Unchanged DCF derived valuation of $0.27/share

RaaS update report 31 January 2023

X2M Connect (ASX:X2M) – Tracking in-line across key variables

X2M Connect (ASX:X2M), which is focused on digitising the utilities sector across APAC with its proprietary technology, has delivered its maiden operating cashflow profit in Q2 FY23 of $0.389m driven by a 42% increase quarter on quarter in cash receipts to $7.2m.

Key points from the result: Most key variables were in-line or ahead of Research as a Service (RaaS) expectations including a cash-flow positive Q2, device growth of 23% on September 2022 to 361k (RaaS 345k), H1 FY23 revenue +96% to $9.0m (RaaS $9.2m), cash costs of ~$4.3m (RaaS $4.6m) and a cash balance of $3.05m; X2M finished the quarter with $3.05m in cash, aided by increased customer deposits, a $1.0m loan in advance of the expected FY23 R&D claim, and strong revenue growth (+96%). Post balance we estimate cash of $3.5m from the R&D tax credit; We view customer deposits as a continuing and sustainable source of funding given arrangements in place with a number of South Korean municipalities, taking significant pressure off working capital. Our DCF-derived valuation is $0.27/share, against a reference price of $0.095/share at last close.

Select the link to read the full article by Research as a Service (RaaS): RaaS Update Report 31 January