Extreme Vehicle Battery Technologies Corp

Extreme Vehicle Battery Technologies Corp (CSE: ACDC) is a blockchain and battery technology company with revolutionary, patented Battery Management Systems (BMS) designed to meet the growing demand for scalable, smart solutions for the rapidly growing Electric Vehicle (EV) and Energy Storage Solution (ESS) markets.

Key Highlights:

• New Product Launch: The group declared the launch of its first product IoniX Pro TITAN Series, which is targeted for large scale mega markets, such as renewable energy, major industrial and cities. The company expects the above product to exceed the current requirements and meet the “smart” grid integration requirements in the coming years. The company expects revenue from the above product in the coming quarters. 

• Scope of expansion: As most of the developed economies are leaning towards solar power and replacing oil and gas energies, we believe the long-term outlook of the EV segment remains strong in the coming years, which is a key positive and is expected to support the company’s operations. 

• Positive Technical Indicators: From the weekly chart analysis standpoint, its shares are hovering in a bullish price zone with its shares traded above the crucial short-term as well as long-term support levels of 50-day and 200-day SMAs and EMAs. Further, the leading momentum indicator the 14-day and 9-day RSI is hovering in neutral zone, and mostly tilted towards the overbought zone. However, on the daily price chart the stock traded below its immediate support levels of 5-day,10-day and 20-day SMAs, but long-term bullish stance is still intact, as on the daily price chart, the stock is still hovering above the crucial long-term as well as short-term support levels of 200-day and 50-day SMAs. Therefore, technical indicators suggest a further upside from the present trading levels.

Financial Highlights

Source: Company Filings

• For the quarter ended October 2020, the company reported total expenses of CAD 0.405 million, as compared to CAD 0.169 million in Q3FY19.
• Net loss and comprehensive loss for the period stood at CAD 0.404 million, as compared to CAD 0.167 million in Q3FY19.
• The group reported cash balance of CAD 0.17 million, while total assets were recorded at CAD 1.248 million.

Risks: The company is in its nascent stage and has launched its products recently. There is a possibility that the product might witness lower traction and might not perform as per the company’s expectations, which would remain a key concern. Further, since it is a small-cap company, investors are exposed to liquidity risks as well.

Stock Recommendation: The stock of ACDC moved ~944% in the last three months, as investors are leaning towards the stock due to its recent product launch. The company caters to the Electric Vehicle segment, wherein the scope remains enormous, as most of the countries are moving to renewable energy sources due to lower carbon emissions norms. However, investment in ACDC is subject to many risks including liquidity risks, price consolidation as stock has surged humongous over the past three months and business operation and future expansion of the company is heavily dependent upon continued funding to fund the operation and expansion. Hence, considering scope of expansion in the industry, the bullish technical indicators and risk associated with the investment, we recommend a ‘Speculative Buy’ on the stock of ACDC on February 22, 2021 at the closing price of CAD 0.47. We recommend investors to access their risk profile before entering into the stock.

ACDC Daily Technical Chart (as on February 22, 2021). Source: Refinitiv (Thomson Reuters)

Imaflex Inc.

Imaflex Inc. (TSXV: IFX) specializes in the manufacturing and sale of polyethylene films. The principal activities of the Company and its subsidiary consist in the manufacture and sale of products for the packaging industry, including polyethylene film and bags, as well as the metallization of plastic film for the plasticulture and packaging industries.

Key Highlights 

• Inspiring Financials: Thecompany has shown a resilient operational performance backed by a strong line-up of innovative products in the past few years. Gross margin and EBITDA margin grew from 10% and 5% in FY15 to 18% and 16% in H1 2020, respectively. Furthermore, the company is well-positioned to drive sales and margin expansion based on a strong core and ADVASEAL and investments in new production equipment, heightening sales and profitability.

Source: Company 

• Innovative and proprietary solutions:The Company continues to develop innovative and proprietary solutions. From now on, they hope to capture a much larger share of the agriculture film market due to its advanced crop protection and yield enhancement products, such as ADVASEAL. The management believes the value of the global addressable market for an active ingredient release film like ADVASEAL would be much larger than that for traditional mulch films. In the U.S. alone, the Company estimates that approximately 130 million pounds of mulch film is being used, resulting in an estimated total addressable market for ADVASEAL of approximately USD 750 million.

• Healthy liquidity: Strong cash flow generation and disciplined capital allocation continued to strengthen the company's balance sheet. As at September 30, 2020, they had access to CAD 14.3 million of cash for operating activities, comprised of CAD 2.3 million of cash, along with the full CAD12.0 million available under its revolving line of credit. 

Financial overview of Q3 2020 (In thousands of CAD)

Source: Company 

• In Q3 2020, the company registered a growth of 19.3% in revenue to CAD 22.9 million, against CAD 19.1 million in the previous corresponding period. The increase was driven by robust, flexible packaging sales volumes and heightened sales of agricultural films and converted products.
• Gross profit in Q3 2020 stood at CAD 4.3 million, against CAD 2.5 million in pcp. The improvement was driven mainly by the more significant sales volumes, diminishing the impact of labour and overhead costs relative to sales, and heightened control of the Corporation’s variable production costs.
• On the back of higher revenue and lower finance cost, the company posted a healthy EBIT of CAD 2.4 million, against CAD 1.8 million in Q3 2019, partially offset by higher selling and administrative expenses.
• Net income came at CAD 1.2 million in Q3 2020, against CAD 0.4 million in pcp. Higher gross profit helped the company to post higher net income, partially offset by foreign exchange loss of CAD 0.4 million. 

Risks associated with investment

The Company is involved in a competitive industry and marketplace in which there are many participants. There are several other challenges like shortage of labour, poor revenue mix, higher input costs, which might drag the company’s overall performance. 

Stock recommendation

The Company’s ability to develop innovative solutions while offering high-quality products and service gives it a competitive edge. Combined with its ability to take on smaller orders with short lead times and at competitive prices also helps the Company to create customer loyalty, which is a positive factor. Furthermore, operationally, they are anticipating growth and increased profitability resulting from their recent equipment purchases. Moreover, the management is optimistic on the fourth quarter of 2020 revenues and profitability to surpass 2019 levels. On the valuation front, the stock is available at a forward EV/Sales multiple of 0.7x against the industry (Containers & Packaging) median of 1.4x. Hence, considering the aforesaid rationale, we recommend a “Hold” rating on the stock at the closing price of CAD 1.13 on February 22, 2021.

Source: Refinitiv (Thomson Reuters)

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.