DiSa Ltd

DiSa Ltd | Buy

Fair value: 2 cents

Aug 30 close: 0.08 cent

Broker: KGI Securities, Aug 30

DiSa's technology business continues to exhibit strong growth.

Sale of Digital Safety (DiSa) codes rose 87.8 per cent year on year to $169,000 in financial year 2018 (FY2018), becoming the main driver of revenue.

Revenue contributions from the technology business are now 71 per cent of total revenue, compared to 28 per cent in FY2017. As a result, gross margins rose to 72 per cent in FY2018, compared to 35 per cent in FY2017, and we expect further margin expansion as momentum in the technology business picks up.

However, operating margins remain weak even as net cash position improves.

Operating losses declined 43.8 per cent year on year to $9.68 million, driven by one-time items, an increase in operating lease and employee benefit expenses as business picks up in the United States.

Among risks are slow user adoption and a breach in DiSa's encryption that could lead to reputational damages and a decline in revenue. Going concern could become a problem if DiSa fails to scale and cover its burn rate.

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