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Clean energy and healthcare growth play

Published: 13:24 17 Mar 2022 GMT

Dalrada Financial Corp (OTCQB:DFCO) is a global company that holds a portfolio of subsidiaries comprising early-stage high growth businesses within three verticals — healthcare, clean energy and information technology. In this note, we re-examine the growth dynamics and potential valuation upside.

In the December quarter, Dalrada grew revenues eleven-fold over the corresponding period in 2020 to US$5.4mln. The growth was driven by particularly impressive performance in the diagnostic testing business which experienced strong growth in on-site COVID-19 testing services. The group ended the period with US$181k of cash while the accounts receivable position expanded by US$1.8mln over the quarter to stand at US$6.0mln. This was primarily due to the COVID-19 test receivables taking up to three months to collect and hence we expect the debtor position to unwind over the coming quarters. After the period end, the group raised around US$2.7mln via convertible debentures.

COVID-19 testing has continued to perform well since the period end; however, with the pandemic easing, we anticipate the testing business will shift and expand its focus on other diagnostic capabilities the company is currently researching such as DNA analysis, liquid biopsy, syndromic assays, antibody level testing and other laboratory services. The pandemic has also left a diagnostic backlog as many patients put off routine check-ups, and with mandates now lifted will create an influx of opportunities for the company’s Empower laboratory services.

We expect the clean energy segment to become an increasingly important revenue driver for Dalrada. The company showcased the application of Likido heat pumps in the hospitality industry at the AHR Expo (Air-con, Heating, and Refrigeration) in Las Vegas in the first week of February. Likido systems can provide hot water for rooms, laundry and swimming pools and provides free cooling with an efficiency of 800%. This means that 1kW of electrical energy produces 8kW of thermal energy. One LikidoONE in the USA produces 800 US gallons of hot water per hour at 160 Fahrenheit for an electrical input of 46.1kW while a gas-fired boiler would use 203kW. These systems provide energy savings of up to 75% compared with existing systems and offer an important step forward for customers in terms of achieving their net-zero targets, with a 93% reduction in carbon equivalent emissions. Other applications for Likido heat pumps include industrial processing facilities, data centres, industrial drying, climate control facilities, district heating & cooling, pharmaceuticals, plastic packing recycling, food processing and energy harvesting. The company is currently installing its first three units in Spain and has a growing pipeline in the UK, EU, US, and Mexico. Furthermore, with recent fossil fuel prices on the rise, many countries are accelerating programmes for heat pump manufacturing to decarbonise heat. Consequently, we anticipate accelerating revenues from Likido through calendar years 2022 and 2023.

We will reassess our forecasts following the third-quarter results in May.

What's in the report?

Financial results and forecasts
Growth drivers
Management
Market conditions
Milestones & inflection points
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