5 small and micro cap industrials on the move in November

December 11, 2023 10:42

Independent Investment Research

Small & micro caps had a positive month in November with the ASX Small Ordinaries Accumulation Index up 7.04% and the ASX Emerging Companies Accumulation Index up 3.66%. Over 50% of stocks in the coverage universe posted a positive share price performance. The below takes a look at 5 small and micro cap industrials that experienced strong share price moves during the month.

(1) ClearVue Technologies Limited (ASX: CPV)

ClearVue Technologies was up 79.2% in November on the back of a number of announcements regarding the appointment of distributors.

The Company entered the African market through the appointment of Concept Business Group as a distributor in the region. Under the agreement, Concept Business Group has the exclusive distribution rights for ClearVue solar integrated glass units (IGUs) in South Africa, Botswana and Lesotho and non-exclusive rights to distribute to other African territories. The agreement is for five-years with two further five-year extensions subject to agreement and meeting ongoing performance criteria and a licence renewal fee of US$150,000. The agreement is subject to the distributor undertaking any local certification testing of the ClearVue product and commencement of a demonstration project, being a project using at least 300 square metres of ClearVue PV IGU products to be ordered within 120 days of the date of the agreement. In year 2, ClearVue requires minimum orders of 600 square metres of IGU products increasing each subsequent year up to 3,000 square metres in year 5.

The agreement aligns with South Africa’s incentives to help businesses contribute to a more sustainable energy future and transition to renewable solutions. The CEO of ClearVue commented “The market opportunity in Africa is immense as the region looks for solutions to enhance their existing energy infrastructure. South Africa in particular faces significant challenges with its energy grid.”

ClearVue also expanded the US footprint by appointing 8G Solutions as a distributor for the ClearVue solar IGUs in Colorado, Missouri and Arizona and signed a manufacturing and distribution agreement with H T Glass Pte Ltd for distribution rights in Singapore.

The Company has made significant progress over the last 12-months with the Company in the process of transitioning from R&D to commercialisation. There is a clear market for the Company’s technology given the accelerating demand for clean, renewable energy solutions globally. Given the quarterly cash outflow in the September quarter and the cash at September-end, the Company will need a capital injection. In October, the Company entered into an At-the-Market (ATM) facility with Alpha Investment Partners. The facility is for $30 million and provides access to capital over five years.

(2) Plenti Group Limited (ASX: PLT)

Plenti Group shares jumped sharply on the release of the 1H’FY24 results and the announcement of a strategic partnership with NAB.

The loan portfolio continued to grow in 1H’FY24 with the loan book growing to $2.0 billion. The Company reported revenue of $97 million, up 52% on the pcp, as a result of loan growth and higher borrower interest rates. Revenue growth, improved loan margins and operational efficiency improvements resulted in a positive Cash NPAT of $1.5 million, a 10% increase on the pcp, despite increased funding costs and higher credit losses. The Company stated its objective for FY24 was to grow revenue to over $200 million, deliver full year Cash NPAT growth. reduce the cost-to-income ratio to less than 30% and deliver $25 million in inefficiencies as the loan book scales towards $3 billion.

The strategic partnership with NAB will see the launch of “NAB powered by Plenti” for car and electric vehicle loans and select renewable energy finance solutions to households. The car and EV loan product is expected to be launched in 1H’CY24, in which NAB will be responsible for marketing and promoting the co-branded car and EV loan product to its customers and Plenti will be responsible for the provision of loan application experiences, credit assessment, loan settlement and on-going loan and customer management. Loans will be funded by NAB and held on NAB’s balance sheet, with credit risk borne by NAB. Plenti will receive an upfront payment for the establishment of the technology, infrastructure and operational set up, an upfront fee per loan funded which steps down once the loan book reaches $1 billion with Plenti guaranteed a minimum value of establishment fees per month until fees received reach a threshold amount, and a monthly servicers fee calculated as a percentage of the loan book which scales down as the loan book grows until the loan book reaches $3 billion. The agreement is for five years with the ability to extend for a further five years upon agreement from both parties.

The minimum annual revenue to be received by Plenti for the car & EV loan product under the strategic partnership is $3 million. Indicatively, annual revenue for Plenti in a year with originations of $500 million and an average loan book of $1 billion would be approximately $20 million. The timeframe to reach this indicative annual revenue will depend on several factors including the appeal of the car loan offering to NAB’s customer base and the success of NAB’s marketing and promotional activities.

In addition to the loan programs the parties have entered into an equity investment agreement, which provides NAB the ability to acquire up to a 15% interest in Plenti, subject to certain timeframes and prices.

The one analyst covering Plenti at present is forecasting the Company will generate its first full year profit in FY24.

