Bravura Solutions Limited

BVS Details

Latest Developments: Bravura Solutions Limited (ASX: BVS) offers software solutions to life insurance, funds administration, and wealth management advisers, and end consumers across the UK, Asia, Europe, Africa, Australia, and New Zealand.

• On 11 March 2022, Werner Martin Deda ceased to be a Director and Joint Company Secretary in BVS.
• On 8 March 2022, UBS Group AG increased its shareholding from ~5.01% to ~6.01% in BVS.

Financial Overview of 1HFY22:

• BVS has increased investment in strategic areas to expand the operational capability of Sonata Alta, provide cloud solutions to clients, retain talent, and invest in R&D. The higher investment is driven by industry structural demand for microservices, cloud, & subscription services, shortage of IT managers/ developers, increased digitalisation, etc.
• The top-line grew by ~14% Y-o-Y to ~$132.3 million in 1HFY22 from ~$115.7 million in 1HFY21 driven by a rise in contracted recurring revenue (~20% Y-o-Y) underpinned by long-term contracts. Recurring revenue constituted ~81% of total revenue during the period.

The Trend of Cash Conversion, Highlights; (Analysis by Kalkine Group)

Key Risks: The company faces changing technological landscape, geographical expansion risk, acquisition risk, peer competition, and geopolitical uncertainty.

Outlook:

• BVS continues to look for geographical expansion, growth in the distributor network, and sales pipeline. Its operating costs are growing at a similar rate to revenue.
• BVS expects EBITDA in the range of ~$45 - $50 million and has updated the NPAT guidance to ~$25 - $30 million for FY22.

Valuation Methodology: P/E 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 BVS gave a negative return of ~31.87% in the past three months and a negative return of ~46.74% in the past six months. The stock is currently trading below its 52-weeks’ average price level band of $1.495 - $3.980. The stock has been valued using the P/E multiple-based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount than its peers’ median P/E multiple, considering its increased investment in software implementation, acquisition risk, and an uptick in the debt-to-equity ratio. For this purpose of valuation, a few peers like Pushpay Holdings Ltd (ASX: PPH), Nuix Ltd (ASX: NXL), Infomedia Ltd (ASX: IFM) have been considered. Considering the current trading levels, growth in key metrics, strengthening structural industry demand, higher FY22 revenue expectations, an indicative upside in valuation, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the closing market price of $1.635, down by 1.802%, as of 21 March 2022. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

BVS Daily Technical Chart, Data Source: REFINITIV 

Dotz Nano Limited

DTZ Details

Full-Time CFO Appointment: Dotz Nano Limited (ASX: DTZ) manufactures and commercializes tracking, marking, verification, and diagnostic solutions via its distributors and scientific alliances in Australia, Europe, Japan, China, North America. DTZ has recently appointed Guy Khavia as the full-time CFO given the implementation of the company’s growth strategy and thereby increasing business needs. Tomer Segev, the long-term part-time CFO is leaving and assisting in a smooth transition of responsibilities.

FY21 (Ended 31 December 2021) Results Overview:

• The company has a large addressable market for its advanced materials technology in the key diagnostics and authentication markets. It continues to fulfil current contracts, expand its sales pipeline, and grow its manufacturing capability.
• DTZ held ~US$4.13 million cash and cash equivalents and ~US$603,721 lease liabilities as of 31 December 2021.

Comparative Key Metrics; (Analysis by Kalkine Group)

Key Risks: The company faces COVID-19 led disruptions, regulatory delays for expanding to new markets, technological changes, and the risk of commercialisation of its technology and solutions.

Outlook: DTZ plans to undertake full scale manufacturing of its SARS-CoV-2 test kits and ramp up clinical trials for product testing in multiple countries. It aims to further grow its distributor network and regulatory approvals for new markets including the US to increase the sales of test kits globally.

Stock Recommendation: The stock of DTZ gave a negative return of ~16.04% in the past three months and a negative return of ~14.99% in the past six months. The stock is currently trading below its 52-weeks’ average price level band of $0.245 - $0.470. Considering the current trading levels, expansion of distributor network, ramp up of product testing and development in multiple countries, the broad applicability of its solutions across airports, education facilities, healthcare, etc., technical levels mentioned below, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the closing market price of $0.340, down by ~2.858%, as of 21 March 2022. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Technical Note: On the daily chart, DTZ stock prices are trading above the horizontal trend line support level and taking the support of the trendline. Moreover, the momentum oscillator RSI (14-period) is trading at ~44.63 level, indicating positive momentum. However, the prices are trading below the trend-following indicator 21-period SMA, which may act as a resistance zone. An important support level for the stock is placed at AUD 0.305 while the key resistance level is placed at 0.400.

DTZ 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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