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Vection Technologies (VR1) reported A$4.6m in Q223 receipts, up A$0.2m q-o-q. Recent announcements of the company’s selection to develop virtual reality (VR) and metaverse technologies to promote space travel underpin the vital role partnerships play in the company’s strategy. VR1 also reported progress in commercial opportunities in defence, aerospace and service agencies, among others, all expected to bear fruit in the latter half of the current fiscal year. As such, management reiterated its FY23 revenue guidance of A$24–26m. We are encouraged by the Q223 results and maintain our FY23 forecasts.
Vection Technologies |
Space travel in the metaverse |
Quarterly activities update |
Software and comp services |
7 February 2023 |
Share price performance
Business description
Next events
Analysts
Vection Technologies is a research client of Edison Investment Research Limited |
Vection Technologies (VR1) reported A$4.6m in Q223 receipts, up A$0.2m q-o-q. Recent announcements of the company’s selection to develop virtual reality (VR) and metaverse technologies to promote space travel underpin the vital role partnerships play in the company’s strategy. VR1 also reported progress in commercial opportunities in defence, aerospace and service agencies, among others, all expected to bear fruit in the latter half of the current fiscal year. As such, management reiterated its FY23 revenue guidance of A$24–26m. We are encouraged by the Q223 results and maintain our FY23 forecasts.
Year end |
Revenue (A$m) |
Adj EBITDA* (A$m) |
PBT** |
EPS** |
EV/revenue (x) |
P/revenue (x) |
Net cash*** (A$m) |
6/21 |
3.5 |
(0.4) |
(2.5) |
(0.27) |
18.5 |
21.1 |
2.2 |
6/22 |
18.9 |
0.9 |
(7.0) |
(0.67) |
3.4 |
3.9 |
10.8 |
6/23e |
26.1 |
3.7 |
1.3 |
0.08 |
2.5 |
2.8 |
10.6 |
Note: *Adjusted EBITDA is normalised, excluding non-cash payments, exceptional items and interest revenue. **PBT and EPS are normalised, excluding exceptional items and interest revenue. ***Includes debt and financial leases.
Q223: Cash position remains strong
VR1 reported A$4.6m in cash receipts in Q223, a slight increase versus Q123’s A$4.4m, while net cash used in operations fell slightly to A$1.5m. Net cash used was A$0.6m versus Q123’s A$1.0m. The company’s cash position remains strong to support continued investments in infrastructure, sales and R&D, with A$13.5m in cash and cash equivalents as of 31 December 2022. We do not expect the need for any significant capital raises in FY23, absent any major mergers or acquisitions.
Partnerships remain key growth lever
Partnerships remain a vital lever for growth and a way to expand VR1’s distribution network. Management recently announced a memorandum of understanding to develop the first VR metaverse platform to promote space travel. Soon after, it announced a related A$0.4m agreement with Next One Film Group to develop VR gaming, scientific and educational content to support the space travel market. The company was chosen for these in part due to its expertise in VR and metaverse technologies. We await further details on these opportunities as well as existing partnerships, such as Webex by Cisco.
Valuation: Execution remains key to reducing gap
VR1 trades at 2.5x FY23e revenue, a 53% discount to its small-cap peers. A peer multiple of 5.2x implies a share price of A$0.13, nearly double the current value. We believe that the successful execution of VR1’s strategic plan and aforementioned commercial opportunities, especially in H223, and further advancements in the company’s existing partnerships could reduce the valuation gap.
