Connexion Telematics Turns Debt Free; Stock Breaking Out of Consolidation?

  • May 31, 2019 AEST
  • Team Kalkine
Connexion Telematics Turns Debt Free; Stock Breaking Out of Consolidation?

Connexion Telematics Ltd (ASX: CXZ) is an ASX listed IOT firm which is focusing on revolutionising smart car technology for the automotive industry. It has also bagged commercial agreements with leading automotive players in the industry to roll out its proprietary smart car technologies.

On 31st May 2019, the company announced that it has made the final repayment on the last remaining debt facility.

The company had previously laid out its plans to extinguish all the borrowings by 30 June 2019 and informed the shareholders about the same in its quarterly activities update. Finally, the company has paid the sole outstanding amount of $150,000 and post this the company is now debt free.

Key Personnel statement

Mr Mark Caruso, Chairman of the company, stated that the board had worked hard over the past few years to extinguish its debt and make the company financially well positioned to deliver and service its OnTrac product.

March 2019 quarterly update

On 30th April 2019, the company announced its March 2019 quarterly update. The subscription revenue was stated at $1.3 million and is expected to continue at $550k- $600k per month with approx. 30% of gross margin. The flagship product, OnTRAC’s system implementation experienced some additional activity and costs during the quarter.

The company’s Commercial Link saw growth in subscription base by 10% to 4,803 during the quarter.

On the cash flow front, the company made a total of A$101,225 from operating activities and investing activities led to the cash outflow of A$3.64 million. It also used A$150,000 towards financing activities.

At the end of the reporting period (31 March 2019), the company had a total of A$190,501 as cash in the balance sheet.

Technical Outlook

From December 2018, the stock had made a quick and strong rally of 175% from the closing price of A$0.008 for the week ended 3rd December 2018 to the high of A$0.022 for the week ended 14th January 2019.

However, soon this short rally lost steam and the stock price plummeted, and in a few weeks, the stock price dropped to the same levels from where it had previously started the rally. The weekly chart witnessed the formation of a bearish engulfing candlestick pattern.

The bearish engulfing candlestick pattern as the name suggests is a bearish reversal pattern and is expected to reverse the prior uptrend.

Weekly Price Chart of Connexion (Source: Thomson Reuters)

It is a two-candlestick pattern in which the first candle closes in green, depicting an uptrend and the second candle closes in red, depicting a downtrend. Another condition for the second candle is that it must open above or at the same price as the closing price of the previous candle and must close below the opening price of the previous candle. This kind of price action makes the second candle engulf the first one, hence completing the pattern.

In the case of Connexion, the pattern got completed, and the reversal was initiated. Most of the damage had been done by the bullish engulfing candle and for the past many weeks the stock has been consolidating, today the stock surged by 30% post the news, and it is trying to break out of the consolidation.

Stock Performance

The company has a market capitalisation of A$8.45 million, and the stock had touched a 52-week high and low of A$0.022 and A$0.003 respectively. The stock closed the day’s trade at A$0.013 on the last up by 30% (as on 31st May 2019). The last one-year return of the stock is 150%, and the YTD return stands at negative 16.6%.


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