3 Diversified Micro-cap stocks “Under 20 Cents” Offering an Opportunity for Long-term Growth – 1AD, PPL, ESS

1. AdAlta Limited (Recommendation: Speculative Buy, Market Cap: $40.45Mn)

Progressing Phase I clinical trials of AD-214: AdAlta Limited (ASX: 1AD) is a clinical stage drug development company that uses its proprietary i-body technology platform to solve challenging drug targeting problems.

• During FY20, the company reported total revenue of $3.84 million, up from $3.5 million in FY19. Net loss for FY20 stood at ~$6 million. During the December 2020 quarter, the company received encouraging results from its Phase I clinical trials of AD-214. Further, the company also progressed on its overall strategy on multiple fronts, including its collaboration with GE Healthcare, the prioritisation of additional indications for AD-214 and the selection of the next targets for the company’s i-body platform.
• Cash and Debt Scenario: At the end of FY20, the company had cash of around $3.36 million and borrowings of around $2.19 million. For FY20, the company’s current ratio stood at 2.1x. In the first two quarters of FY21, the company has improved its cash position and at the end of December 2020 quarter it had a cash balance of $8.06 million.
• Outlook: With a decent cash position, the company is well placed to progress AD-214 into the patient part of Phase I trials and to add additional assets to its pipeline as it accelerates its growth trajectory through 2021. The company had recently announced that it will extend the healthy volunteer Part A of its Phase I clinical study of AD-214 to explore encouraging results from cohorts studied to date.

A Pictorial Presentation of Key Metrics:

SWOT Analysis:

Stock Recommendation:

• Over the last three months, the stock has provided a return of 45.45%.
• On the technical analysis front, the stock has a support level of ~$0.125 and resistance of ~$0.187.
• The company is planning to add three additional assets into its pipeline during calendar 2021. Further, it is progressing co-development discussions with third parties to expand its external pipeline by combining AdAlta’s i-bodies.
• Key Risks: Investment Risks, Regulatory Risks, Failure of Clinical Trials
• Considering the encouraging results received from the recent clinical trials, improved cash position, expanding pipeline, and associated key risks, we give a “Speculative Buy” recommendation on the stock at the closing price of $0.160, down by 3.031% as on 12 February 2021. 

2. Pureprofile Limited (Recommendation: Speculative Buy, Market Cap: $25.38Mn)

Decent Results in Q2FY21: Pureprofile Limited (ASX: PPL) is one of the leaders in data and insights, programmatic media and performance media that connects brands with empowered customers across the world by finding, understanding and engaging them through direct-to-consumer technology platforms.

• For Q2FY21, the company reported total revenue of $8.2 million, up 26% on pcp, driven by decent performance in all business units. EBITDA for Q2FY21 stood at $742k, up 866% on pcp, due to strong revenue growth. Platform (SaaS) and Media business units grew 90% and 46% respectively during Q2FY20 leveraging the momentum built in the prior quarter. During the quarter, the company successfully completed recapitalisation plan which raised net cash of $2.4 million.
• Debt and Cash Scenario: During Q2FY21, the company reduced its debt facility from $25 million to $3 million which further strengthened its balance sheet. The company ended Q2FY21 with a cash balance of $3.1 million, up 116% on the previous quarter.
• Outlook: Looking ahead, the company is focused on cash management and maintaining a robust balance sheet position. Further, the company intends to maintain and build on revenue momentum from Q2 across the business. PPL is also focused on panel growth for new and existing countries.

A Pictorial Presentation of Key Metrics:

SWOT Analysis:

Stock Recommendation:

• Over the last six months, the stock of PPL has provided a return of 38.10% and it is currently trading lower than the average 52-weeks price level band, offering a decent opportunity for accumulation.
• On the technical analysis front, the stock has a support level of ~$0.018 and resistance of ~$0.029.
• Looking ahead, the company is focused on the launch of Data Dashboards and Pure.amplify in the UK and expanding Data Dashboards in Australia.
• Key Risks: Technology Disruption, COVID-19 Uncertainties, Stiff Competition.
• Considering the company’s decent performance in Q2FY21, improved cash balance, increased panel sizes in Australia, NZ, UK and US, and current trading level, we give a “Speculative Buy” recommendation on the stock at the closing price of $0.024, as on 12 February 2021.

        3.Essential Metals Limited (Speculative Buy, Market Cap: $24.09Mn)

Advancing Gold Exploration Projects: Essential Metals Limited (ASX: ESS) is an active explorer, focused on key global demand-driven commodities. The company operates a portfolio of strategically located lithium, caesium, gold, nickel and cobalt projects in mining regions in Western Australia, plus a high-quality lithium asset in Canada.

