One Beaten Down Small-Cap Stock – ABV

One Beaten Down Small-Cap Stock – ABV

Advanced Braking Technology Limited (ASX: ABV) is an Australian automobile company engaged in the business of manufacturing its patented sealed braking system worldwide. Advanced Braking Technology produces brakes for the sectors, where there is a requirement of high safety as well as environmental responsibility.

On the financial front, revenue from the trading activities stood at $3.275 million in the first half of FY2019, a decrease of 1% compared to the corresponding period of FY2018. The company’s gross margin decreased by 5.0% and stood at 39.0% against the corresponding period of FY2018. The expenses of the company for the first half of FY2019 was $2.872 million, which fueled the loss for the period of $1.199 million.

David Slack, Director of the company made $500k loan facility available to the company during December 2018. The loan is repayable by 30 June 2019 with interest of 15% payable per annum. The loan will be converted into convertible notes, however, subject to the approval of the shareholders on the same terms as the convertible notes were extended during the quarter.

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The company’s margin remained under pressure over the previous period coupled with the negative profitability ratios. The company remained debt-heavy with its debt-equity above the industry median consistently, however, the cash and cash equivalents improved over the previous period.

Inventories amounting to ~$137,000 related to a historical R&D project for brakes used within the waste industry will be written-off by the company since the company will have a little chance of utilizing the remaining inventory of the product within the next 12 months.

During the period, there were several trials on Terra Dura brakes by a broad range of domestic and global customers, concluded successfully. However, polymer housing design experienced some difficulties in extreme mining conditions. In November 2018, the organization initiated an upgradation in the structure that will support for better execution in every single extreme condition, including extremely harsh mining applications.

Going forward, several initiatives can be announced by the company. These will further add to the product applications of the company and target global automotive braking applications. The company has a strong network of global distribution, which will continue growing, coupled with the addition of complementary product offerings. The strong network was driven by the success in sales growth in Failsafe and Failsafe Emergency brakes. Besides this, the group has taken an initiative to identify the strategic partners and opportunities that will enhance the scale of the business.

On the price-performance front, the stock of Advanced Braking Technology Limited last traded at a price of $0.013 with a market capitalisation of $3.86 million as on 5 April 2019. ABV stock has generated a YTD return of -27.78%. ABV had significant price volatility over the past few months with negative returns on the stock of 48%, 31.58% and 13.33% over the past six months, three months and one-month period, respectively. Its 52-week high price stands at $0.046 with an average trading volume of ~310,594.


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