humm Group Limited

HUM Details

Announces JV with neobank Douugh: humm Group Limited (ASX: HUM), previously known as FlexiGroup Limited, is a diversified full-service payments company with a market capitalisation of ~$624.03 million. The company recently announced a proposed joint venture with neobank Douugh (ASX: DOU) to launch a Douugh branded buy now pay anywhere feature into the U.S market in the first half of 2022. Under the JV, humm’s technology platform will be utilised by Douugh to manage a line of credit up to US$1,000 to eligible customers through a dedicated ‘Credit Jar’ on Douugh’s platform and virtual Mastercard. humm is also making a strategic investment of $2.5 million in Douugh to support the development and execution of this initiative.

FY20 Result Highlights: During FY20, the company witnessed double-digit volume growth across a simpler line of products in BNPL, Cards and Commercial. The company saw 172% online growth year-on-year in BNPL via a seamless digital experience to our customers. Over the year, the company added 570,000 new customers, representing a growth of 37% on the previous year. FY20 Statutory Net Profit After Tax (NPAT) stood at $21.4 million and Cash NPAT stood at $29.2 million, reflecting COVID-19 macro-overlay provision.

3-Year Financial Results (Source: Company Reports) 

Outlook: Looking ahead, the company is focused on leveraging humm brand into new products, new verticals and new markets. Further, the company is targeting a cost to income ratio of 40% by the end of the 2022 financial year. During the first quarter of FY21, the company witnessed decent volume performance in Buy Now Pay Later and Commercial, despite the business continuing to take a prudent approach to credit risk and approvals. In light of improved credit performance and cost management, the company expects its 1H21 Cash NPAT to be higher than 1H20 Cash NPAT of $34.5 million.

Valuation Methodology: Price to Earnings Multiple Based Relative Valuation (Illustrative)

Price to Earnings Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: The stock has provided a return of 25.12% in the past one month and is currently trading lower than the average of its 52-weeks’ price level band, offering a decent opportunity for accumulation. On the technical analysis front, the stock has a support level of ~$0.911 and resistance of ~$1.475. We have valued the stock using price to earnings multiple based illustrative relative valuation method and have arrived at a target price with an upside of low double-digit (in percentage terms). For the purpose, we have taken peers like Smartgroup Corporation Ltd (ASX: SIQ), Eclipx Group Ltd (ASX: ECX), Money3 Corp Ltd (ASX: MNY), etc. Considering the company’s decent performance in FY20, recently announced joint venture with neobank Douugh, modest outlook, current trading levels, valuation and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the current price of $1.220, down by 3.175% on 7 December 2020.

HUM Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Praemium Limited

PPS Details

Strengthens Partnership with Qualis Capital: Praemium Limited (ASX: PPS) is involved in the provision of technology platforms for managed accounts, investment administration and financial planning. As on 7 December 2020, the company’s market capitalisation stood at ~$356.04 million. Through its subsidiary Powerwrap Limited, PPS holds an initial 4% equity stake in Qualis Capital LLC, a US-based alternative investments platform provider. The company recently strengthened its strategic partnership Qualis Capital as it takes up its entitlement in a rights issue to fund growth initiatives.

September 2020 Quarter Highlights: During the September 2020 quarter, the company’s Global Praemium FUA reached $31.2 billion, comprising Australia platform FUA of $15.0 billion, International platform FUA of $3.5 billion and FUA for VMAAS of $12.8 billion. Over the quarter, the company made a significant investment into platform enhancements with a focus on integration and digitisation of many existing advice processes. During the quarter, the company took control of Powerwrap, following payment for the 94% in acceptances received during the take-over.

Q1FY21 Results (Source: Company Reports)

Outlook: The company’s diversified revenue streams, healthy balance sheet and solid cash flows provides it the financial strength to pursue strategic acquisition opportunities and focus on organic growth. The merger with Powerwrap is expected to deliver significant synergies for the company.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: On the technical analysis front, the stock has a support level of ~$0.601 and resistance of ~$0.795. We have valued the stock using an EV/Sales multiple based illustrative relative valuation method and have arrived at a target price of low double-digit upside (in percentage terms). For the purpose, we have taken peers like Hub24 Ltd (ASX: HUB), Humm Group Ltd (ASX: HUM), Money3 Corp Ltd (ASX: MNY), etc. Although the stock of PPS has provided a return of 41.58% in the last three months, considering the company’s diversified revenue streams, healthy balance sheet, expected synergies from the recent merger with Powerwrap, we are of the view the stock may provide further upside in the coming times. Hence, considering the aforesaid facts and valuation, we give a “Hold” recommendation on the stock at the current market price of $0.715, up by 0.704% on 7 December 2020.

PPS Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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