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 enterprise networks.

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.

Author ownership disclosure: Yes: TSXV: NVI

Read Disclaimer:

This 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 responsibility to update the information contained in this article. The information contained within this article should not be construed as offering of investment advice. Those seeking direct investment advice, should consult a qualified, registered, investment professional. This is not a direct or implied solicitation to buy or sell securities. Readers are advised to conduct their own due diligence prior to considering buying or selling any stock.

Investorfile.com 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.

The author of this article has acquired and may trade shares of Novra Technologies Inc. through open market transactions and for investment purposes only.