Navigator Global Investments Limited

NGI Details

Appointment of Director: Navigator Global Investments Limited (ASX: NGI) is an asset management company catering investors globally by providing investment management products and services through Lighthouse Investment Partners, LLC (Lighthouse) (wholly owned subsidiary) and six other alternative asset management companies. Recently, Suvan de Soysa was appointed as an Independent non-executive Director of the company.

Assets Under Management Update:

• Net Distributions: The group gained net distributions of US$17.8 million from its NGI Strategic Portfolio (total US$19.2 million) for the period of 1^st July 21 to 14^th January 2022. Where an amount of US$7.2 million was also included in 1HFY22 earnings.
• Profit Sharing Arrangement: NGI is entitled to first US$17.5 million of the distributions received from NGI Strategic Portfolio and 20% of any amount above US$17.5 million from FY22-FY25 (indexed at 3%). 80% above will be given to Dyal Capital Partners.
• Assets under Management (AUM): AUM remained same as ~US$21.5 billion as of 31^st December 2021, aligned with the same amount as of 30^th September 2021.

FY21 Top & Bottom-line Highlights:

• The revenue from operating activities was up by ~6% Y-o-Y to ~US$107.96 million and the net profits increased by ~47% Y-o-Y and recorded as ~US$26.75 million for 30^th June 2021.
• The company delcared a final divided of ~US$ 5.5 cents.
• NGI closed its final accounts at the end of 30^th June 2021 with a cash balance of ~US$52.1 million versus ~US$27.03 million in at the end of 30^th June 2020.

Estimated AUM Highlights (Source: Analysis by Kalkine Group)

Key Risks:

• Stiff Competition: The company’s operational and financial performance could be impacted by the rising market share of its peers in the industry.
• Currency Risks: The company’s is susceptible to the risks associated with the currency fluctuations.
• Regulatory Risk: NGI is exposed to a more complex regulatory environment; any failure in compliance could lead the business to fines, penalties, etc.

Outlook: The company expects its total portfolio distributions (prior profit sharing) to be ~US$30-$45 million for FY22. NGI forecasts Alternative AUM market to flourish and increase by ~9% from 2021 (~US$ 11.3 trillion) to 2025 (~US$ 17.2 trillion). The profit sharing mentioned above remains same till FY25, later to that NGI anticipates acquiring 100% interest in NGI Strategic Portfolio. The Estimated NGI share of distribution from NGI Strategic Portfolio is estimated to be ~US$20-$22 million for FY22. 

Valuation Methodology: P/B 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 NGI has been corrected by ~14.86% and has given a positive return of ~3.68% in the past three and nine months, respectively. The stock is trading below its 52-week low-high average of $1.44 - $2.22, respectively. The stock has been valued using a P/B 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/B multiple, considering the volatility in the currency prices, reduction in gross margins and the COVID-19 disruptions. For the purpose of valuation, peers such as Pacific Current Group Ltd (ASX: PAC), Commonwealth Bank of Australia (ASX: CBA), and Westpac Banking Corp (ASX: WBC), and others have been considered. Considering the expected upside in valuation, maintenance of the AUM levels, improved net margin position & ROE, 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 $1.60, 10:30 AM (GMT+10), Sydney, Eastern Australia, as on 27 January 2022.

NGI Daily Technical Chart, Data Source: REFINITIV  

SelfWealth Limited 

SWF Details

Directors’ Change in Interest: SelfWealth Ltd ASX: SWF) is operational on a flat fee basis and offers an online trading platform to the Australian and US markets. Recently a few of its directors, Anthony Lally and Robert Edgley gained 823,346 and 553,250 ordinary shares, respectively in the company.

2QFY22 Updates:

• Growing Market Share: With an increase of ~9.5% Q-o-Q in active traders to 117,674 and ~17% Q-o-Q hike in securities held in HIN to ~$7.97 billion, Investment Trend report has confirmed SWF’s market share increase in last six months.
• Crypto Agreement: The company signed a Heads of Agreement with BTC Markets to add cryptocurrency services to its platform.
• Track Records: The November month of 2021 was recorded as the second highest number of ASX trades in a month and highest number of unique portfolios trading.
• Quarterly Revenue: SWF’s focus to diversify in product and geographically is witnessed by ~10% of the total SWF’s revenue and ~34% of total Active Traders is now accounted by the US share trading. The operating revenue increased by ~14% Y-o-Y and was reported as ~$5.07 million in 2QFY22 versus ~$4.46 million in 2QFY21.
• Cash Position: The cash outflow from operating activities appeared as ~$2.43 million im 2QFY22, mainly owing to product manufacturing and operating costs. With the cash receipts of ~$ 5.07 million, it closed its quarter with a cash balance of ~$14.88 million at the end of 31^st December 2021 versus ~$17.54 million at the end of 30^th September 2021.

Active Traders Highlight (Source: Analysis by Kalkine Group)

Key Risks:

• Technology Risks: Having its business online, it is majorly dependent on the technology used and their regular upgradation. Failure to which or glitches in the system could lead to operational risks.
• Competition Risk: The online platform industry SWF works in has stiff competition, which is prone to lost opportunities due to the new entrants and the existing players.
• Currency Risk: Having its business internationally causes it to face currency risks.

Outlook:  As stated in its Quarterly Report, SWF is on track to become first Australian retail platform to provide USA Early Access and advanced order types. Also, the roadmap to launch Hong Kong international trading is also on its path for this quarter. SWF indulged in aggressive marketing initiatives and product development and issued a placement offer of ~$11.74 million to let the expansion approach flow throughout FY22. SWF’s members accepted the instant deposits, live pricing and ESG data positively. On the other hand, 2QFY22 also saw the application of Chi-X ETF access.

Stock Recommendation: The stock of the company has given a negative return of ~44.44% in the past six months. Currently, the stock is trading at par to its 52-week low level of $0.195. On a TTM basis, the stock of SWF is trading at an EV/Sales multiple of 2.8x, lower than the industry’s mean (Investment Banking and Investment Services) of 9.2x, thus seems to be undervalued. Considering the growth strategies in line, expansion strategies in US and HK market, current trading levels, valuation on a TTM basis, 2QFY22 performance, introduction in cryptocurrency market and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the closing market price of $0.195, down by ~9.303%, as on 27^th January 2022.

SWF 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 unfavorable movement in the stock prices.

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