Company: Dorsavi Ltd
Ticker: ASX:DVL
Sector: Artificial Intelligence / Bio-Tech
What Does DVL Do?
AI-enabled wearable sensors that accurately capture and analyse movement and muscle activity, which allows customers to assess particular injuries, understand who is performing high risk movements and how to mitigate these injuries, particularly in Elite Sports, Occupational Health and Safety (OH&S) and medical/physiotherapy markets.
We like this simplistic yet effective technology, as it also allows the market to easily digest DVL and its products.
DVL Recent Performance
Since July 2022, DVL has been soaking and creating a strong base between $0.011 and $0.017. Relatively speaking, we believe DVL has been quite resilient during this period, given the pandemic, increasing interest rates and general bearish sentiment towards tech since 2022. This base now provides a solid foundation for an investment entry, with fair upside potential on the provision of incoming AI sector tailwinds and share price catalysts.
What is The Sector Thematic?
AI is making a resurgence early in 2024 after a depressed back half of 2023, and with a change of sentiment we believe the strong tail winds can continue, driven by the large AI thematic and it being the fasted growing industry in the history of humanity.
AI leader, Nvidia, is up over 400% in the last 12 months taking its market cap to an astounding US $2 trillion, which has also instigated ASX AI leader Brainchip Holdings Ltd to recently break out of its multi-year lows with its share price growing from $0.16 to $0.49 in under a month.
What Do We Like About DVL?
Tiny Market Cap & Low Base
As of writing this, DVL is capped at just ~$8.9m, making it one of the cheapest AI focused companies on the ASX.
At this market cap and after almost two years of creating a base around ~$0.015, DVL has a good risk vs reward to significantly re-rate if it can deliver on its ‘Next Growth Phase’ strategy.
Decades of R & D – Not a Flash In The Pan
Co-founder and CEO Andrew Ronchi has been developing this technology since the year 2000, which has resulted in tens of millions of dollars in product innovation and development.
Importantly, over this time DVL has established itself in the emerging wearable sensors market, developing a strong reputation and meaningful relationships, leading to an established pipeline of sales, proving viability of their product and business model.
Growing Market For Wearable Sensors
The Wearable Sensors Market size is estimated at US $4.36bn in 2024, and is expected to reach US $7.83bn by 2029, growing at a CAGR of 12.41% during the forecast period (2024-2029).
This increasing demand for wellness monitors and fitness trackers is a crucial factor driving this growth.
The Sports & Fitness sector for example has seen a prominent shift towards wearable performance devices due to the advancements in technology which have allowed everyday consumers, individual athletes, sports teams and physicians to monitor functional movements, workloads and biometric markers to increase performance and recovery.
Through innovation, DVL has also diversified their technology to other emerging sectors, gaining an early movers advantage in markets such as OH&S and medical/physiotherapy.
Gaining Momentum Through Repeat Business With Industry Giants
DVL have longstanding contracts, notably with QBE ($26bn market cap), to deliver ergonomic insights and strategies to limit injuries at work to QBE’s client base.
Not only does this provide a strong source of revenue, but it also allows DVL to directly target large scale entities who could directly benefit from their market leading technology.
DVL also has agreements with BHP ($226bn market cap), Woolworths ($40bn market cap), Caterpillar ($167bn market cap) and Boeing ($124bn market cap) who have continued to request DVL services, seeking data insights and preventative initiatives to reduce their workplace injuries.
We believe these references will be critical in penetrating the US market and executing DVLs ‘Next Phase of Growth’.
Recent Business Model Transition to SaaS
In 2021, DVL transitioned from a ‘once off consulting’ revenue structure, to a recurring Software as a Service (SaaS) revenue structure. This now makes DVLs products easily scalable, significantly decreasing overheads and increasing its potential for recurring revenue and higher margins.
From its implementation DVL has crystalised its efficacy, demonstrated by some key financial metrics. For example, Operating Cash Outflows were $9.8m in FY 2018, compared to $1.6m in FY 2023.
Generating Revenue, Strong Tailwinds & Pursuing Next Phase of Growth
With the impacts of the pandemic, rising inflation and hiking of interest rates, which significantly impacted junior tech stocks, DVL still managed to achieve an average of ~$2m revenue per annum over 4 years.
With these constraints largely in the rear view and some strong tailwinds now developing, if DVL can continue to maintain their low Operating Cash Outflows and execute on its strategy to penetrate the U.S workplace market (US $2.5bn) it provides meaningful room for revenue growth and ultimately profitability.
