TOP IDEAS: Novra Technologies Inc. (TSXV: NVI) is set
to emerge stronger from a tough year in 2020 due to COVID as its sales
pipelines rebuild and new products launch in 2021. Investofile reiterates its
target to accumulate the shares up to a price of C$0.30.
We acknowledge that COVID-19 had a
big impact on Novra Technologies’ business as sales fell off sharply in 2020.
However, it also appears that the Company has weathered this storm and revenues
and profits could resurface again some time in 2021.
Based in Winnipeg, Manitoba, Novra Technologies Inc.
(TSXV: NVI – C$0.085) is the parent company of the Novra Group of Companies,
which includes Kanata, Ontario-based International Datacasting Corporation
(IDC) and Georgia, USA-based Wegener Corporation.
Novra is an international technology provider of
products, systems and services for the distribution of broadband multimedia
content via satellite and hybrid networks. The Company’s product applications
focus on broadcast video and radio, digital cinema and digital signage,
providing highly reliable data communications for digital content. Customers
include major broadcasters and service providers, as well as government and
The disruption in business caused
by COVID-19 had a significant impact on Novra’s hardware sales for most of last
year (services revenue less so). For the nine-month period ended
September 30, 2020, revenues were down over 50% to C$3.3 million and the Company
reported negative EBITDA OF C$600,000 during this same period.
But, going forward for Novra, things do not appear to
be so bleak.
A glimpse at the Company’s Q3 2020
Management Discussion & Analysis (MD&A) filing may tell a different
story. As highlighted in this document and subsequent to the end of Q3, new
order activity and deliveries of product to major radio broadcasters and
communications providers worldwide have picked up, suggesting 2021 could be a
turnaround year for Novra.
Despite the decline in sales, Novra is still in a
relatively strong financial position. Management’s expense control and cash
management strategies last year, along with use of government disaster relief
programs related to COVID-19, resulted in positive cash flows for the nine-month
reporting period in 2020. As of September 30, 2020, the Company had over C$3.2
million in cash and no traditional bank debt on its balance sheet.
For preparation of this blog post, we spoke to the CEO
of Novra Technologies, Harris Lonitas. While he expressed his disappointment
with the total revenues reported to date, he indicated that most of the
hardware sales where not lost in 2020 but, rather, just delayed and there will
be a catch-up period. While the sales outlook for the Company is improving
vastly compared to last year, there is some uncertainty in supply chains for
electronic components which have extended manufacturing lead times.
The Company’s R&D activities continue
to remain very active, in that a number of new products are ready for roll-outs
in 2021 within its traditional markets. According to the CEO, recent R&D
efforts have developed (yet-to-be-announced) new product technologies in a new vertical
for the Company. Novra continues to expense all of its R&D costs, which is
a more conservative reporting method.
Investorfile admits that Novra Technologies is one of
the very few of our Top Ideas that (as of yet) has not met our expectations.
Yes, it is true, that since we first recommended this stock as a small cap
value pick, the value of shares had appreciated in value as high as 90%. (See: Novra Technologies is getting bigger and the stock is
a value buy). But now the stock trades at a share price which is
almost 45% lower since the day Investorfile initiated coverage on the Company.
With that said, we still think that Novra Technologies
is a viable microcap investment for investors with a longer-term investment
horizon. With a current market capitalization that is less than the value of
the Company’s cash holdings, an investment in this stock is compelling, given
its turnaround prospects. As such, Investorfile reiterates its recommendation
to accumulate the shares of Novra Technologies up to a price of C$0.30. For
those investors who can acquire these shares with an average cost base around
C$0.20 (which is less than one-times the Company’s 2019 sales), we see
tremendous value for significant capital gains as Novra’s business operation
normalizes, plus the added growth potential from new product releases.
In Investorfile’s introductory blog
post on Novra, we noted that the Crocus Investment Fund, a Manitoba-based Canadian
Labour-Sponsored Fund that is in receivership, owned about 11% of the Company’s
outstanding shares. While the Crocus Investment Fund is no longer reported as a
major shareholder of Novra Technologies, we still believe the trustee for the
Fund is liquidating the remaining shares it still owns and, as such as of late,
this has been an overhang on the stock price. We feel this liquidation process
(while it lasts), provides a great buying opportunity for new investors to
accumulate the stock.
As reported to date, the largest
shareholder of Novra Technologies is the Company’s CEO with 15.5% ownership.
The Company has about 33.3 million shares outstanding.
Novra Technologies websites: www.novra.com and www.novragroup.com.
ownership disclosure: Yes: TSXV: NVI
article is for informational purposes only. This article is based on the
author's independent analysis and judgment and does not guarantee the
information's accuracy or completeness. The information contained in this
article is subject to change without notice, and the author assumes no
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information contained within this article should not be construed as offering
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is not engaged in an investor relations agreement with Novra Technologies Inc. nor
has it received any compensation from Novra Technologies Inc. for the
preparation or distribution of this article.
author of this article has acquired and may trade shares of Novra Technologies
Inc. through open market transactions and for investment purposes only.