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Date : 15/01/2021

Weebit Nano

ASX :

WBT

Market Cap : $215.36 Million

Buy

52 Week Range : $0.20 - $3.19

Share Price : $2.96

With the company close to commercialisation, WBT is positioned well for their recent equity raise. We continue to hold out a "Buy" recommendation.

Company Analysis

Weebit Nano (ASX: WBT) has become one of the most talked about stocks on the ASX off late, and it has not been just talk. The stock performance in the past year has been incredible. WBT has been one of the top grossing stocks for our members in the past 3 months. Our last recommendation was a buy at a share price of $1.76 on the 8th of December. We even told all eligible members to go ahead and participate in the Share Purchase Plan that was on offer at an issue price of $1.70 a share. Fast forward a month, the stock currently trades at $2.96 a share with a lot of upward momentum behind it. This surge represents 74% return to members who participated in the Share Purchase Plan, and a 244% return in the last 3 months.


Source: Tradingview.com

Even with these stellar performances, it’s not over yet for WBT. We reckon they are just getting started in 2021.

Cash Runway & Commercialisation

With the recent equity raise through the private placement and SPP, Weebit Nano has raised $15 million. Their burn rate has been just over $1 million per quarter. Weebit Nano has confirmed that the funds will be utilised for the next development phase for the standalone memory market and increase their activities to begin commercialisation in the embedded memory market. Neuromorphic technology research is also an area where some of these funds will go towards. This additional research may open further pathways for revenue generation in the future.

The cash runway is estimated to be around $19 million for the firm as it moves into the new year. Additionally, WBT is holding on to Option contracts that are worth $18.5 million. These option contracts have been written with a strike price of 45 cents – making them in the money and bound to be exercised.

Timely funding is one of the risks that investors consider and take on when investing in such a young firm. With the recent equity raise and strong cash position, WBT is set up for commercialisation and looks like they will start generating revenues in FY2021. This considerably reduces the discount rate and de-risks the investment and hence has been one of the major causes for the stock price skyrocketing.


Source: WBT

Management & Directors

Purchase of shares by the directors of a company is a good sign to investors as it reinforces them that the directors believe in what they are doing and are confident of delivering growth in shareholder value. During December, six directors of WBT exercised unlisted Option contracts and increased their stake in the firm. These are good signs as it’s not just us who are confident of WBT commercialising its operations in 2021, but it’s also their directors.

Ishai Naveh is a very well-known figure in the semiconductor industry having co-founded Adesto. He has over 35 years of experience and has worked on process development, integration, manufacturing, setting technology requirements, addressing customer needs, etc. Ishai has been brought in as the new Chief Technology Officer at WBT. This is a highly competitive industry with potential competitors coming up in the future. The appointment and the timeline of WBT’s commercialisation plans go hand-in-hand.

There are two types of commercial deals we are keeping an eye on – license agreements with bigger players that will bring in royalties for WBT, and direct selling of their product. This opens up two different revenue models for Weebit Nano. The size of the market and the potential remains the same from our previous coverage of the stock. Members can click here to view our report for a deep dive into the commercialisation opportunity and outlook for Weebit Nano during 2021.

Recommendation

The recent equity raise de-risks the investment in WBT. It also better positions the firm for the all-important commercialisation phase that is expected to occur mid-2021. The market opportunity remains huge and we reiterate our “Buy” recommendation.

 

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