Nearmap Ltd

NEA Details

Change in Board: Nearmap Ltd (ASX: NEA) is engaged in the provisioning of geospatial map technology for businesses, enterprises, and government customers. As announced on 8 February 2022, the company has appointed Helen Souness on the role of Independent Non-Executive Director, which will be effective from 1 March 2022. In addition, Ms Tracey Horton has resigned from her position of Non-Executive Director.

FY21 Financial and Operational Highlights:

• For the year ended 30 June 2021, the company reported Annual Contract Value (ACV) of $128.2 million against $106.4 million in FY20.
• During FY21, the company achieved a milestone of surpassing $100 million in revenue, which amounted to $113.4 million, reflecting a growth of 17% over pcp. The revenue growth was backed by the record ACV expansion of the North American portfolio.

 ACV Trend (Source: Analysis by Kalkine Group)

Key Risks: NEA’s business is exposed to a risk arising from the failure in maintaining data and cybersecurity. NEA is exposed to risks pertaining to the shift in technology, which can impact its operational health.

Outlook:

• NEA expects to report Annual Contract Value (ACV) in the range of $150 million and $160 million for FY22 on a constant currency basis. The company would continue to target growth of 20-40% in ACV in the medium to long term and to maintain underlying retention above 90%.
• The company believes that its North America portfolio will exceed the ACV of its Australia and New Zealand portfolio, which would be reflected in 1HFY22 performance. The company has surpassed US$100 million in Group ACV and US$50 million of ACV in its North America portfolio.
• The company has scheduled to release 1HFY22 results on 16 February 2022.

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 NEA is trading near to its 52-week low level of $1.230, offering a decent opportunity for accumulation. The stock of NEA has been corrected by ~11.53% and ~41.16% in the past one and three months, respectively. The stock has been valued using an EV/Sales multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company can trade at a slight discount to its peers’ average EV/Sales multiple, considering the COVID-19 disruptions, rising debt to equity ratio, etc. For the purpose of valuation, peers such as Altium Ltd (ASX: ALU), TechnologyOne Ltd (ASX: TNE), LiveHire Ltd (ASX: LVH), and others have been considered. Considering the indicative upside in valuation, growth in revenue, ACV expansion, rising global subscription, optimistic outlook, current trading levels, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $1.265, as on 09 February 2022, 11:50 AM (GMT+10), Sydney, Eastern Australia.

NEA Daily Technical Chart, Data Source: REFINITIV  

Integrated Research Limited

IRI Details

Market Scenario: Integrated Research Limited (ASX: IRI) is engaged in designing, developing, implementing and sale of systems and applications management computer software for business-critical computing.

• As per the company’s report, it has a total addressable market (TAM) of A$1.28 billion, which is being supported by the launch of new products and leveraging long-term growth.
• IRI believes that it is well placed to take benefit of cards growth and new payment types. The company is part of the overall payments market, which addresses the 737 billion non-cash payment transactions– excluding cheques.

Trading Update: TCV was up in FY22 YTD as compared to pcp, which was backed by new products and hybrid traction. Reported revenue and NPAT were mainly in line with pcp. The company witnessed the impact of change in revenue mix as SaaS contracts are recognised over time.

FY21 Financial Summary:

• For the year ended 30^th June 2021, the company posted revenue amounting to $78.5 million against $110.9 million in FY20. NPAT for the year went down by 67% to $7.9 million against $24.1 million in FY20.
• During the year, IRI continued its transformation journey with the rollout of new cloud-based products for driving long term growth as well as recurring subscription revenues.

Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks: The company’s growth is exposed to risks arising from the on-going global uncertainty caused by COVID-19 and other geo-political uncertainties. In addition, any adverse movement in the foreign currency could impact the financial health of the company.

Outlook:

• The company is optimistic about expansion of TAM, growing delivery of new products to market and generate revenue growth and profitability.
• IRI is likely to witness further product innovation in FY22, and it is optimistic about the strong Collaborate solution suite. The company’s growth strategy is to leverage the structural market changes of hybrid working and cashless payments.
• IRI has scheduled to release 1HFY22 results on 17 February 2022.

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 IRI is trading near to its 52-week low level of $0.885, offering a decent opportunity for accumulation. The stock of IRI has corrected ~22.51% and ~38.27% in the past one and three months, respectively. The stock has been valued using a P/E multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company can trade at a slight discount to its peers’ average P/E multiple, considering the declining earnings and high debt to equity ratio. For the purpose of valuation, peers such as TechnologyOne Ltd (ASX: TNE), Hansen Technologies Ltd (ASX: HSN), Infomedia Ltd (ASX: IFM), and others have been considered. Considering the expected upside in valuation, new product launches, huge addressable market, decent outlook, current trading levels, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.895, as on 09 February 2022, 10:30 AM (GMT+10), Sydney, Eastern Australia.

IRI Daily Technical Chart, Data Source: REFINITIV 

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

Note 2: Investment decisions 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 analysis has been achieved and subject to the factors discussed above alongside support levels provided.

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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