Dotz Nano Limited

Company Overview: Dotz Nano Limited (ASX: DTZ) is a technology-based company, which is engaged in the research, production, and marketing of graphene quantum dots. The company’s flagship products namely, ValiDotz, Fluorensic, BioDotz, and InSpec are used for bio-imaging, liquids tagging, lubricants, and DEF authentication, anti-counterfeiting, brand & reputation security, and oil & gas industry.

DTZ Details

DTZ Rides on Development & Commercialisation of “Dotz Test Kit”: The company’s amended service agreement with Caerus Therapeutics Inc to facilitate the development and commercialisation of its rapid SARS-CoV-2 Diagnostic kit (the “Dotz Test Kit”), reflects the versatility of DTZ’s technology. It also signed an agreement with UAE-based Hygiene Links in the UAE, Egypt, and Sudan for the distribution of the “Dotz Test Kit” and received initial US$2.1 million purchase order.

Key Findings from 1HFY21 Results:

• Rise in Revenues: In 1HFY21, the company’s revenue from the contract with customers soared 684% on pcp and came in at US$258,124.
• Obtained Authorization: In early 2021, DTZ obtained CE mark authorisation for its sale of Dotz Test Kits in respect of nasopharyngeal swab samples in the European Union. The company also submitted to the U.S. FDA for an Emergency Use Authorisation (“EUA”) for the distribution of SARS-Cov-2 virus detection technology.
• Completion of Clinical Trials: As part of its FDA EUA application, the company carried out clinical trials, which resulted in 96.77% positive agreement and 100% negative agreement between the CDC 2019-Novel Coronavirus (2019-nCoV) Real-Time RT-PCR Diagnostic Panel.
• Inked Deal with Zohar Dalia: The company inked a distribution agreement with Zohar Dalia Professional LP to supply the latter with its non-toxic molecular markers and detectors, to sell Zohar Dalia’s Active V-SRD® solution across various markets, which includes the UK, Italy, India, Germany, France, Spain, Australia, and Africa.
• Manufacturing Agreement: The company entered into a non-exclusive manufacturing agreement with Systaaq Diagnostic Products to produce its nasopharyngeal swab and saliva-based Test Kits.
• Increase in R&D Expenditures: In 1HFY21, the company’s research and development expenses increased to US$617,919 from US$365,627 reported in the year-ago period, owing to the commercialisation of its graphene quantum dots.
• Cash & Debt Position: The company exited 1HFY21 with a cash balance of US$4.64 million. Total debt amounted to ~US$0.71 million at the end of the period.

Ongoing investment in product innovation to capitalise on new market opportunities are key growth drivers. In addition, the company remains on track to commercialise its anti-counterfeiting technology and apply for regulatory approval for the Dotz Test Kits in various markets, thus, strengthening its geographical footprint. The below picture depicts a decent momentum in DTZ’ top-line since 1HFY19.

Revenues Highlight; Analysis by Kalkine Group

Key Metrics: For 1HFY21, the company reported a gross margin of 72.9%, higher than 70.7% reported in 1HFY20. In 1HFY21, the company recorded a current ratio of 4.84x compared to the industry median figure of 2.24x. The debt-to-equity ratio for the period stood at 0.15x, lower than the industry median figure of 0.26x.

Profitability Profile; Analysis by Kalkine Group  

Top 10 Shareholders: The top 10 shareholders together form around 31.64% of the total shareholdings, while the top 4 constitutes the maximum holding. Southern Israel Bridging Fund Two L.P. held the maximum number of shares with a percentage holding of 17.11%, each, followed by Harpaz (Kerry) holding 4.33%, as also highlighted in the chart below: 

Top 10 Shareholders; Analysis by Kalkine Group 

Risk Analysis:

• The company is exposed to market risk (including fair value and interest rate risk), credit risk, and liquidity risk.
• COVID-19 Led Uncertainties: The company is exposed to the prevailing global uncertainties related to COVID-19 and other geopolitical tensions.
• Stiff Competition: The company is exposed to stiff rivalry from competitors developing similar product lines and services.
• The company is also exposed to forex headwinds.

Outlook: The company’s authorisation to use CE mark clears the Dotz Test Kit for sale in the European Union, thus, generating additional sources of revenue. The company remains well-paced to ramp-up its commercialisation efforts across the diagnostics, authentication, and surface sanitisation solutions backed by its robust sales, marketing, and development activities. Further, the company’s differentiated virus detection technology enables fast and effective SARS-CoV-2 virus testing at scale, thus, aiming to increase its global addressable market across various industries and geographies and deliver on its growth strategy.

Stock Recommendation: Recently, the company appointed Mr. Gideon Shmuel as its Executive Director and Chief Executive Officer. Also, the company appointed Ms. Kerry Harpaz as a Non-Executive Director of the company. Both positions are effective immediately. The stock of the company went up by ~18.57% in the past three months. Currently, the stock is trading above the average of its 52-week high and low levels of A$0.435 and A$0.20, respectively. Considering the decent liquidity position, higher revenue base, robust product pipeline, FDA approvals, obtaining CE mark authorisation, strategic distribution deal, positive outlook, technical levels as mentioned below, current trading levels, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of A$0.415, up by ~1.22% as on 10 September 2021.

Technical Commentary:

On the daily chart, DTZ stock witnessed a breakout of an ascending triangle pattern at AUD 0.396 level on August 30, 2021, and prices are sustaining above the upper band of the pattern. The leading indicator RSI (14-Period) is trading at ~58.82 levels and indicating bullish momentum in the stock. An important support level for the stock is placed at AUD 0.34, while the key resistance level is placed at AUD 0.49.

DTZ Daily Technical Chart, Data Source: REFINITIV

Note: The purple color line in the chart depicts RSI (14-period).

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Technical Indicators Defined:-

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Disclaimer

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