• During FY20, the company was focused on advancing its two gold exploration projects, namely the Juglah Dome and Golden Ridge Projects in Western Australia. For FY20, the company reported gross profit of $4.76k and net profit of $1.36 million. During the December 2020 quarter, the company successfully completed drill programme at Juglah Dome project and tested four prospects. The results from the drilling confirms continuity of gold mineralisation at the Gards Prospect and shows it broadens to the south where it remains open and untested. Over the quarter, the company raised $4 million via an oversubscribed Placement and Share Purchase Plan.
• Cash and Debt Scenario: For FY20, the company’s current ratio stood at 3.66x. At the end of the December 2020 quarter, the company had cash reserves of $6.6 million and nil debt.
• Outlook: ESS is currently preparing appropriate programs to test for the potential south-eastern extension of the Gards mineralisation. It is also planning for field checking and geological mapping of other priority gold targets. The company recently announced that it will enter into a nickel Farmin/Joint Venture with a subsidiary of Crest Investment Group Limited (CREST) over the Company’s BlairGolden Ridge Project in Western Australia.

A Pictorial Presentation of Key Metrics:

SWOT Analysis:

Stock Recommendation:

• Over the last three months, the stock has provided a return of 28.83% and is trading lower than the average 52-weeks price level band, offering a decent opportunity accumulation.
• On the technical analysis front, the stock has a support level of ~$0.110 and resistance of ~$0.155.
• On a TTM basis, the stock is trading at a price to book multiple of 1.4x, lower than the industry median of 3.2x.
• With decent cash balance, the company is well placed to continue multi -phase exploration programs aimed at advancing the company’s two exciting gold projects near Kalgoorlie, Juglah Dome and Golden Ridge.
• Key Risks: Exploration-Related Risks, COVID-19 Uncertainties, Fluctuations in commodity Prices.
• Considering the company’s debt free balance sheet, recently discovered gold mineralisation at the Gards Prospect, recent Joint Venture with a subsidiary of Crest Investment Group Limited (CREST), current trading level and TTM valuation, we give a “Speculative Buy” recommendation on the stock at the closing price of $0.120 as on 12 February 2021. 

Comparative Price Chart (Source: Refinitiv, Thompson Reuters)

1. AdAlta Limited (Recommendation: Speculative Buy, Market Cap: $40.45Mn)

Progressing Phase I clinical trials of AD-214: AdAlta Limited (ASX: 1AD) is a clinical stage drug development company that uses its proprietary i-body technology platform to solve challenging drug targeting problems.

• During FY20, the company reported total revenue of $3.84 million, up from $3.5 million in FY19. Net loss for FY20 stood at ~$6 million. During the December 2020 quarter, the company received encouraging results from its Phase I clinical trials of AD-214. Further, the company also progressed on its overall strategy on multiple fronts, including its collaboration with GE Healthcare, the prioritisation of additional indications for AD-214 and the selection of the next targets for the company’s i-body platform.
• Cash and Debt Scenario: At the end of FY20, the company had cash of around $3.36 million and borrowings of around $2.19 million. For FY20, the company’s current ratio stood at 2.1x. In the first two quarters of FY21, the company has improved its cash position and at the end of December 2020 quarter it had a cash balance of $8.06 million.
• Outlook: With a decent cash position, the company is well placed to progress AD-214 into the patient part of Phase I trials and to add additional assets to its pipeline as it accelerates its growth trajectory through 2021. The company had recently announced that it will extend the healthy volunteer Part A of its Phase I clinical study of AD-214 to explore encouraging results from cohorts studied to date.

A Pictorial Presentation of Key Metrics:

SWOT Analysis:

Stock Recommendation:

• Over the last three months, the stock has provided a return of 45.45%.
• On the technical analysis front, the stock has a support level of ~$0.125 and resistance of ~$0.187.
• The company is planning to add three additional assets into its pipeline during calendar 2021. Further, it is progressing co-development discussions with third parties to expand its external pipeline by combining AdAlta’s i-bodies.
• Key Risks: Investment Risks, Regulatory Risks, Failure of Clinical Trials
• Considering the encouraging results received from the recent clinical trials, improved cash position, expanding pipeline, and associated key risks, we give a “Speculative Buy” recommendation on the stock at the closing price of $0.160, down by 3.031% as on 12 February 2021. 

