Praemium Limited

A look at June Quarter: Praemium Limited (ASX: PPS) is engaged into portfolio administration services. The market capitalisation of the company stood at ~$192.51Mn as of 19^th July 2019. Recently, the company via a release dated 15^th July 2019 updated the market about its June 2019 quarter performance. The company recorded quarterly gross inflows of $903 Mn throughout Australia and International. The platform funds under administration stood at $9.53 Bn after $405 Mn net inflows and market movements of $244 Mn.

The individually managed account contributed 8% of the overall fund under administration growth for the June 2019 quarter. PPS won Innovation Award for its Integrated Managed Account platform at the IMAP Awards in June 2019.


Platform Gross Inflows and FUA (Source: Company Reports)

What to Expect:The company is focused on accelerating its growth. As per the half-yearly report, the group is debt-free, and it continues to generate positive cash flows. Adding to that, Praemium Limited has strong cash reserves to further invest in its earnings enhancing initiatives, which includes organic and strategic opportunities, as well as to manage any future foreign currency impacts of overseas operations.

Stock Recommendation: The current ratio of PPS stood at 1.69x in 1H FY19 in comparison to the industry median of 1.58x. This implies that PPS is in a decent position to address its short-term obligations in comparison to the broader industry. Also, respectable liquidity levels place the company in a position to make deployments towards strategic business activities. With respect to the stock’s past performance, it generated a return of 23.38% in the time span of one month. As per ASX, the company’s stock is trading towards its 52-week lower levels of $0.320. The company reported an EBITDA margin of 13.7% in 1H FY19 against the industry median of 26.5%. It posted net margin of 2.9% in comparison to the industry median of 14.7%. Hence, considering the above-stated facts and current trading levels, we give a “Speculative Buy” recommendation on the stock at the current market price of A$0.460 per share (down 3.158% on 19^th July 2019).
 

Superloop Limited

AGM To Be Conducted on October 30, 2019: Superloop Limited (ASX: SLC) is primarily involved in construction and operation of independent telecommunications infrastructure across the Asia pacific region, which includes the provision of complete high-performance network solutions for wholesale, enterprise and channel customers. The market capitalisation of the company stood at ~A$250.77 Mn on 19^th July 2019. As stated by the company in its previous announcements, it had been in the final stages of a material one-off transaction that would have delivered a result well within the guidance ambit for the financial year 2018/19. In the final days of the 2018/19 financial year, the Board of the company became concerned that the proposed terms of the transaction were not in the longer-term interests of SLC.Accordingly, on 30 June 2019, the Board declined to accept the terms of that transaction as it stood and requested that management seek to negotiate more favourable terms. It was added that the company would hold its Annual General Meeting on 30^th October 2019. In the 1H FY19, it reported revenue of $60.3 Mn, reflecting a rise of 18% on YoY basis and posted EBITDA of $4.5 Mn in 1H FY19.


Financial Summary of 1H FY19 (Source: Company Reports)

Future Aspects: SLC has not completed negotiations before 30 June 2019 to secure a significant commercial agreement which would have contributed the expected EBITDA to achieve its guidance for FY19. The expected EBITDA for FY2019 is now likely to be lower than that set out in the 1H FY19 investor presentation i.e. in the range of $13 million and $18 million, and subject to the finalisation of June’s trading figures and completion of its audited full year results, in the ambit of around $7 Mn to $8 Mn (including about $1 Mn of restructuring costs from February 2019). Further, the company stated that the negotiations with the parties are still ongoing and if the negotiations are successfully concluded then it will be reflected in future earnings.

Stock Recommendation: The company reported a debt-to-equity ratio of 0.25x in 1H FY19 as compared to the industry median of 1.15x, which reflects that the company is less dependent on the debt component. This might help the company in stabilising the balance sheet moving forward. The lower debt on the balance sheet is generally considered as a positive sign. The company reported a gross margin of 49.3% in 1H FY19 as compared to the industry median 57.5%. It reported a current ratio of 0.87x in 1H FY19 in comparison to the industry median of 0.93x.

Coming to the stock performance, it yielded negative returns of 38.51% and 32.65% in the time span of one month and three months, respectively. Currently, the stock is trading close to a 52-week low level of $0.900. Hence, considering the aforesaid parameters and current trading level, we give a “Speculative Buy” recommendation on the stock at the current market price of A$0.975 per share (down 1.515% on 19^th July 2019).    

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