Further, DVL has global approvals (FDA, TGA, CE Mark) for its products which are classed as a ‘medical grade’ wearable. This effectively means that DVL has approval to market and sell its AI-enabled sensor technology to major corporations and government agencies in the U.S, Australia & Europe.
Directors With Skin In The Game, Share-Based Salaries & Strong Alignment With Shareholders
Total director holdings equate to approximately 21% of the register (undiluted). Further to this, directors have spent ~$4.2m purchasing shares on market and/or in placements, with a collective average of $0.09 per share. This is a significant premium to the current share price of $0.015
Moreover, Mr Ronchi (CEO & Founder) opted to take 21% of his annual salary ($220k) in share-based payments, whilst the remaining board of directors have opted to take 100% of their annual salaries ($44k) in share-based payments, for every year since 2020.
It is clear to us that the board of directors and senior company leaders have genuine incentives to see share price appreciation and are strongly aligned with shareholders.
Tight Top 20 Register & Long-Term Holders
DVL maintains a tight capital structure with the Top 20 shareholders holding 59% of the register, in addition to 48% of the register consisting of DVL directors, lead brokers or associates of the before mentioned.
Additionally, these key players within the Top 20 have been significantly increasing their position, adding over 100 million shares since 2021.
Share Price Catalysts & Our Expectations
Increase revenue and profit
DVL revenues and profit have largely been stagnate for several years for reasons previously mentioned. With these constraints in the rear view, DVL has already signed some interesting partnership deals in the U.S (Norton Healthcare, Georgia University), and we would like to see DVL materially increase their revenues during 2024.
Execute ‘Next Phase of Growth’ Strategy
We would like to see DVL aggressively penetrate the U.S market via two specific market segments, workplace and clinical. Executing a contract with a tier one enterprise customer we believe would act as a significant share price catalyst and vindicate management’s strategy
Peer Comparison
| Equal & Comparable Peer Analysis | |||
| ASX: DVL | ASX: WHK | ASX: W2V | |
| Market cap (Fully Diluted) | $8.9m | $13.7m | $20.2M |
| Enterprise valuation | $8.0m | $12.5m | $21.6M |
| Cash | $0.8m | $2m | $0.71M |
| Debt | $0 | $0.8m | $2.1M |
| Top 20 Ownership | ~59% | ~39% | ~25% |
| Director Ownership | ~21% | ~8% | ~13.8% |
| Flagship product | AI-enabled wearable sensors | AI based cybersecurity | AI-driven automated auditing product |
| Annual Revenue FY22/23 | $1.8m | $3.2m | $3.3M |
| Operating Loss FY22/23 | ($1.8m) | ($1.7m) | ($1.7M) |
Cheapest AI Company on The ASX
Boasting one of, if not the smallest market cap in relation to AI focused ASX companies, a tight register and highest insider ownership it provides clear upside potential. Additionally, with recurring revenue and the implementation of strategies to expand and increase sales in the short term, DVL offers a very attractive risk vs reward thesis.
Reward Peer Comments
Market leaders outside of Australia have validated DVLs product, with several companies within the U.S generating significant interest and sales.
These companies include:
- StrongArm Technologies (Private Company) – U.S based technology company providing wearable devices which provide data and insights for industrial workers in effort to reduce work place injuries. In 2022, StrongArm Technologies generated significant interest and received US $50 million in funding, valuing the company at US ~$200 million. It is reported StrongArm Technologies generate approximately US ~$26.3 million per annum.
- Whoop (Private Company) – U.S based technology company which provides wearables devices which track recovery, cardiovascular strain, and sleep. In 2021, Whoop raised $200 million led by SoftBank’s Vision Fund 2, at a valuation of $3.6 billion. Although not an exact like for like comparison, it does demonstrate the U.S interest in wearable device technology.
Investment Risks
Dilution
Challenging market conditions have required DVL raise capital on several occasions over the past two years. Whilst we believe market conditions are turning, dilution remains a risk as it is for all ASX junior companies
Macro Environment
The past few years have been a challenging bear market for majority of ASX listed junior companies and as with all bear markets, they can continue longer than anyone expects, potentially taking DVL share price with it.
New Competitors
The technology sector is increasingly competitive and new market entrants or established companies do pose a threat of taking potential DVL market share