Should Investors Be Threatened By These Loss-Making Companies? – IVO, SAS, BRN, SOR, DCC

  • Jul 31, 2019 AEST
  • Team Kalkine
Should Investors Be Threatened By These Loss-Making Companies? – IVO, SAS, BRN, SOR, DCC

As per the latest financial reports of the five companies, they have reported losses due to several unavoidable factors. Invigor Group reported a loss of ~$12.33 million in FY18 results. Despite the loss, the company?s platform is well placed to capitalise on growth opportunities. Sky and Space Global also continued to achieve significant milestones within the satellite communications industry, while incurring a loss of $3.14 million in 1HFY19. Brainchip Holdings reported losses with simultaneous increase in the amount of cash outflows in operating activities, reflecting continued focus on attaining business milestones and group strategies. Strategic Elements reported a loss of $1.26 million owing to funding of project developments. DigitalX witnessed a loss in 1HFY19 due to lower revenues from token advisory which was consistent with the overall market trend for crypto assets.

Now let us have a detailed look at the latest updates on the stocks, to provide a bigger picture of their respective business performance.?

Invigor Group Limited

Invigor Group Limited (ASX: IVO) is engaged in providing B2B data intelligence and solutions.

Plans to establish Wine sales platform: The company on 31 July 2019, updated the exchange that it is planning to establish a wine sales platform for the Chinese consumers. The company is looking forward to launching a WeChat-powered online community to sell and market Australian wine to Chinese domestic consumers and Chinese within Australia.

In another recent update on 30 July 2019, the company notified that several multi-national groups have chosen its Shopper Insights and Loyalty as the product of choice, to help boost their revenue.

Other Recent Developments: The company recently entered into a Joint Venture agreement with NZ?s Enring Group to scale up its WeChat Pay-powered e-commerce operations in Asia. Invigor also acquired the Sun Asia Group adding substantial revenue from the Australian-farm produce supply contracts to Asia and India. In addition, the company has an order book that has an approximate worth of $30 million. The Sun Asia Group recently entered into a sale agreement for A$25 million/year, for the supply of Australian produce to Asia. Overtime, the company has also grown its partnership with Winning Group and WeChat.

Financial Highlights: During the financial year ended 31 December 2018, the company generated revenue amounting to ~$2.32 million, up 74% on prior corresponding year revenue of ~$0.72 million. Loss for the period amounted to ~$12.33 million, as compared to a loss of ~$13.15 million in prior corresponding year.

2018 Income Statement (Source: Company Reports)

The stock of the company closed the market session, at a price of A$0.003, reporting no change on the previous trading price (as on 31 July 2019). The stock has a market capitalisation of A$8.57 million.

Sky and Space Global Limited

Sky and Space Global Ltd (ASX: SAS) is a nano-satellite, space technology company.

Highlights of June Quarter: On 31 July 2019, the company published June quarter report, wherein it was mentioned that during the period ended 30 June 2019, SAS reported continued growth of post launch distribution networks and revenue channels owing to signing of six additional reseller agreements. In addition, the company secured eight MOUs that broadened its launch capabilities and added to commercial opportunities. As at 30 June 2019, the company had a cash balance of ~A$2 million.

Reseller Agreements: Apart from the reseller agreements with Streamcode, Lotivity, Penteon and T-Systems South Africa, the company signed two new reseller agreements during the quarter with Advanced TMS and SGV Satlink Corporation. Under the agreements, Advance TMS and SGV Satlink Corporation would resell, market and distribute SAS services and products.

Loan Agreement: The company recently, in May this year notified that it has executed a convertible loan agreement for an amount of US$1.1 million, with Telefox Ltd. The funds will be utilised for providing working capital to support the company achieve its goals.

Agreement with GomSpace: The company also inked a deal with GomSpace to deliver its newly designed 6U nanosatellites. The agreement would involve manufacturing of an additional fleet of nanosatellites by Gomspace, to support a Global Coverage constellation. The agreement would enable the company to extend its services to new markets including Russia, China, South Africa, Australia, Canada and Argentina. In addition, the agreement is expected to support higher revenue generation with the added coverage capability.

1HFY19 Highlights: During the half-year period ended 31 December 2018, the company reported an income of $19,333, as compared to pcp income of $48,918. Loss for the period amounted to ~$3.14 million against 1HFY18 loss of ~$4.92 million.

1HFY19 Income Statement (Source: Company?s Report)

On 19 July 2019, SAS had requested for the voluntary suspension over its shares on the ASX, while it continues to move ahead with the conclusion of financial arrangements along with its hunt for the two non-executive Directors. The company anticipates the voluntary suspension to come to an end, no later than the beginning of the trading session on 15 August this year.

The stock of the company, last traded on 3 April 2019, at a market price of A$0.028.

Brainchip Holdings Limited

Brainchip Holdings Limited (ASX: BRN) is engaged in the development of software and hardware accelerated solutions for advance artificial intelligence and machine learning applications.

