Nearmap Limited

Nearmap Limited (ASX: NEA) with a market cap of $698.85m is into geospatial market, which captures and provides data insights pertaining to the location right from the field to the office and providing excellent business tools to the corporate customers as well as the government.

Healthy financial performance driven by growth in subscriber base from Australia and US: Group ACV (Annualised contract value) recorded an excellent growth with portfolio of the Australian operations recording 22% to $48.8 m in FY18 from $40 m in FY17 and 142% growth to $17.4 m from $6.9m in FY17 from the US operations. NEA group reported 32% growth in revenues to $54.1m in FY18 from $41.1m in FY17 supported by continued growth in the customer base and the customer retention. 34% increase in the cash receipts was reported during the period. Group ACV exceeded $70m at the end of Q1FY19.

Diverse set of customer base: NEA has a diverse set of customer base in both US and Australia. It has significant customer base from small and medium enterprises as well as it holds a diverse set of national enterprise customers.


Group ACV Portfolio (Source: Company Reports)

Technically, the scrip has remained at an uptrend with dips in the month of October touching the low of $1.22 and closing at $1.37. In the current month, the scrip is trading above the 50 day EMA ((Exponential Moving Average) and above the previous month closing levels. Major Indicator like Relative strength index is at suitable level with no divergence formation and MACD (moving average convergence and divergence indicator) is consolidating around the signal line.

NEA with its growing subscriber base and expanded product suite and 3D products will provide new market opportunities in both the US and Australia, and with its vision to deliver long term growth and with global market for the Geospatial mapping projected to grow at a CAGR of 14.6% and touch $4.5bn by the end of 2025 along with sufficient cash resources, is in the process to tap the growing market. We give a “Hold” on NEA at the current price levels of $1.575.

The Citadel Group Limited

The Citadel Group Limited (ASX: CGL) with a market cap of $400.48m is a leading software and services company engaged mainly in the development and delivery of managed technology solutions. The Company has entered into varied new contracts as well as extensions to the already existing contracts during FY2018.These new contract wins and extensions were all across the company’s verticals of National Security, Defence, e-Health, Government and Tertiary Education. During FY18, CGL has increased its investment in its existing software solutions and launched the new cloud based SaaS solutions.

Strong Financial performance driven by strong growth strategy:CGL group reported approximately 9.8% growth in the total revenues to $108.5 million for FY18, up from $98.8 million in FY17, supported by a combination of growth strategies which includes the signing of new contracts, varied acquisition activities and the execution on existing contracts. EBITDA margins grew by 13% to $34m in FY18. Significant growth in the net income at $14.3m in FY18 was noted, and this was against $8.6m in FY17. Strong NPAT growth along with the healthy balance sheet increased fully franked dividends to 13.8 cents per share in FY18.

Technically, the scrip has remained at an uptrend from the start of the year 2018, with some retracements between the months of February –April. The scrip continued this upside rally till November 9, 2018 after which dips were well seen on the daily charts. The current price levels are well above the previous month closing level of $7.6. Major Indicator like Relative strength index is reaching oversold territory and MACD (moving average convergence and divergence indicator) is consolidating in the negative zone.

Driven by strong financial metrics and new contracts along with the renewal of old contracts and investment in new software solutions, the group is expected to move upwards. We give a “Speculative Buy” recommendation on CGL at the current price levels of $8.100.