Akoustis Technologies

Akoustis Technologies (NASDAQ: AKTS) operates in the fiber optics and telecommunication sector and develops radio frequency (RF) filters of Mobile Wireless devices.

Investment Rationale – SPECULATIVE BUY at USD 10.22

• Stronger Liquidity: As of 31 March 2021, AKTS reported US$90.4 million of cash and cash equivalents, representing an increase of US$46.0 million from the position reported on 30 June 2020. Therefore, the increased financial strength shall drive new capacity to support equipment uptime.
• It is encouraged by the growing activity in WiFi, Infrastructure and 5G Mobile market, while it has plans to boost capacity by the calendar year 2021 to nearly 500 Million Filters Per Year.
• From a technical standpoint, the MACD line has crossed over the signal line, which is supporting the bullish trend. Meanwhile, 14-day RSI (56.49) indicates a neutral signal with indecisive action.
• In the past six months. AKTS’ stock price has outperformed the NASDAQ Composite index by delivering approximately 21.09% return.

Risk Assessments

• AKTS needs to control its RF product associated increased cost of sales and non-recurring engineering cost to be profitable.
• The trading volume in the stock is relatively low, which can further impact the liquidity.
• Most of its revenue depends on a few large customers.

Recent News

Contract: On 17 May 2021, AKTS announced its patented XBAW® filters with new WiFi 6E reference design had secured a new contract from a leading system-on-chip (SoC) maker.

Financial Highlights for the quarterly period ended 31 March 2021 (as on 3 May 2021)

 (Source: Company Website)

• Akoustis reported a 92% year-on-year growth in revenue during Q3 FY21 as XBAW Filter Shipments rose over 100% sequentially.
• The net loss got worsened due to gross loss driven by the significantly increased cost of sales.
• However, the Group is in a decent position to capitalize on BAW filter markets and deliver substantial earnings growth in future.

Share Price Chart    

 (Analysis done by Kalkine Group)

Valuation Methodology: EV/Sales Approach (FY21) (Illustrative) 

Conclusion

AKTS delivered tremendous growth in Q3 FY21 revenue with substantially increased non-recurring engineering services. Moreover, the Company has zero debt on the balance sheet to navigate through the prevailing challenges. It has an XBAW® patent portfolio and scaling up the capacity to meet the market demand. The stock made a 52 week High and Low of USD 19.15 and USD 7.25, respectively. On the technical chart, the next important support level is at USD 8.38.

Based on the decent revenue, promising market dynamics, growing customer activity, enhanced liquidity, boosted capacity with support from favourable valuation conducted above, we have given a "SPECULATIVE BUY" stance on Akoustis Technologies at the closing market price of USD 10.22 (as of 9 June 2021), with a lower double-digit upside potential based 79.42x EV/Sales (approx.) on FY21E Sales (approx.).

Amryt Pharma Holdings Ltd

Amryt Pharma Holdings Ltd (NASDAQ: AMYT) is a Pharmaceutical Company that focuses on the treatment of rare and orphan diseases.

Investment Highlights – SPECULATIVE BUY at USD 11.39

• FY21 revenue guidance has been raised to US$205 - US$210 million.
• Overall, it has a revenue-generating commercial portfolio, financial flexibility to pursue anticipated development plans, and global commercial infrastructure to support the long-term growth plans.
• The acquisition of Chiasma Inc shall make the Company a global leader in rare and orphan diseases.
• From a technical standpoint, the MACD line has crossed over the signal line, supporting the bullish trend. Meanwhile, 14-day RSI (40.26) hovering near the oversold zone.
• In terms of 12-month forward valuation multiples, EV/Sales and Price/Earnings metrics are undervalued against the Health Care sector.

Key Risks

• The growth trajectory depends on the pipeline of product candidates, which could fail to be marketable products.
• There is a liquidity risk as the Company has been incurring losses since its inception.
• Also, the adverse US federal income tax regimes and fluctuating exchange rates can affect the financial condition further.

