Here’s a promising group of four stocks under 40 cents, showing the diversity of the microcap sector. These are small stocks, and none of them are showing a profit, let alone a dividend; but they are ticking a lot of boxes in their respective fields.
1. Harvest Technology Group (HTG, 39 cents)
Market capitalisation: $206 million
12-month total return: 32.2%
3-year total return: 157.2% a year
FY21 Yield: no dividend paid
Analysts’ consensus target price: n/a
Perth-based Harvest Technology Group is quietly building a strong position in the multi-billion-dollar global satellite communications sector, through its proprietary technology that allows real-time, secure, encrypted transfer of high-definition video, audio and data anywhere in the world. Its Harvest Infinity product range (hardware and Software-as-a-Service [SaaS]) allows users to encrypt video, audio and data at military-grade security and send it from point to point over any medium, including satellite, 4G, 5G, broadband and internet, fibre and cellular, to anywhere in the world, using ultra-low-bandwidth.
This technology is one of the few solutions available that allow customers with remote operations and assets to have secure high-quality, real-time voice, video and data transfers from remote locations. The company is currently testing a software solution that will enable this data transmission technology to be used over any medium, including 4G, 5G, broadband and internet.
The Harvest Infinity product range incorporates four proprietary remote technology solutions:
- Infinity Nodestream: allows for secure, low-bandwidth, distributed multiple video feeds to be distributed point-to-point from anywhere in the world via satellite.
- Infinity Wearwolf: A wearable device for delivering real-time live content from personnel working in remote locations, to enable simultaneous review and decision making worldwide from the office or the home.
- Infinity AVR2: Designed to deliver real-time live content over low-quality satellite networks point-to-cloud, to enable simultaneous review and decision-making worldwide.
- Infinity Remote Inspection System (RIS): the RIS allows for remote sites to be inspected and operated from anywhere in the world, by offering live streaming of multiple channels of video, audio and other data. Combined with Harvest’s Remteq software, the remote-control system can use drones to remotely conduct inspections on land, and unmanned maritime vehicles (UMV) to do so on the surface of the sea or underwater.
The company’s subsidiary, Opsivity provides SaaS field support solutions using AI and Augmented Reality (AR) to harness knowledge and share operational expertise across field teams to rapidly solve technical issues in real-time to increase productivity for field technicians. Harvest also has a collaboration with Netherlands-based Fugro, to provide solutions to the offshore energy and renewables sector, for remote subsea inspections.
Last month, the company announced a collaboration with Innovation Central Perth, which is led by US giant Cisco Systems Inc., to conduct a proof-of-concept study to integrate Harvest’s unique bandwidth technology into Cisco’s WebEx platform – which is estimated to have more than 300 users globally.
This month, Harvest announced that it had entered into a worldwide reseller agreement with global satellite provider Speedcast Australia Pty Ltd, which delivers critical communications to the energy, mining, maritime, media and government and enterprise sectors through its Unified Global Network Platform.
Harvest Technology is not yet profitable, but its technology is world-class and the company has huge potential markets across a wide range of industries, including mining, oil and gas, utilities, defence, aviation, shipping, emergency services, gaming and media streaming companies.
2. Alcidion Group (ALC, 35 cents)
Market capitalisation: $367 million
12-month total return: 169.2%
3-year total return: 102.7% a year
FY21 Yield: no dividend paid
Analysts’ consensus target price: 45 cents (Thomson Reuters)
Listed in June 2011, the Melbourne-based Alcidion is an emerging player in the field of healthcare informatics, which involves digital processing of data and use of AI-driven clinical decision support tools to manage healthcare case flow, workloads and patient flow, deliver real-time analytics and insights, allow better-informed and timelier clinical decisions, and improve patient safety, and to help hospitals and healthcare systems work more efficiently.
Alcidion’s health informatics technology products — Patientrack, Miya Precision, Smartpage and ExtraMed — and its specialist IT services are being used by 336 hospitals across the United Kingdom, Australia and New Zealand, with 73 healthcare organisations being Alcidion clients. Alcidion says 1.3 billion observations have been recorded on its systems, at point-of-care, with 25 million alerts generated to highlight patient deterioration.
Sales growth in Australia/New Zealand and the UK has been impressive, with the main focus now on the rate of new contract additions in the UK. From providing 16% of revenue just two years ago, the UK business’ contribution in FY21 was 44% of revenue. The company’s strategy is focused on capturing a bigger share of the UK market.
Long-term contracts provide a predictable largely recurring revenue base. In FY21 Alcidion reported a 39% jump in overall revenue to a record figure of $25.9 million, about $16.3 million of which came from recurring sources; a 56% increase on last year’s recurring revenue figure. Gross profit surged 43%, from $15.9 million to $22.8 million, with the gross profit margin increasing from 85.9% to 88.3%.
The company made a $500,000 loss at the EBITDA (earnings before interest, tax, depreciation and amortisation) level, but that was a $3.5 million improvement. On an underlying basis, Alcidion says it made a $500,000 profit at EBITDA level, a $4.4 million turnaround. Operating cash flow surged into the positive, to $1.5 million, a $3.6 million change. It also has a strong balance sheet with $25.0M cash and no debt. Alcidion has started FY22 with a strong base of recurring revenue, and as elective surgeries return with the surge in COVID-19 vaccination levels, Alcidion could benefit from increased demand for management software. Although not yet profitable at a net-profit level, this is a stock doing a lot of things right.