(3) Findi Limited (ASX: FND)

Findi shares were up 62.7% in November with the share price jumping 54.7% on 15 November on the news that the Company’s subsidiary, Transaction Solutions International (India) Pvt Ltd had raised $37.6 million ahead of its IPO from Piramal Alternatives, an Indian investment group, in the form of Compulsory Convertible Debentures. The Debentures are compulsorily convertible to equity at IPO. The price was based on a 10x FY23 EBITDA multiple and represented a pre-IPO market cap of $153 million. The Debentures reflect a fully diluted equity interest of ~16.7% once converted at IPO. The Debentures have a coupon payment of 8%p.a. until conversion and TSI has a call option to buyback the securities at an IRR of 18%.

The share price has been on the rise since late October. On 30 October the Company announced it had secured a 10 year contract with State Bank of India (SBI) for the provision of 4,219 ATMs that will generate revenue of between $550 million to $620 million and EBITDA of between $250 million and $280 million over the contract period. The contract has a start date of early 2025. Findi has been providing ATMs for SBI through a third-party outsourcing agreement since 2016, which was due to expire in December 2023. Findi is one of the largest non-bank ATM operators in India, with a network of over 20,000 ATMs.

The announcement came after the Company had reaffirmed FY24 guidance of revenue of $67.3 million and EBITDA of $23.6 million. This represents an uplift of 23.4% and 40.6%, respectively on FY23. The addition of the revenue from the SBI contract will be a significant uplift to Group revenue.

During the month, the Company released its 1H’FY24 results, reporting revenue of $31.8 million, EBITDA of $12.6 million and NPAT of $1.1 million. This represented an increase of 30.2%, 84.4% and 352%, respectively on the pcp. As at 8 December 2023, the Company was trading at a Market Cap/EBITDA multiple of 1.6x based on FY24 guidance, which is substantially below the EBITDA multiple valuation for the Debentures.

(4) Whispir Limited (ASX: WSP)

Whispir shares jumped significantly on the news of an off-market takeover offer by Soprano Design (Technology) Australia Pty Ltd (Soprano) for 100% of the shares in Whispir at a price of $0.48 per share. The offer price represented a 60% premium to the closing price on the day prior to the offer. Soprano stated that this was the best and final offer and a revised offer would not be provided. Soprano owns 15.8% of Whispir’s shares on issue.

Subsequently, Zipline Cloud Pty Ltd (Zipline) announced its intent to make a non-binding indicative offer for the Company. In its Letter of Intent Zipline detailed that the offer will be at a premium to the Soprano offer. Zipline was expected to submit a proposal by close of business of 8 December. There has been no information provided to the market as to whether a proposal has been received.

On 5 December, the Company released its statement regarding the Soprano offer. Whispir has recommended shareholders reject the offer. The Target’s Statement outlines a number of reasons for the recommendation which included: (i) if shareholders accept the offer they will give up the opportunity to potentially participate in the offer from Zipline (should a formal proposal emerge) or offers from other parties. The Board stated that the Company has engaged in discussions with several parties regarding their interest in the business; and (ii) the Independent Expert valued Whispir’s shares between $0.4859 and $0.5649. The Independent Expert determined that the offer from Soprano was not fair but reasonable.

The Soporano offer is open for acceptance until 21 December 2023, unless extended or withdrawn. Whispir shareholders have seen the share price decline from a high of $5.24 in 2020 to as low as $0.23 in 2023. Shareholders will no doubt be keen to see the offer from Zipline before making a decision.

(5) Veem Ltd (ASX: VEE)

Veem’s share price continued its positive momentum in November, rising 53.1% and hitting new 12-month highs during the month.

During the month, Veem announced that Strategic Marine had advised that the VG140SD Veem Gyrostabilizers will now be fitted on its fourth-generation fast crew boat. Strategic Marine has accelerated the delivery dates for the 12 gyrostabilizers that were ordered in June 2023. Veem will now deliver three gyros before 31 December 203 and remaining nine gyros during the 2H’FY24. Strategic Marine had previously committed to purchase a minimum of 12 gyrostabilizers over a three year period.

As a result of the acceleration of the delivery dates, Veem has advised it expects to report revenue from gyrostabilizers in excess of $10 million in FY24, double that for FY23. At the AGM in November, the Company stated that it expected to see solid revenue growth in coming years from gyros with continued investment into marketing and further development of large gyros.

The Company provided EBITDA guidance for 1H’FY24 in the range of $6-$7 million and NPAT in the range of $2.6-$3.0 million, a 50% increase on the pcp.

In October 2023, the Company announced an exclusive worldwide agreement had been entered into with Sharrow Marine, in which the two parties would partner to design propellers for inboard powered vessels and Veem to exclusively manufacture and sell the propellers. The project is subject to Veem’s acceptance of the performance of the Sharrow design on the Veem test vessel. Veem expects to complete the testing by the end of January 2024 with first sales of propellers expected to be Q2’2024 with the full range available by the end of 2024 if testing is successful. The Company advised the total addressable market for inboard propellers is estimated to be US$2.6 billion with the annual new build market at ~US$338 million.