Recent News

FDA Update: On 7 June 2021, the Food and Drug Administration confirmed that Oleogel-S10 (AMYT’s New Drug Application for the treatment of Epidermolysis Bullosa) would not require an Advisory Committee meeting. 

Q1 FY21 Financial Highlights (for three months ended 31 March 2021, as of 5 May 2021)

(Source: Company website)

• During Q1 FY21, there was an 8.7% growth in revenue against Q1 FY20, and therefore, reported a fifth consecutive quarter of positive EBITDA.
• EBITDA soared 115% in Q1 FY21 against the same period the previous year.
• The Company also experienced significant commercial and regulatory success during the first quarter.
• As of 31 March 2021, the cash balance stood at US$118.6 million (31 December 2020: US$118.8 million)

Share Price Chart

   (Analysis done by Kalkine Group)

Valuation Methodology: EV/Sales Approach (FY21) (Illustrative)

Conclusion

Britain’s Amryt Pharma has boosted its liquidity profile with the NASDAQ listing. Moreover, it has increased the FY21 revenue guidance following the remarkable growth in Q1 FY21 revenue and EBITDA. It has also expanded the market share and improved cash generation to capitalize on the market opportunities.  Moreover, the proposed acquisition of Chiasma is likely to bolster the global commercial and operational footprint to execute its growth plans. The stock made a 52-week High and Low of USD 15.50 and USD 10.06, respectively. On the technical chart, the next important support level is at USD 9.34.

Based on strong trading momentum, regulatory and operational success, improved revenue guidance, we have given a "SPECULATIVE BUY" stance on Amryt Pharma Holdings Ltd at the closing market price of USD 11.39 (as of 9 June 2021), with a lower double-digit upside potential based 2.42x EV/Sales (approx.) on FY21E Sales (approx.).

Limelight Networks Inc

Limelight Networks Inc (NASDAQ: LLNW) provides content delivery network to strengthen download speeds, streaming quality, and advertising capabilities.

Investment Rationale – SPECULATIVE BUY at USD 3.22

• As anticipated by the management, Q1 FY21 was challenging; however, the Company has operational improvement to accelerate growth and improve profitability.
• The Company is focused in high-growth content areas with large addressable market, such as gaming, on-demand and live-video, cyber security, web content, among others.
• From a technical standpoint, the MACD line has crossed over the signal line, which is supporting the bullish trend. Meanwhile, 14-day RSI (52.40) indicates a neutral signal with indecisive action.
• In the past month. LLNW’s stock price has outperformed the NASDAQ Composite index by delivering approximately 6.27% return.

Risk Assessments

• It is a lossmaking entity operating in a competitive market space. Moreover, the widened operating losses can limit the business expansion.
• Volatility in interest rates and foreign exchange can impact its debt and investment portfolio.

Financial Highlights for the quarterly period ended 31 March 2021 (as on 29 April 2021)

 (Source: Company Website)

• During Q1 FY21, Limelight made significant operational improvements and organizational changes to accelerate revenue growth and profitability.
• The Company has appointed Bob Lyons as the new Chief Executive Officer.
• During the first quarter, revenue slightly declined by 10%, while the Company continued to report EBITDA loss.
• The Company also reduced the workforce by 16% to deliver annualised savings.

Share Price Chart    

 (Analysis done by Kalkine Group)

Valuation Methodology: EV/Sales Approach (FY21) (Illustrative)

Conclusion

Limelight has implemented a new operating and organizational model to streamline commercial motions. Although the first quarter was challenging, the Company has a three-pillar strategy to improve execution, accelerate growth and be profitable. Moreover, the Company is working towards addressing the unmet market needs and scale edge platform and transform the Company. The stock made a 52 week High and Low of USD 8.19 and USD 2.76, respectively. On the technical chart, the next important support level is at USD 2.64.

Based on the supporting long-term sector fundamentals, organizational and operational accomplishments, with support from valuation conducted above, we have given a “SPECULATIVE BUY” stance on Limelight Networks Inc at the closing price of USD 3.22 (as on 9 June 2021), with a lower double-digit upside potential based 2.33x EV/Sales (approx.) on FY21E Sales (approx.). 

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

*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).