June Quarter Update: On 30 July 2019, the company released an update for the quarter ending 30 June 2019. It mentioned that during the quarter, it had reported total cash outflows of US$2.1 million. As on 22 July 2019, the company had a cash balance of US$12.5 million. In addition, the company provided a forecast of US$2.2 million for recurring operating expenses pertaining to September 2019 quarter. Total cash receipts during the quarter amounted to US$73,000.

Key Developments: In the month of June this year, the company signed a definitive agreement with Socionext Americas for the collective development of the Akida NSoC. The company also signed a convertible securities agreement with CST Capital Pty Ltd as trustee of the CST Investments Fund. Under the agreement, the company received an advance of US$2.85 million. The company also raised approximately A$10.7 million under an Entitlement offer at a price of US$0.06 per share.

During the period ended 31 December 2018, the company reported revenue amounting to ~US$0.95 million, up 252% on prior corresponding period revenue of ~US$0.27 million. During the period, the company incurred a net loss after income tax of ~US$16.52 million, as compared to a net loss of ~US$13.77 million in 2017. The company witnessed a substantial rise in research & development expenses owing to increase in the number of technical staffs employed, costs related to new projects & increase in amortisation expense of intangible assets. R&D expenses during the year amounted to ~$3.97 million, up 80% on pcp expenses of ~$1.76 million.

Profit & Loss Statement (Source: Company?s Report)

The stock of the company, last traded at a market price of $0.053, down 8.621% on 31 July 2019.

Strategic Elements Limited

Strategic Elements Limited (ASX: SOR) is a registered Pool Development Fund.

SOR launched Stealth Technologies Pty Ltd: On 31 July 2019, the company updated that it has launched an artificial intelligence and robotics company, Stealth Technologies Pty Ltd. The new entity has distinct capabilities in custom building of automated robotic machines, integration of computer vision capabilities and creation of artificial intelligence through machine learning and software development.

The company also updated on significant technical improvements in the Nanocube Memory Ink technology being developed in collaboration with the University of New South Wales

Statement of Cash flows: On 31 July 2019, the company released cash flows statement for the period ending on 30 June 2019. The net cash used n the operating activities stood at A$543k, while the net cash used in investing activities was recorded at A$2k. The cash and cash equivalents at the end of the quarter stood at A$2,390k.

Drilling Agreement: On 3 July 2019, the company reported that it has executed an agreement with the Western Australian Government for a funding of $150,000, for the purpose of drilling at the Behemoth Project in the remote Gibson desert. The project is said to have large gravity and IP geophysical anomalies & has a potential for nickel, copper, gold and rare earths.

During the half- year ended 31 December 2018, the company incurred a loss amounting to ~$1.26 million, as compared to a loss of ~$0.94 million in the prior corresponding year. Loss during the period was attributable to funding of project developments conducted through the group?s subsidiaries and the costs associated with operating an Australian company listed on ASX.

Consolidated Income Statement (Source: Company?s Report)

The stock of the company, closed at a market price of A$0.055, up 25% from its prior close on 31 July 2019. The stock is priced close to its 52 weeks high level of A$0.060 and has a market capitalisation of A$10.88 million.

DigitalX Limited

DigitalX Limited (ASX: DCC) is engaged in provision of advisory services including ICO/STO advisory, Blockchain consulting, funds under management and media.

June Quarter Update: On 31 July 2019, the company mentioned that during the quarter ended 30 June 2019, it had witnessed a strong cash and digital asset position of over US$10.5 million at the end of the quarter. The strong cash position was attributable to a capital raise of A$3.75 million. At the end of the quarter, the company had cash, listed digital assets and liquid unlisted investments of over US$10.5 million.

Listed Digital Asset Holdings and DigitalX Investment Fund Units (Source: Company?s Report)

Business Updates: The company continued its advisory services during the quarter and announced that it was advising Bullion Asset Management Pte Ltd on the launch of its gold backed stablecoin, xbullion. The company did not have any new advisory engagement during the quarter. The company?s asset management division is also in the process of completing preparations for the launch of new products. Also, during the period ended 31 December 2018, the company had incurred a loss of US$4.18 million.

Board Changes: Post June quarter this year, the company announced changes to the Board including resignation of Mr Stephen Roberts and Mr Sam Lee. The company also announced the re-appointment of Mr Toby Hicks as the non-executive chairman.

Outlook: The company is extremely positive about the future for commercialising blockchain technologies and developing a strong growth strategy. With a significantly strengthened balance sheet and appointment of an experienced legal and corporate governance, the company seems to have a stable foundation for executing its growth strategy.

The stock of the company, last traded at a market price of A$0.040, up by 2.564 percent from the prior close (as on 31 July 2019). The company a market capitalisation of A$23.25 million, with ~596.22 million shares outstanding.


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