Small & Micro Cap Industrial Stocks on the Move in May

June 10, 2023 09:39

Independent Investment Research

The month of May witnessed a number of key announcements and important results as technology, mining, and other industrial companies continued to outperform. Industry-level strength continued to push up stocks, and the theme should continue through the year unless we see a significant recession.

1) Serko Limited (ASX: SKO)

Serko’s stock rose by over 50% after the Company’s results came in. Serko provides a range of SaaS corporate travel solutions, including expense management, and intelligent online travel services, serving enterprises, governments, and SME’s. Serko’s products are available in 190 countries.

Serko’s stock surged as FY23 total income rose by 150% YoY, to $45 million, and average revenue per booking increased 65% YoY, to $9.5 million. Meanwhile, average revenue per completed room night came in at $9.30 or 36% higher YoY. Despite the significant increase in revenue the Company continued to struggle with profitability posting a net loss of $28 million.

The Company is expecting to move beyond the Australian and New Zealand market soon and expand its focus to more global market such as the United States. It plans to introduce its Zeno Booking and Zeno Expense. Serko continues to partner with major OTA (online travel agencies) such as Booking.com to provide a seamless managed booking experience. The Company provides a range of different metrics, which allows for companies to make informed decisions that are in line with their corporate policy.

2) Life360 Inc (ASX: 360)

Life360’s stock surged 36%, after results came in better than expected. The Company provides location safety and driving safety products, as its core life subscription revenue increased by 34% YoY to $68 million, as global monthly active users increased by 37% YoY to 51 million. A significant portion of those users were US users, which now total 31 million. Meanwhile, annualised recurring revenue came in at $239 million. The Company was also able to achieve profitability at an earlier stage than initially expected and the CEO said the following -”In March we provided guidance for Life360 to achieve Adjusted EBITDA profitability from Q2’23 onwards and for full year CY23. We have achieved this milestone a quarter early, with 1Q’23 positive Adjusted EBITDA of $0.5 million.”

Life360, which provides a range of location and driving safety features, has been increasing prices in line with its new product rollout. The CEO provided the following outlook as a result – “Price increases for existing U.S. Android subscribers rolled out in April, and due to expected one-time churn U.S. net adds will be more muted in Q2. However monthly iOS subscriber churn has already returned to normal following a short-term spike after the Q4’22 price increases.”

Management expects revenue to reaccelerate after Q3, once the rollout has been complete, which should provide further momentum to the stock as we head towards the end of the year.

3) DRA Global Limited (ASX: DRA)

DRA Global saw its stock surge by 30% as the multi-disciplinary engineering company, which provides services to infrastructure, engineering, mining, industrial, and energy firms, concluded its annual general meeting. The new CEO continues to outline that the fiscal year should see significant revenue gains stemming from $638 million in new contracts during the recent fiscal year, 60% of which are set to be realised during FY23’.

The Company has been plagued by controversy in recent times after the former CEO filed a $9 million lawsuit, where he alleged a breach of his employment contract. Regardless, the Company has projected that the year should continue to see positive results, as contracts are processed, and the Company looks to get back to revenue levels it had achieved in previous years. It should be noted, revenue in the recent past has been affected by COVID-related residual effects. Those issues are expected to be resolved and the future looks much better now as mining, energy, etc, continue to witness a boom.

4) Silex Systems Limited (ASX: SLX)

Silex Systems was up a further 17% in May with the shar price up 180% over the year to May-end. Silex currently deals in Uranium enrichment technology. Uranium demand has soared, due to the broader effort to move away from historical fuel sources, specifically fossil fuels. The isotope separation technology is likely to be commercialised soon and will be opening their first planned commercial plant facility in Paducah, Kentucky, which will be able to produce 2,000 tonnes of natural UF6, or 5 million pounds of U308 equivalent per year, over a period of 30 years.

