LiveTiles

 
Decent Performance in FY18:LiveTiles Limited (ASX: LVT) is a small-cap company with the market capitalization of circa $297.85 Mn as of September 21, 2018. Recently, the group raised $2 Mn capital through oversubscribed Share purchase plan. Earlier, the company noted that $25 million (before costs) had been raised via a placement of shares to its investors. Accordingly, following the successful close of the SPP, there has been an increase in the amount raised by the Company to $27 million (before costs). Funds raised from the placement and share purchase plan will be used to continue driving customer and revenue growth through investment in the Company’s direct sales and customer success teams, further development of the Microsoft and partner channels and marketing. The placement was highly successful and oversubscribed.

On the financial front, the group delivered decent performance in FY18 wherein the group recorded Annualised Recurring Revenue (ARR) growth of 275% to $15.0 Mn in FY18 over the prior year. It was mainly driven by strong growth in enterprise customers during the period. Furthermore, transacting partners increased by 40% to 94 in FY18 against FY17. As a result, Revenue and other income grew by 33.1% and amounted to $6.44 Mn during the same period. However, operating expenses increased by 154.5% in FY18 against FY17. Resultantly, net loss after tax came in at $22.05 Mn in FY18, exhibiting a fall of 198.2 percent on a Y-o-Y basis. Based on the strong revenue growth in FY18, the group expected to deliver another year of strong customer and revenue growth in FY19. As of now, the group remains focussed on converting its strong pipeline of sales opportunities as it builds its global footprint. On the balance sheet front, the current ratio stood at 2.38x with zero debt.


Annualised Recurring Revenue Trend (Source: Company Reports)

Meanwhile, the stock has generated a YTD return of 28.57% and now looks promising at current levels. In the last one month, the stock has fallen by about 11.48% and the volatile trend is continuing. Given the mix of scenario, it is worth to watch the stock at the current price of $0.530 as the group aims to use the entire proceeds for growth through SPP funding.
 

Adairs

Growth across all profit & loss metrics in FY18:Adairs Limited (ASX: ADH) has posted FY18 total sales of $ 314.8 Mn, an increase of 18.8% pcp. It was mainly driven by rising transaction volume supported by new and existing customers, including its growing Linen Lovers membership base. Total segment EBIT was posted at $45.3 Mn, an increase of 46.9% over the comparative period. The company posted the normalized NPAT of $30.6 Mn, up 45.4% pcp. Higher NPAT was the outcome of increased sales and reduced interest expense.The company has consistently posted higher operating margins over 3 years with the latest coming in at 13.9% compared to the industry average of 6.9%. Apart from effective cost management, it has also generated higher returns for the shareholders consistently with ROE marked at 28.2% for FY18 against the industry return of 14.5%. As at 30 June 2018, the company had Cash and cash equivalents of $ 12.718 Mn. The current ratio and quick ratio stood at 1.59x and 0.61x, respectively in FY18 which is broadly in-line with previous year.Based on the strong performance, the Board of Directors declared fully franked final dividend of 8.0 cents per share and it will be payable on September 26, 2018 with the record date of September 12, 2018. This brings the total full-year dividend to 13.5 cents per share, an increase of 68.75% higher than the last year.


Financial Highlights (Source: Company Reports)

On the other hand, Catalyst Investment Managers Pty Ltd, a substantial holder of the Group changed its holding from 22.33% of interest to 11.09% of the voting power. Meanwhile, the stock has risen 20 percent in the past six months as at September 20, 2018 and is trading at a reasonable PE level of 12.72x. However, the ADH’s stock remains the most shorted share on ASX as per the ASIC report of 17 September 2018. It is indicative of over 20.15% of short position. We maintain our “Hold” recommendation on the stock at the current market price of $ 2.390 as it traded at the higher level.
 

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