2. Pureprofile Limited (Recommendation: Speculative Buy, Market Cap: $25.38Mn)

Decent Results in Q2FY21: Pureprofile Limited (ASX: PPL) is one of the leaders in data and insights, programmatic media and performance media that connects brands with empowered customers across the world by finding, understanding and engaging them through direct-to-consumer technology platforms.

• For Q2FY21, the company reported total revenue of $8.2 million, up 26% on pcp, driven by decent performance in all business units. EBITDA for Q2FY21 stood at $742k, up 866% on pcp, due to strong revenue growth. Platform (SaaS) and Media business units grew 90% and 46% respectively during Q2FY20 leveraging the momentum built in the prior quarter. During the quarter, the company successfully completed recapitalisation plan which raised net cash of $2.4 million.
• Debt and Cash Scenario: During Q2FY21, the company reduced its debt facility from $25 million to $3 million which further strengthened its balance sheet. The company ended Q2FY21 with a cash balance of $3.1 million, up 116% on the previous quarter.
• Outlook: Looking ahead, the company is focused on cash management and maintaining a robust balance sheet position. Further, the company intends to maintain and build on revenue momentum from Q2 across the business. PPL is also focused on panel growth for new and existing countries.

A Pictorial Presentation of Key Metrics:

SWOT Analysis:

Stock Recommendation:

• Over the last six months, the stock of PPL has provided a return of 38.10% and it is currently trading lower than the average 52-weeks price level band, offering a decent opportunity for accumulation.
• On the technical analysis front, the stock has a support level of ~$0.018 and resistance of ~$0.029.
• Looking ahead, the company is focused on the launch of Data Dashboards and Pure.amplify in the UK and expanding Data Dashboards in Australia.
• Key Risks: Technology Disruption, COVID-19 Uncertainties, Stiff Competition.
• Considering the company’s decent performance in Q2FY21, improved cash balance, increased panel sizes in Australia, NZ, UK and US, and current trading level, we give a “Speculative Buy” recommendation on the stock at the closing price of $0.024, as on 12 February 2021.

        3.Essential Metals Limited (Speculative Buy, Market Cap: $24.09Mn)

Advancing Gold Exploration Projects: Essential Metals Limited (ASX: ESS) is an active explorer, focused on key global demand-driven commodities. The company operates a portfolio of strategically located lithium, caesium, gold, nickel and cobalt projects in mining regions in Western Australia, plus a high-quality lithium asset in Canada.

• During FY20, the company was focused on advancing its two gold exploration projects, namely the Juglah Dome and Golden Ridge Projects in Western Australia. For FY20, the company reported gross profit of $4.76k and net profit of $1.36 million. During the December 2020 quarter, the company successfully completed drill programme at Juglah Dome project and tested four prospects. The results from the drilling confirms continuity of gold mineralisation at the Gards Prospect and shows it broadens to the south where it remains open and untested. Over the quarter, the company raised $4 million via an oversubscribed Placement and Share Purchase Plan.
• Cash and Debt Scenario: For FY20, the company’s current ratio stood at 3.66x. At the end of the December 2020 quarter, the company had cash reserves of $6.6 million and nil debt.
• Outlook: ESS is currently preparing appropriate programs to test for the potential south-eastern extension of the Gards mineralisation. It is also planning for field checking and geological mapping of other priority gold targets. The company recently announced that it will enter into a nickel Farmin/Joint Venture with a subsidiary of Crest Investment Group Limited (CREST) over the Company’s BlairGolden Ridge Project in Western Australia.

A Pictorial Presentation of Key Metrics:

SWOT Analysis:

Stock Recommendation:

• Over the last three months, the stock has provided a return of 28.83% and is trading lower than the average 52-weeks price level band, offering a decent opportunity accumulation.
• On the technical analysis front, the stock has a support level of ~$0.110 and resistance of ~$0.155.
• On a TTM basis, the stock is trading at a price to book multiple of 1.4x, lower than the industry median of 3.2x.
• With decent cash balance, the company is well placed to continue multi -phase exploration programs aimed at advancing the company’s two exciting gold projects near Kalgoorlie, Juglah Dome and Golden Ridge.
• Key Risks: Exploration-Related Risks, COVID-19 Uncertainties, Fluctuations in commodity Prices.
• Considering the company’s debt free balance sheet, recently discovered gold mineralisation at the Gards Prospect, recent Joint Venture with a subsidiary of Crest Investment Group Limited (CREST), current trading level and TTM valuation, we give a “Speculative Buy” recommendation on the stock at the closing price of $0.120 as on 12 February 2021. 

Comparative Price Chart (Source: Refinitiv, Thompson Reuters)

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