Exhibit 1: Financial summary
A$000s |
2021 restated |
2022 |
2023e |
|
Year end 30 June |
AAS |
AAS |
AAS |
|
PROFIT & LOSS |
||||
Revenue |
|
3,471 |
18,894 |
26,056 |
Variable Cost of Sales |
(849) |
(11,454) |
(13,127) |
|
Gross Profit |
2,622 |
7,440 |
12,929 |
|
Operating Expenses* |
(3,993) |
(10,453) |
(9,230) |
|
Adjusted EBITDA |
|
(424) |
881 |
3,699 |
Non-Cash Payments |
(230) |
(1,892) |
(1,400) |
|
EBITDA |
|
(654) |
(1,011) |
2,299 |
D&A |
(658) |
(958) |
(1,000) |
|
Operating Profit (Normalized) |
|
(2,285) |
(5,907) |
1,255 |
Exceptionals/Other |
(26) |
(44) |
(44) |
|
Operating Profit/(Loss) (EBIT) |
|
(2,259) |
(5,863) |
1,299 |
Net Interest and financial expense |
(171) |
(1,070) |
- |
|
Profit Before Tax (norm) |
(2,456) |
(6,977) |
1,255 |
|
Profit Before Tax (AAS) |
|
(2,430) |
(6,933) |
1,299 |
Tax |
(77) |
(168) |
(312) |
|
Profit After Tax (norm) |
|
(2,533) |
(7,144) |
943 |
Profit After Tax (AAS) |
|
(2,506) |
(7,100) |
987 |
P/(L) from discontinued operations |
(36) |
- |
- |
|
Minority interest |
(137) |
(419) |
58 |
|
Net income (norm, to Vection Technologies equity holders) |
(2,533) |
(7,144) |
943 |
|
Net income (AAS, to Vection Technologies equity holders) |
|
(2,543) |
(7,100) |
987 |
Average Number of Shares Outstanding, basic (m) |
931 |
1,071 |
1,124 |
|
EPS - normalised, basic (c) |
|
(0.27) |
(0.67) |
0.08 |
EPS - AAS, basic, to Vection Technologies equity holders (c) |
(0.24) |
(0.62) |
0.08 |
|
Gross Margin (%) |
75.5% |
39.4% |
49.6% |
|
EBITDA Margin (%) |
NA |
NA |
8.8% |
|
Operating Margin (before GW and except.) (%) |
NA |
NA |
4.8% |
|
BALANCE SHEET |
||||
Fixed Assets |
|
18,273 |
17,785 |
18,870 |
Intangible Assets |
17,338 |
17,028 |
18,066 |
|
Tangible Assets |
240 |
293 |
339 |
|
Right of Use Assets |
632 |
424 |
424 |
|
Other |
63 |
41 |
41 |
|
Current Assets |
|
13,063 |
22,419 |
24,308 |
Cash |
7,084 |
14,869 |
14,708 |
|
Receivables |
4,879 |
6,208 |
8,000 |
|
Inventories |
1,084 |
1,341 |
1,600 |
|
Other |
17 |
- |
- |
|
Current Liabilities |
|
11,272 |
8,475 |
8,672 |
Trade and other payables |
3,615 |
6,974 |
7,200 |
|
Provisions and Other |
6,405 |
30 |
- |
|
Employee benefits |
36 |
78 |
78 |
|
Lease liabilities |
168 |
195 |
195 |
|
Borrowings |
1,047 |
1,199 |
1,199 |
|
Long Term Liabilities |
|
4,637 |
3,751 |
4,141 |
Provisions |
- |
- |
- |
|
Employee benefits |
333 |
433 |
824 |
|
Lease liabilities |
530 |
286 |
286 |
|
Borrowings |
3,175 |
2,415 |
2,415 |
|
Other |
599 |
616 |
616 |
|
Net Assets |
|
15,428 |
27,977 |
30,365 |
Minority Interest |
(117) |
(479) |
(898) |
|
Shareholder's Equity |
|
15,545 |
28,457 |
31,263 |
CASH FLOW |
||||
Operating Cash Flow (before interest, tax, etc.) |
|
(2,251) |
(1,092) |
2,235 |
Net Interest |
(50) |
(50) |
- |
|
Tax |
(24) |
(104) |
(312) |
|
Capex |
(66) |
(164) |
(246) |
|
Purchase of intangibles |
(1,330) |
(1,838) |
(1,838) |
|
Acquisitions/disposals |
2,305 |
(21) |
- |
|
Equity financing |
7,221 |
12,127 |
- |
|
Lease payments |
(96) |
(80) |
- |
|
Change in net cash |
5,708 |
8,777 |
(161) |
|
Opening net debt/(cash), not incl. leases |
|
(735) |
(2,862) |
(11,255) |
Exchange rate movements |
(280) |
(383) |
- |
|
Other |
(3,301) |
0 |
- |
|
Closing net debt/(cash), not incl. leases |
|
(2,862) |
(11,255) |
(11,094) |
Closing net debt/(cash), incl. leases |
|
(2,164) |
(10,774) |
(10,613) |
Source: Vection Technologies, Edison Investment Research
|
|
Research: Real Estate
FY22 was a robust year for Foxtons with revenue up 11%, but the short-term outlook is less certain for recessionary reasons. However, the outlook remains encouraging with the new CEO on the cusp of announcing a growth-oriented operational review. 65% of revenue is now generated from the resilient Lettings and Financial Services divisions, a proportion that is likely to increase over time. Our ‘base’ case valuation gives a value of 53p/share, but ignores the potential of M&A expansion in particular. Our revised ‘bull’ case valuation implies a share price of 118p, which is more than twice the current share price, highlighting the potential.
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