Stocks’ Details

The Citadel Group Limited

Contract Wins Supported Citadel Group in FY 2018: In FY 2018, Citadel Group Limited (ASX: CGL) ended FY 2018 by generating total revenues of $108.5 million which reflects the YoY growth of 9.8%. The growth in the revenues was witnessed on the back of contract wins which was witnessed throughout its solutions and advantages which were witnessed because of the products’ cross-selling to the present clients as well as advantages because the new solutions got implemented.

However, the rollout of the Australian Federal Government Agency contract (Multi-year) also supported the YoY growth in revenues.  


CGL’s Revenues and EBITDA (Source: Company Reports)

The favourable momentum in the EBITDA was encountered because of premium quality deliveries being provided with respect to the present contracts and a more focused approach towards the SaaS solutions which generate higher margins. Let us now have a look at the company’s gross profit margins. In FY 2018, the company generated gross profit margins of 50% and these margins aided by the premium quality deliveries and launch of the software solutions which happens to be scalable. However, the extensions of the contract brought down the fixed expenses effect thus, supporting gross profit margins.

Customer Base to Support CGL Moving Forward: As demonstrated in the FY 2018 results presentation, Citadel Group is in the robust position to encounter growth moving forward. The company is expected to be benefited by the increasing customer base. Additionally, the company would be witnessing growth momentum with the help of robust opportunities pipeline which it possesses throughout the suite of SaaS solutions.   

The company might also go for the merger and acquisition opportunities so that its capabilities can be improved.

Stock Analysis: On the daily chart of Citadel Group Limited, two technical indicators have been applied on the daily chart of and default values have been considered. According to Exponential Moving Average or EMA, the stock might witness bearish momentum as the stock price has crossed the EMA and is moving downwards. By considering the Relative Strength Index or RSI, it was seen that the 14-day RSI is near the oversold region. Once 14-day RSI reached the oversold region, it might encounter a rebound.

As a result, we maintain our “Speculative Buy” rating on the stock at the current market price of A$7.260 per share.  
 

Afterpay Touch Group Limited

Robust Growth Witnessed in FY 2018: Afterpay Touch Group Limited (ASX: APT) ended FY 2018 by generating revenues and other income of A$142.3 million. The company’s performance in FY 2018 was aided by the Pay Now contribution (which is of full year) as well as robust momentum in the Afterpay. In FY 2018, the underlying sales of Afterpay amounted to $2.184 billion which implies the growth of 289% on the YoY basis. This growth was encountered on the back of robust momentum throughout the important drivers of demand. These important drivers include repeat customer activity, new customers and retailers as well as increased share with respect to checkout.


Revenue and EBITDA Contribution (Source: Company Reports)

The important ratios of Afterpay Touch Group Limited witnessed the growth in the YoY basis. In FY 2017, the company’s EBITDA margin was -137.5% which got improved in FY 2018 to -85.1%. The company’s operating margin stood at -101.7% in FY 2018 reflecting an improvement on the YoY basis as in FY 2017, the company’s operating margin was -217.4%.

Maintained Primary Focus Towards Revenue Growth: As stated in Afterpay Touch Group Limited’s FY 2018 annual report, there happens to be robust opportunity to enhance the profitability as well as revenues with the help of the business strategy. The company would be focusing towards the activities which would help it in terms of growth in the revenues, long-term returns as well as it would also be inclined towards delivering the profitability through improving underlying Afterpay sales as well as Afterpay merchant fees.

Stock Analysis: On the daily chart of APT, Moving Average Convergence Divergence or MACD has been applied and default values have been used. As per the observation, the MACD line has crossed the signal line and is moving downwards. However, the MACD line is moving very close to the signal line. There are expectations that another crossover might occur. Therefore, the market players need to closely watch the stock at the current market price of A$11.760 per share.

Stock Price Comparative Chart (Source: Thomson Reuters)
 

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