Facedrive Inc

Facedrive Inc (TSXV: FD) is a multi-faceted company that operates in the technology sector. The company is fulfilling its mandate through a number of verticals that either leverage its existing technologies or project synergies with existing lines of business through its five verticals, that includes Facedrive Rideshare, Facedrive Marketplace, Facedrive Foods, Facedrive Social and Facedrive Health.

Key highlights

• Clocked record revenues in Q1 2021: The company garnered record revenue of CAD 4.2 million in Q1 2021, an increase of CAD 3.8 million, compared to CAD 0.38 million in the previous corresponding period. The Company generates substantially all of its revenue from Facedrive Rideshare and Facedrive Foods.
• Acquired EcoCRED: On April 14, 2021, the company announced that it had completed the acquisition of 100% of the equity ownership of EcoCRED, from Exelorate Enterprises, LLC, a wholly owned subsidiary of Exelon Corporation at the price of USD 1.0 million. We believe the acquisition would open new avenues of the growth for the company.
• Getting investment from Ontario’s government:Recently, the company announced that TraceSCAN, the COVID-19 wearable contact-tracing solution developed by its Facedrive Health vertical, has been endorsed with an investment by the Ontario Ministry of Economic Development. It would be receiving CAD 2.5 million under this agreement.
• Food delivery vertical showing substance:The company recently reported that their food delivery vertical, "Facedrive Foods," is seeing significant growth, with total orders exceeding 5,000 per day in mid-April 2021, representing a 5% month-over-month increase since February 2021. Moreover, in 19 locations throughout Canada, the firm worked with around 4905 eateries, totaling over 273,625 active users on a platform.
• The growing number of users and drivers:The number of registered Facedrive Rideshare drivers in Canada climbed to 19,696 as of March 31, 2021, up from 13,647 as of March 31, 2020, while the number of Rideshare users climbed to 67,278 from 46,138. 

Financial overview of Q1 2021 (In Canadian dollars)

Source: Company

• The company announced its Q1 2021 results, wherein it posted an increase in revenue at CAD 4.2 million, compared to CAD 0.38 million in the previous corresponding period (pcp). The rise in revenue was primarily due to healthy performance from Facedrive Foods segment where revenue stood at CAD 3.4 million, compared to nil revenue in pcp. 

• The company witnessed an increase in all line items under operating expenses, as a result the total operating expenses in the reported period increased to CAD 10.99 million compared to CAD 2.0 million in pcp.

• Operating loss in Q1 2021 rose to CAD 6.7 million, against CAD 1.6 million in the previous corresponding period, mainly due to higher operating expense, and amortization.

• Net loss stood at CAD 5.8 million, against CAD 1.4 million in pcp. The increase in net loss is primarily attributable to the growth and development of the Company during Fiscal 2020 and the costs associated with such growth and development.
• As on March 31, 2021, the Cash and cash equivalent stood at CAD 18.7 million, compared to CAD 3.9 million as of December 31, 2020. 

Risks associated with investments

The Company’s operating expenses have increased in the recent past, which is a reason for concern for the company. The solutions which are provided by the company can be replaced by other information technology firms, and hence might lead to price competition.

Stock recommendation

Thanks to a strong performance from the Facedrive food segment, the company started FY2021 with record revenues of CAD 4.2 million against CAD 0.38 million in pcp. It recently acquired EcoCRED, and we believe the acquisition will provide new opportunities for the company's growth. The TraceSCAN solution's concept is intriguing, and proper implementation would result in significant business prospects for the company. Moreover, the other applications like Facedrive Health and Facedrive Marketplace would generate revenues in the upcoming quarters, which is a key positive. The company is already witnessing growth from its food delivery vertical and rideshare vertical, where the number of orders executed, and the number of users and drivers are increasing, respectively. Based on technical analysis, the stock has a support at CAD 12.8 level. Hence, considering the aforesaid facts and decent growth prospects, we recommend a ‘Speculative Buy’ rating on the stock at the closing price of CAD 15.60 on June 01, 2021.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock if the price closes below the support level. 

One-Year Technical Price Chart (as on June 01, 2021). Analysis by Kalkine Group 

Computer Modelling Group Ltd

Computer Modelling Group Ltd. (TSX: CMG) is a Canada-based computer software technology company serving the oil and gas industry. The Company operates through the development and licensing of reservoir simulation software segment.

Key highlights

• Healthy operating profit: The Company continue to be profitable and have solid cash generation despite the ongoing economic challenges in the oil and gas industry. During fiscal 2021, operating profit rose and represented 45% of total revenue V/s 42% in the previous corresponding period.
• Consistently generating free cash flows: The resilience of the business helped the group in posting spirited performance. The company has witnessed consistent free cash flows, which is applaudable. In Q4 2021, the company’s free cash flow stood at CAD 5.75 million against CAD 6.84 million in the previous corresponding period. While on an annual basis, free cash flow stood at CAD 24.47 million.
• Industry beating margins: Despite the hard time for the industry and economy, the management’s solid determination helped them leaping the industry median margins on many fronts in FY2021, which is a key positive. The chart below gives a glimpse of this.

• Decent dividend yield: The company has a strong history of dividend payment, which establishes the fact that the company’s business is resilient and has reported stable cash flows over the years. Recently, the company announced a quarterly dividend of CAD0.05 per share, payable on June 15, 2021. Furthermore, at the last closing price, the stock was delivering a yield of 3.683%, which is decent amid the low interest rates.

Financial overview of FY 2021

Source: Company

• The company announced annual result, wherein it reported top line at CAD 67.3 million, lower than CAD 75.7 million in the previous corresponding period (pcp). The decline was primarily due to a 13.3% y-o-y decline in the Software license revenue to CAD 59.5 million.
• The company witnessed solid operational efficiency and reported a 16.6% slide in operating expenses over the previous corresponding period, supported by the reduced SM&P services, R&D expenses, and general expenses. Operating profit stood at CAD 30.5 million v/s CAD 31.7 million in pcp.
• Net and total comprehensive income stood at CAD 20.1 million v/s CAD 23.4 million in pcp, supported by lower operating expenses. 

Risks associated with investment

Annuity/maintenance license payments, which are mostly dependent on the oil and gas sector, are the company's primary source of revenue. The firm suffered a drop in income from the aforementioned sector owing to decreased capital allocation from the oil and gas industry firms for a significant portion of 2020 owing to the degradation of worldwide crude oil prices. If the current trend continues, the financials might fall.

Valuation Methodology (Illustrative): EV to EBITDA

Stock recommendation

Despite the chaos caused by the COVID-19 pandemic, the firm produced a good set of figures, outperforming the industry margin on many fronts, which is noteworthy. Furthermore, it maintained its free cash flow generation pace, with CAD 24.47 million. By altering its cost structure, the corporation also hopes to ensure the business's long-term viability. It has taken various cost reduction measures and is preserving its liquidity and maintaining a strong balance sheet to deal with this uncertain time. Furthermore, rising worldwide commodity prices are expected to promote future demand for the company's products from the oil and gas industry, which is a major plus. Based on technical analysis, the stock has a support at CAD 4.4 level. Therefore, based on the above rationale and valuation, we recommend a “Speculative Buy” rating on the stock at the closing price of CAD 5.43 on June 01, 2021.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached or if the price closes below the support level.

One-Year Technical Price Chart (as on June 01, 2021). Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.

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.