Company Overview: Airtasker Limited (ASX: ART) is one of the Australia’s top online marketplace for connecting people, local services, as well as businesses. Since introducing in 2012, the company has aided over $1 billion in working prospects and served greater than 1 million unique paying customers. The company’s mission and vision involve empowering people to realise the full value of their skills.

ART Details

ART to Ride on Buyout Synergies and Decent Liquidity Position: Airtasker Limited (ASX: ART) is a leading marketplace in Australia for local services. The company’s market capitalisation as on 2 July 2021 stood at ~$459.25 million. The company got listed on the ASX on 23 March 2021, following the completion of a successful IPO. On 21 May 2021, the company informed the market that it has wrapped up the buyout of a US-based local services marketplace Zaarly, for a purchase consideration of around $3.4 million. The acquisition is in line with the company’s strategy to accelerate expansion in the United States - a $500 billion local services market. The move also aids ART to gain over 597,000 registered customers and over 900 verified service providers in the region. Apart from this, ART also completed a fully underwritten placement of 20.7 million new ordinary shares in Airtasker for an issue price of $1.00 per share to institutional, professional and sophisticated investors. The company intends to utilise these procced to fund the Zaarly acquisition and expand in key city markets in the US and UK.

Coming to 1HFY21 results, the company reported total revenues of $12.61 million, up from the year-ago figure of $9.37 million. Service revenue for the period increased from $8.19 million reported in 1HFY20 to $11.08 million in 1HFY21. The company has reported net loss of $2.05 million in 1HFY21, which declined from $7.07 million reported in the year-ago period. Subsequent to a fruitful listing on ASX on 23 March 2021, the company provided a market update for its 3QFY21 period ending 31 March 202. During the quarter, the company’s results outperformed the prospectus expectations, with costs lower than forecast. Gross marketplace volume (GMV) for the March quarter stood at $41.2 million (unaudited), depicting ~57.9% of the 2HFY21 prospectus estimate of $71.3 million. During the quarter, revenues also outpaced the 59.7% of the 2HFY21 prospectus forecast of $11.9 million and came in at $7.1 million (unaudited). The company also remains on track to expand its foothold in the international market. In the UK, organic growth enhanced owing to recovery in Covid-19 with marginal marketing investment. Further, the company also established its London marketing team and delivered robust ROI. With zero marketing investments, the company opened markets in the US with immediate and growing demand side interest.

Revenues Trend; Analysis by Kalkine Group

Key Metrics, Healthy Balance Sheet, and Decent Liquidity: The company has a strong financial position with a cash balance amounting to $14.72 million at the of 1HFY21, reflecting the robust cash generative nature of the business. Total debt at the end of the period stood ~0.571 million. Net cash from operating activities came in at $4.27 million in 1HFY21, up from net cash outflow of $1.03 million reported in the year-ago period. Notably, in 3QFY21, the company’s cash flow from operating activities (unaudited and including IPO costs), was positive $484k. Excluding IPO costs, the company generated operating cash flow of $2.1 million in 3QFY21. As at 31 March 2021, the company’s cash balance stood at $29.7 million. A healthy balance sheet will help the company to attain its long-term objectives and will aid the company to enhance its shareholder’s value and pursue a further strategic acquisition.

In FY20, the company’s EBITDA margins stood at -46%, which improved from the year-ago period figure of -197.8%. Net margins in the same time span stood at -53.1%, as compared to -210.1% reported in the year-ago period. In FY20, the company’s current ratio came in at 0.48x, higher than 0.40x reported in FY19.

Profitability and Liquidity Profile; Analysis by Kalkine Group  

Top 10 Shareholders: The top 10 shareholders together form around 53.86% of the total shareholdings, while the top 4 constitutes the maximum holding. Hammond (Peter) held the maximum number of shares with a percentage holding of 14.32%, followed by Bai (Xiaofan Fred) holding 13.76%, as also highlighted in the chart below: 

Top 10 Shareholders; Analysis by Kalkine Group 

Risk Analysis: ART operates an online marketplace and is dependant on technology for the seamless functioning of its business. Stiff competition is expected to rise as market competitors grow in number and the current ones develop their product lines and services with modernised technologies to entice customers and maintain the present ones. Thus, retaining robust and long-term customer relationships is a tough task in the midst of stiff competition. ART is acquiring many companies, which results in some integration risk. Also, regular acquisitions are a diversion for management, which could impact organic growth. Also, market pressures, regulatory and legislative pressures, limited trading history as the company got listed on ASX in March 2021 along with losses in 1HFY21 remain major concerns. 

Outlook: As per the management, ART’s operational and financial performance has been robust since the commencement of 2HFY21, despite the impact of the COVID-19 pandemic and the following lockdowns. The company remains optimistic to exceed prospectus forecasts and upgrades FY21 GMV and Revenue estimates. For FY21, ART now predicts GMV to be in the range of $148-$152 million, up from the prospectus forecast of $143.7 million. Revenues for FY21 are expected to be in the range of $25.5-$26 million, as compared to $24.5 million of prospectus forecast. Further, the company expects FY21 GMV’s total addressable market in Australia to be in the range of $148-152 million. This places the company’s business for accelerated growth in FY21 and beyond. Going forward, the company’s growth strategies, expansion of product suite, acquisition synergies, and other investments are expected to boost the top-line growth of the business.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative) 

Source: Analysis by Kalkine Group 

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks. 

Stock Recommendation: The stock of the company has been corrected by ~3.03% in the past three months. Currently, the stock is trading below the average of its 52-week’s high and low levels of $1.965 and $0.880, respectively. We have valued the stock using an EV/Sales multiple based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). We believe that the company might trade at a slight discount as compared to its peer average, considering stiff competition from peers, integration risk, market pressures, regulatory and legislative pressures, limited trading history along with losses in 1HFY21. For that purpose, we have considered peers such as Seek Ltd (ASX: SEK), REA Group Ltd (ASX: REA), to name a few. Considering the increase in revenues in 1HFY21, decent liquidity position, positive long-term outlook, synergies from buyout, current trading levels, and valuation, along with key risk associated with the business (as stated above), we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $1.12, up by 0.9% as on 2 July 2021.

ART Daily Technical Chart, Data Source: REFINITIV 

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above. 

Technical Indicators Defined:-

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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