Penny Stocks are those stocks which trade at a market price lower than $1 and has a lower market capitalization of less than $300 million.
Penny stocks are speculative in nature. The penny stocks are associated with a high degree of risk characterized by high level of price variation. These stocks volatile due to their low liquidity, and wide bid-ask spread move up or down in value at a much faster rate than the other category of stocks.
An economy comprises of three sectors: primary, secondary and tertiary sectors. Services sector are also called tertiary sector. In Australia majority of the business are in into services sector. As per Australian government data release, the services sector makes up over 70% of the country’s GDP and employing 4 out of 5 Australians. Let us have a look at two companies that cater to the services industry under the basket of penny stock category.
HomeStay Care Limited
About the company:
HomeStay Care Limited (ASX: HSC) belongs to the information technology sector, and its HomeStay Intelligent Home platform allows the elderly to live in their own home for a longer duration. The platform uses data analysis along with human monitoring for determining residents' habits as well as spot variances in their patterns. These early insights help the care providers as well as families in making a better decision and help them to reduce pointless care and in enabling welfare checks in a better and responsive manner.
On 20 June 2019, the company announced that it has entered into a partnership with St John of God Accord on a new start-of-the-art house that is designed for people with intellectual disability and complex needs.
St John of God Health Care is one of Australia’s largest Catholic providers of healthcare services and was established in Western Australia in 1895 and is a non-profit private healthcare group and a ministry of the Catholic Church. St John of God Accord is a segment of St John of God Health Care offers accommodation support across thirty-one houses and short stay at two respite houses. The organization employs close to 14,000 staff across the globe.
Under this partnership, HomeStay is the lead technology partner for St John of God Accord. The Caring Intelligent Home system of the company would be the critical component in new Mavis Avenue house of St John of God, which is set to open this week in Brighton, Victoria. The residents would be moving here late this month. The Caring Intelligent Home system of the company comprises of an emergency hub, movement and bedroom and bathroom door remote sensors. The system also has a Companion app, which helps in creating more quality one-to-one time between residents and the carer. Other than this, the system has a MyDay app which is designed for promoting independence as well as reduce anxiety.
Further, the house meets the ‘High Physical Support’ requirements as per Specialist Disability Accommodation design category as well as Liveable Housing Australia design rules for the accommodation of individuals with complex needs.
The partnership of the company with St John of God Accord would align its strategic focus on the disability sector. Commenting on the partnership, CEO of St John of God Accord, Lisa Evans stated that they are committing an additional $11.6 million to developing an additional 10 houses for people with intellectual disability in the near future.
The shares of HSC have given a return of 11.11% in the previous five days. The shares of HSC last traded on 20 June 2019 at A$0.020. Today as at AEST: 2:36 PM, HSC shares have not traded on ASX. HSC holds a market capitalization of A$13.9 million and has approximately 695 million outstanding shares.
Silver Chef Limited
About the company: Silver Chef Limited (ASX: SIV) is a long-term rental company catering to the needs of various players from nascent companies to restaurants and hotels. The company was established in the year 1986 in order to aid the businesses fund the equipment needs via Rent-Try-Buy® Solution. Thus, helping the businesses to preserve their cash and expand itself. Silver Chef has addressed over twenty-five thousand customers till date.
In continuation to the market announcement made by the company on 17 June 2019, Silver Chef Limited Extended Exclusivity Agreement with Next Capital Pty Ltd (Next) to 19 June 2019 related to proposed take private option by way of a scheme of arrangement.
The extension would provide the financiers of Next Capital Pty Ltd as well as Silver Chef along with the mezzanine financier of Next with ample time to agree an acceptable basis on which the parties can move forward with a recapitalization of the Company after the implementation of a scheme of arrangement. Agreeing terms with the multiple financiers is an essential condition for Next to make a fully financed offer for the Company.
However, this has not proved possible, and the company has now been advised by the financiers and Next that the negotiations between them will continue. In order to finalize the negotiations, the company had agreed to extend the exclusivity period to 5 pm, 30 June 2019.
On 30 April 2019, the company highlighted that Next was finalizing the due diligence and was in discussion with the existing financers of the company with respect to the provision of ongoing financing for some time so that Next is able to complete Silver Chef’s acquisition via a scheme of arrangement.
The company had agreed to the amended Exclusivity Agreement with Next for the extension of the exclusivity period for finalizing its funds as well as obtain necessary approvals.
Moreover, the company got waivers from its existing financiers till 31/05/2019 regarding the breach of its debt covenants as at 30 June 2018. However, waivers were conditional on a successful raising of $45 million to repay Syndicated Debt Facility of the company. The company also had to maintain a net debt to net rental asset ratio, as per the Syndicated Debt Facility, not more than 65% by 31 May 2019.
On 21 June 2019, the shares of SIV were trading at A$0.345 (AEST: 3:25 PM) down by 2.817% as compared to its previous closing price. SIV holds a market capitalization of A$13.94 million and has approximately 39.27 million outstanding shares.
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