Microsoft cloud investments and is well-placed to take advantage of the upcoming demand coming from the segment.
• Outlook: Due to the growing customer-base within the cloud services, the long term business prospects of the group remains positive. The group has total users of ~7 million, representing ~3% of Microsoft 365 users. Going forward, the group expects the user base to increase to ~50 million, which is a key positive.

Source: Company Presentations

Key Risks: The combined entity is exposed to certain risks, like the entry of new players within the cloud migration segment, which might lead to price competition, loss of market share etc.

Stock Recommendation: AvePoint, Inc. has the upper hand over the peers, as it utilizes the full benefits of Microsoft Cloud, which gives enterprise scalability, enhances collaboration and significant expertise in compliance management, which is a key positive and would attract several mid-market clients.  Moreover, due to the impact of COVID-19, Microsoft’s cloud solutions, including Microsoft 365 and Microsoft Teams, have reported accelerated demand due to the growing work from home culture and increasing demand for data security. The stock of APXT gained ~52% and ~70% in the last six months and nine months, respectively, due to the collaboration with AvePoint, Inc. Notably, the stock closed above the long-term support levels of 100-days, 150-days and 200-days simple moving averages (SMA), indicating a bullish trend. Considering the current price levels, upcoming business prospects, product launch etc., we recommend a ‘Speculative Buy’ rating on the stock of APXT at the closing price of USD 16.55 on January 15, 2021.

APXT Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Pyxis Tankers Inc.

Pyxis Tankers Inc. (NASDAQ: PXS) is a logistics company with a fleet of five tankers and is engaged in the seaborne transportation of refined petroleum products and other bulk liquids. The company is focused on growing its fleet of medium-range product tankers, which provide operational flexibility and provides  “eco” features and modifications.

Key Highlights

• Reputable Customer Base & Diversified Chartering Strategy: The group has Long-standing relationships with first-class customers worldwide. As of Jan. 15th, 76% of MR available days in Q1 2021 booked at an average rate USD 3.7K/day. The company is well-positioned to capitalize when charter rates improve- hopefully starting in 2H 2021.

• Competitive Cost Structure & Moderate Capitalization: The company’s disciplined, substantially fixed cost structure with scalable operating platform creates an opportunity for greater earnings power when rates improve. The company’s daily total operating cost is competitive to the peer group. The company has moderate capitalization with long-lived debt with a balanced interest rate position - no maturities scheduled until Q1 2023.

• Positive Long-term Industry Fundamentals: Covid-19 continues to create global uncertainty, but the distribution of vaccines underway, which would ease out the uncertainties. After re-balancing of refined petroleum product inventories, global economic recovery should result in demand outpacing net vessel supply growth. Positive industry outlook creates an attractive entry point.

Q3FY20 Financial Highlights:

• PXS announced its quarterly results, wherein the company posted revenue of USD 5.075 million, significantly lower than USD 7.313 million in the previous corresponding period (pcp). The decline was primarily due to a fewer available day of operations. Moreover, the sale of the company’s oldest MR in the Q1FY20 further contributed to the decline.
• The company reported an operating loss of USD 0.605 million, as compared to an operating income of USD 0.659 million in Q3FY19. The quarter was marked by lower voyage related costs and commissions (USD 0.704 million versus USD 1.133 million in pcp), a decline in vessel operating expenses (USD 2.796 million, versus USD 3.063 million in pcp) and a decrease in management fees, related parties (USD 0.152 million, versus USD 0.183 million in pcp).
• The company reported a lower bottom line and posted a net loss of USD 1.873 million, higher than USD 0.812 million recorded in Q3FY19.
• The group reported cash and cash equivalent of USD 0.883 million, while total assets were recorded at USD 91.953 million.

Q3FY20 Financial Highlights (Source: Company Reports)

Risks: The short-term outlook of the company remains extremely challenging due to an uneven economic recovery worldwide due to the ongoing pandemic. Further breakout of COVID-19 pandemic would hamper the demand of the group’s offerings.

Valuation Methodology (Illustrative): EV to Sales

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months 

Stock Recommendation: Despite a slowdown in the operations, the stock of PXS appreciated ~15% and ~17% in the last one month and six months, respectively. However, the long-term outlook and the business prospects for the product tanker sector remains bright backed by the expectation of revival in the global GDP growth coupled with rising demand for seaborne transportation of a broad range of petroleum products, after the rollout of the COVID 19 vaccine. The company is focusing on the acquisition of IMO II and III MR2 class, which would provide eco-efficient product tankers of 10 years of age or less built-in Tier 1 Asian shipyard. Moreover, the group would focus on catering the evolving customer needs and would likely to maintain stable margins financial discipline in the coming days. As the economy recovers from the current turmoil, we expect higher usage of logistics to cater to the higher demand for crude oil. We have valued the stock using the EV to Sales based relative valuation approach and arrived at a target price, which suggests a high double-digit upside side potential (in % terms). For the said purpose, we have considered Top Ships Inc, Capital Product Partners LP and Ardmore Shipping Corp etc., as a peer group. Hence, considering the aforesaid facts, we would recommend ‘Speculative Buy’ rating on the stock at the current market price of USD 0.95 on January 15, 2021.

PXS Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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