Excerpts from KGI Securities report

Analyst: Marc Tan

DISA

Share price: 
0.5 c

Target: 
2.0 c

♦ 1Q19 net losses declined to $2.3mn from $2.5mn in 1Q18 as growth in technology business continues.

♦ We re-iterate our BUY recommendation and maintain our fair value of $0.02 based on DCF valuation.



Growth in technology business continues. YoY, total revenue grew 110% to $99,000, driven by revenue from the sale of codes, which grew 200% to $87,000, making up 88% of total revenue.

EddieChng Disa9.18aEddie Chng, CEO of DISA, presenting at a KGI event.
NextInsight file photo.
Total cost and expenses of the period declined 3.5% to $2.2mn as net losses improved to $2.3mn from S2.45mn in 1Q18.

While net losses declined, employee benefits expenses rose 11.3% to $1.3mn due to a higher number of outstanding share options.

As highlighted in our earlier reports, we believe this is an area where prudence should be warranted, especially if operating activities remains cash flow negative.

Net cash positions improved but cash burn continues. Net cash position grew to $19.1mn but high operating expenses continued to be a drag on performance. YoY, negative net operating cash flows improved to $1.5mn from $1.7mn.

Prior to the completion of proof-of-concept trials with other US retailers, we believe operating expenses will continue to be a drag on earnings.

Additional retailers’ endorsements remain key to the company’s growth prospects. In the coming quarters, we expect suppliers to continue adding more categories and new SKUs for DISA but more importantly, we will be expecting more updates’ surrounding the endorsement of large US retailers other than Walmart as this is the primary assumption to our investment thesis.

Valuation & Action: We maintain our BUY recommendation with an unchanged TP of $0.02. Our target price implies a 9.7x 2021F EPS and is based on a DCF model assuming 14.4% WACC and terminal growth rate at 0%.

Risks: Failure to obtain the endorsement of additional US retailers, slow user adoption and a breach in DISA’s encryption could lead to reputational damages and a decline in revenue. Going concern could become a problem if DISA fails to scale and cover its burn rate.



Full report here.

You may also be interested in:


You have no rights to post comments

Counter NameLastChange
AEM Holdings2.140-0.510
Avi-Tech Electronics0.265-
Best World1.630-0.070
Broadway Ind0.087-
China Sunsine0.3900.005
ComfortDelGro1.350-0.020
Delfi Limited0.9650.010
Food Empire1.4400.010
Fortress Minerals0.2800.010
Geo Energy Res0.330-0.005
GSS Energy0.027-
Hong Leong Finance2.480-
Hongkong Land (USD)3.3800.100
InnoTek0.4500.010
ISDN Holdings0.320-0.010
ISOTeam0.035-
IX Biopharma0.0450.004
Jiutian Chemical0.025-
KSH Holdings0.250-
Leader Env0.051-0.001
Medtecs Intl0.132-0.001
Nordic Group0.335-0.005
Oxley Holdings0.091-
REX International0.1330.010
Riverstone0.675-0.050
Sinostar PEC0.140-0.002
Southern Alliance Mining0.600-
Straco Corp.0.5300.015
Sunpower Group0.2300.005
The Trendlines0.0850.002
Totm Technologies0.023-0.001
Uni-Asia Group0.840-0.010
Wilmar Intl3.320-0.020
Yangzijiang Shipbldg1.7500.010
 

We have 2101 guests and 4 members online

rss_2 NextInsight - Latest News