The increasing demand for Uranium and the geopolitical risks stemming from Russia are playing a key role in driving governments to seek sources of nuclear fuel elsewhere. This means that the wide global target market for Silex providing nuclear fuel technology for both natural and enriched uranium could translate into a multi-billion dollar revenue stream for the Company in the future.

5) Bigtincan Holdings Limited (ASX: BTH)

Bigtincan provides a range of unified sales enablement solutions empowering customer-facing teams to increase sales, by providing better buying experiences. Their solutions target sales teams, marketing teams, field team services, and the Company counts some names such as, Nike, Guess, Prudential, and Starwood Hotels as its customers.

In the 1Q’23, Big Tin Can engaged Morgan Stanley Australia as a financial advisor to assist Big Tin Can with management and evaluation of inbound inquiries and expressions of interest. In

May, the Company confirmed they had received a confidential and non-binding indicative offer from Siris Capital Group LLC of $0.80 per share. The Board does not believe this offer is in the best interests of shareholders and announced it had received another offer which the Company is currently considering.

6) Avada Group Limited (ASX: AVD)

Avada’s share price rose on the back of news that the Company had purchased Wilsons Traffic Management. Investors are likely taking account of the likelihood that the accretive revenue and cost synergies, which should improve the company’s overall financial outlook. The price of the acquisition was a cash payment of $8.8 million funded through debt and cash reserves.

The acquisition will give the Company access to the New Zealand market. Wilson Traffic Management reported an EBITDA of NZ$3 million and currently has 115 traffic controllers and 75 traffic vehicles. Meanwhile, Avada posted a loss of A$ 4.5 million in 1H’FY23, but management has indicated that the second half should produce much better results, as the market recovers, and the Company benefits from accretive results as a result of the acquisition.

7) Temple & Webster Group (ASX: TPW)

Temple & Webster's share price jumped sharply on the back of the business update provided in May. In its update the Company announced the business had returned to year-on-year growth. While the Company had returns to growth sales are still down on the same period in the 1H’FY22.

The Company is facing headwinds as are many in the retail space, Like many businesses it is continuously investing back in the business, and has been shifting its focus towards artificial intelligence (AI) to drive conversion and customer benefits as well as derive productivity gains to lower the over cost of doing business (CODB).

The CEO commented - “For an online-only business without physical stores or in-person sales staff, the potential for AI to significantly lower our CODB %, drive conversion and customer benefits is going to be material. We believe this will further drive our competitive advantages and allow us to win market share.”

In March 2023, the Company announced an on market buy-back program to buy-back up to $30 million of shares over a 12-month period. The buy-back reflects the significant cash on the books of around $100m, providing sufficient capital to complete the buy-back and fund both organic and inorganic initiatives and opportunities.

8) Audio Pixel Holdings (ASX: AKP)

Audio Pixel finished the month on a high, with the share price rising 34% on the day the AGM was held with many investors seemingly impressed with the GEN-1 product demonstration that took place by the Chief Technology Officer. The share price jump was accompanied with strong volume.

During the month, the Company raised $3 million through the issuance of unsecured convertible notes. The Company will pay an interest rate of 12% p.a. payable quarterly in arrears and be convertible into ordinary AKP shares at $9.04. The convertible notes will mature on 31 January 2024. The investors in the convertible notes also received 600,000 unlisted options at a strike price of $10.84, expiring 4 May 2026.

The capital is likely to be used to further the progression from the prototyping phase, to the a reliable mass market product, of speakers that have digital sound reconstruction. These speakers should be able to produce sound anywhere from 20HZ to 20KHZ, all in a surface mount compliant silicon chip.

Audio Pixel is the first and only known company to successfully implement digital sound reconstruction, in a commercially feasible manner. The technology is being compared to moving from the large CRT monitor to the digital flat panel, and allows for the production of speakers, which are technologically better and deliver an order of magnitude better sound, than conventional speaker, with an affordable package, that is only one mm thick. The chip can be used in a single-unit or cascade into a further 64 units, depending on the manufacturers specifications.

This article was written by Parth Pala.