3. Geopacific Resources (GPR, 34 cents)
Market capitalisation: $176 million
12-month total return: –43.2%
3-year total return: –17.7% a year
FY21 Yield: no dividend paid
Analysts’ consensus target price: n/a
Geopacific Resources is a mineral development and exploration company working on copper and gold deposits in Papua New Guinea, Cambodia and Fiji. Its flagship project is its wholly-owned Woodlark Gold Project, located on Woodlark Island in the Milne Bay Province of Papua New Guinea. Woodlark has a resource of 47 million tonnes at a grade of 1.04 grams per tonne (g/t), giving 1.57 million ounces of gold, and a reserve of 28.9 million tonnes at 1.12 g/t, giving 1.04 million ounces of gold.
Geopacific is back drilling at Woodlark for the first time since 2018, defining near-pit potential as well as defining other targets in its mining licence area. The ability to add further ore reserves would significantly enhance the numbers behind what is already a high-returning gold project. At the moment, the mine life is estimated at 13 years, at an estimated internal rate of return (IRR) of 34% a year. Canadian institution Sprott Inc., a global leader in precious metal investments, has won the role as preferred financier: Woodlark is fully permitted and fully funded through to production, to the tune of $143 million of cash with $130 million of project financing
Construction and development of the project are continuing and Geopacific is on track for its first gold pour towards the end of 2022. Once in production, Woodlark will be producing 100,000 ounces of gold a year at an all-in sustaining cost (AISC) – this figure incorporates not only the “cash cost” of production but all the costs that allow production to be sustained – of $1,239 an ounce: at current gold prices, broker Shaw and Partners expects the operation to generate cash flow of about $150 million a year. Shaw says Woodlark is “relatively low-risk,” being a standard and simple open-cut mining operation and carbon-in-leach (CIL) processing plant. Shaw says GPR is “one of the cheapest gold developers on the ASX.” Sovereign risk concerns about operating in PNG have held the share price back, but the broker feels these concerns are overdone.
Geopacific also owns the Kou Sa copper-gold-silver project in Cambodia, but Woodlark is the main game.
4. Antisense Therapeutics (ANP, 29 cents)
Market capitalisation: $167 million
12-month total return: 114.8%
3-year total return: 157.4% a year
FY21 Yield: no dividend paid
Analysts’ consensus target price: 54 cents (Thomson Reuters)
Antisense Therapeutics is working to develop and commercialise “antisense” pharmaceuticals for large unmet markets in rare diseases. The term “antisense” refers to a kind of drug that is different to conventional drugs that are designed to interact with protein molecules. Antisense drugs have a more selective action, and they have the potential to be more effective and less toxic than conventional drugs. Antisense technology could be a gateway to the treatment of genetic diseases by targeting the “expression” of genes, and silencing them, rather than permanently altering them.
Antisense in-licenses its drugs from the Nasdaq-listed Ionis Pharmaceuticals Inc., an established leader in antisense drug development. Under the Ionis relationship, Antisense has worldwide exclusive licenses to use two antisense compounds (ATL1102 and ATL1103) for all disease indications. The company is developing ATL1102 for Duchenne Muscular Dystrophy (DMD) patients and recently reported highly promising Phase II trial results. ATL1102 has also successfully completed a Phase II efficacy and safety trial, significantly reducing the number of brain lesions in patients with relapsing-remitting multiple sclerosis (RRMS). A Phase IIb study of ATL1102 in non-ambulant boys with DMD is planned to be conducted in Europe: approval from the European Medicines Agency (EMA) is expected soon, given that the agency’s paediatrics committee gave a draft decision recommending agreement with Antisense’s Paediatric Investigation Plan (PIP) for the development of ATL1102 for DMD. A PIP must be adopted by the EMA before a medicine can be approved for use in children in EU Member States; it would be very unusual for the EMA not to adopt a PIP that its paediatrics committee had recommended.
The company is also working with the Murdoch Children’s Research Institute (MCRI) in Melbourne to further investigate the potential of ATL1102 to deliver breakthrough treatment for the control of immune-mediated inflammatory muscle damage in muscle diseases where there is an acknowledged need for more effective and safer treatments.
The second drug, ATL1103, is designed to block growth hormone receptor (GHr) expression, thereby reducing levels of the hormone-insulin-like growth factor‐I (IGF‐I) in the blood: this makes it a potential treatment for diseases associated with excessive growth hormone action. By inhibiting GHr production, ATL1103 in turn reduces IGF‐I levels in the blood (serum). There are a number of diseases that are associated with excess GH and IGF‐I action. These diseases include acromegaly, an abnormal growth disorder of organs, face, hands and feet; diabetic retinopathy, a common disease of the eye and a major cause of blindness; diabetic nephropathy, a common disease of the kidney and major cause of kidney failure, and certain forms of cancer.
ATL1103 is in clinical development as a treatment for acromegaly, which is a serious chronic life-threatening disease triggered by excess secretion of growth hormone (GH) by benign pituitary tumours. Oversupply of GH overstimulates liver, fat and kidney cells, through their GH receptors, to produce excess levels of IGF-I in the blood, which manifests in abnormal growth of the face, hands and feet, and enlargement of body organs including liver, kidney and heart. The primary treatments for acromegaly are to surgically remove the pituitary gland and/or drug therapy to normalize GH and serum IGF-I levels. In North America and Europe, there are approximately 85,000 diagnosed acromegaly patients with about half requiring drug therapy.
Good news from the EMA in the near future should give ANP a boost.
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