4 Small-cap Stocks – SYT, VHT, RBL and SCO

Syntonic Limited

New Business Opportunity for Growth: Syntonic Limited’s (ASX: SYT)stock surged 7.692% on April 03, 2018, after the company signed an agreement with turkey’s AKTAY A.S., who has been secured as a reseller of Syntonic DataFlex. As per the agreement, AKTAY A.S. has agreed to meet an aggregate minimum gross revenue of US$5 Mn, subject to a 50% sale commission between the calendar year 2018 and the calendar year 2021. If the minimum gross revenue for any given year is not achieved, AKTAY A.S. will be liable to pay full amount to Syntonic for that given period and will forego its rights to receive its sales commission until the applicable minimum amount is paid. The combined qualified gross revenue for this year and next year would be US$1.25 Mn, which will jump to US$1.5 Mn in 2020 and US$2.25 Mn in 2021. Syntonic has given right to AKTAY to promote, market and resell the Syntonic DataFlex services to AKTAY’s customers within Turkey, Greece, Ukraine, Azerbaijan and the Republic of Cyprus. On the other hand, the company extended its customer reach with the Freeway service and platform technologies in the month of February. As a result of this, Syntonic achieved 7.8% month-on-month growth in the Freeway global installed base in February. The company is consistently exceeding its near-term target of 25% quarter-over-quarter growth in Freeway deployments. The growth of freeway global installed base is a key indicator of Syntonic’s future revenue potential. Eventually, Syntonic continues to build a robust foundation for business success in future. The stock was down by 56.67 per cent in the past six months and slipped by 18.75 per cent in the past one month as on March 29, 2018. SYT went into a trading halt by the close of trading on April 03, 2018; and will remain in such session until April 06, 2018 or when a key announcement is released by the group.
 

Freeway Global Installed Base Trend (Source: Company Reports)
 

Volpara Health Technologies Limited

VHT Exceeded Annual Recurring Revenue Target for FY18: Volpara Health Technologies Limited’s (ASX: VHT) stock surged up about 6.9% on April 03, 2018 with the release of a key update. VHT is a digital health company, focussed on early detection of breast cancer through improving quality of screening using artificial intelligence (AI) technology. The company has announced that it has exceeded its goal of lifting Annual Recurring Revenue (ARR) by 200 per cent for FY18. As a result of this, Volpara’s ARR now stands at NZ$3.6 Mn as compared to NZ$1.1 Mn at the end of FY2017, an increase of 223 per cent and exceeding FY2018 guidance by 23%. Total contract value (TCV) exceeded NZ$11.2 Mn, up 173 per cent on the prior period’s NZ$4.1 Mn. Additionally, the company also indicated that approximately 3.2 per cent of all women screened in the United States are now contracted to Volpara's software (approximately 1.27 Mn women), compared to the target for the year of 3 per cent.On the other hand, Paul Reid was appointed as a non-executive director of the Company. The company remains focussed on delivering innovative and market-leading solutions and continues to broaden and evolve the range of solutions to suit customers’ needs in existing and new territories. Meanwhile, the stock price has been up by 12.50 per cent in the past six months as on March 29, 2018. However, the stock is already trading at a higher level and looks “Expensive” at the current price of $0.77
 

Growth in Annual Recurring Revenue (Source: Company Reports)
 

Redbubble Limited

Strong and Healthy Marketplace Dynamics: Redbubble Ltd (ASX: RBL) is a global online marketplace for print on demand products based on user submitted artwork. Over the first half of FY18, the group has delivered topline growth of 30% to $102 Mn. The topline flagged up due to solid trading performance during the Thanksgiving (including Black Friday and Cyber Monday) and Christmas holiday seasons as well as the “Back to School” period in the northern hemisphere. Gross profit margin was moderately down by ~ 110 bps to 34.5% in 1HFY18 from 35.6% in 1HFY17 due to seasonal difference in product mix, and pricing and promotional activity during the same period. EBITDA stood at $0.9 Mn in first half of the year, up 186.5% on YoY basis. However, net loss after tax came at $2.3 Mn in 1HFY18 from $2.8 Mn in 1HFY17. The business delivered positive cash flow of $18.6 Mn for the half with cash flow from operating activities contributing $22.8 Mn. During the period, customer number increased by 40.2% YoY to 2.35 Mn whereas selling artist increased by 33.1% YoY to 218,800. The company continues to display significant momentum and is building strong fundamentals over the period. Marketplace dynamics also remain healthy and strong. Meanwhile, the stock prices were up by 141.6 per cent in the past six months and inched up by 4.49 per cent in last five days as on March 29, 2018. We give an “Expensive” recommendation on the stock at the current market price of $1.845 and would look for better buying opportunity at a later date.
 

Consistent Growth in Customers, Artists and Fulfilments (Source: Company Reports)
 

Scottish Pacific Group Limited

In Line Performance: Scottish Pacific Group Ltd (ASX: SCO) has reported 8.8% YoY (year on year) growth in net revenue at $54.3 Mn in 1HFY18 on the back of overall product mix growth. EBITDA stood at $26.6 Mn in first half of the year, up 8.6% on YoY basis. NPAT came at $14.5 Mn in 1HFY18 from $13 Mn in 1HFY17, marking a growth of 11.5% YoY. NPATA grew by 10% to $16.5 Mn in 1HFY18 from $15 Mn in 1HFY17. Further, the Board of Directors declared a fully franked interim dividend of 9 cents per share. This represents a payout ratio of 75.9% of Pro-forma NPATA which is within the target pay-out ratio range of 60-80%. The strong growth in the loan book has been achieved by the combination of new business and close to 20% larger average lend per customer. However, the mix of book has changed and higher fee customers from acquired portfolios are replaced with better quality customers. In 2HFY18, the company will launch working capital finance loans to select, pre-approved customers to secured over debtors and other assets. On the other hand, the company announced that Wilson Asset Management Group (WAM) became the substantial holder since 23 March 2018 by holding 9,162,653 of securities with 6.58% voting power. While Yarra Funds Management Limited and other related groups, a substantial holder of Scottish Pacific Group Limited changed its holding from 7.7582% of interest to 9.5313%. Furthermore, the group reaffirms its FY18 guidance of high single digit PBIT growth on the back of strong topline growth and cost control strategy. Meanwhile, the stock price inclined by 12.11% in the past six months and we give a “Hold” recommendation on the stock at the current market price of $3.13


Revenue Growth (Source: Company Reports)

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