Veeva Systems Inc

Veeva Systems Inc (NYSE: VEEV) provides cloud software for the life sciences industry.

Investment Highlights – SPECULATIVE BUY at USD 285.51

• Strong new and existing customer relationship can drive solid growth as demand remained robust.
• Veeva Systems has unveiled explicit guidance, substantiating a further growth potential.
• Improved profitability and financial position underpin the Company’s ability to create significant shareholder value as the Company benefits from its flagship Vault platform and expanding market share.
• From a technical standpoint, the MACD line has crossed over the signal line, which is supporting the bullish trend.
• Over the past five years (FY16 to FY21), revenue and gross profit have grown significantly by a CAGR of around 29.06% and 31.66%, respectively.

Key Risks

• The Covid-19 pandemic led disruptions have impacted its vendors, customers, partners, and results of operations with significant macroeconomic uncertainty. The lengthened sales cycles, pricing pressure from the competition, and lengthened payment term can keep the growth in limit.
• The adoption rate is uncertain for new solutions, and expected growth might not be achieved with fluctuation of results, loss of major customers, system unavailability, and decline in the new subscription.

Recent News

Partnership: On 10 May 2021, Veeva announced a partnership with Parexel (clinical research organization) to accelerate technological advancement and innovation.

Q1 FY22 Financial Highlights (for three months ended 30 April 2021, as of 27 May 2021)

 (Source: Company website)

• During Q1 FY22, revenue surged 29% year-on-year as subscription services revenues rose 26% against Q1 FY21.
• Subsequently, operating income jumped 47% year-on-year in Q1 FY22, driven by product excellence and strong customer success.
• Similarly, net income increased by 33% year-on-year in Q1 FY22, and therefore, the Company provided clear revenue and profit guidance for FY22.
• The total customer reached over 1,000 customers following the addition of 59 customers in Q1 FY22.

Share Price Chart

 (Analysis done by Kalkine Group)

Valuation Methodology: Price/Cash Flow Approach (FY22) (Illustrative)

Conclusion

Following the strong performance in Q1 FY22, for Q2 FY22 - revenue and non-GAAP operating income are expected to be in the range of US$400-US$452 million and US$175-US$177 million, respectively. Similarly, FY22’s revenue is projected to report in between US$1,815-US$1,825 million, with nearly US$3.49 of non-GAAP fully diluted net income per share. Moreover, the Company’s advanced digital innovation, acceleration in the Vault services, and strong customer relationship can support the growth in the long term. The stock made a 52-week High and Low of USD 325.54 and USD 199.00, respectively. On the technical chart, the next important support level is at USD 228.41.

Based on the improved financials, strong customer relationships, product excellence, clear financial guidance, with support from valuation conducted above, we have given a "SPECULATIVE BUY" stance on Veeva Systems Inc at the closing market price of USD 285.51 (as of 1 June 2021), with a lower double-digit upside potential based 90.08x Price/Cash Flow (approx.) on FY22E Cash Flow Per Share (approx.).

NewAge Inc

NewAge Inc (NASDAQ: NBEV) manufactures and commercializes healthy consumer products pertinent to nutritional performance, health & wellness, and healthy appearance.

Investment Rationale – SPECULATIVE BUY at USD 2.38

• The first quarter of FY21 witnessed top and bottom-line growth, supported by ARIIX’s acquisition and significant organic growth.
• The Company is well-positioned to pursue additional industry consolidation and create further value for its shareholders.
• From a technical standpoint, the MACD line has recently crossed over the signal line, supporting the bullish trend, while the 21-period EMA (USD 2.25) is also suggesting an upside potential.
• As per forward 12-month valuation multiples - EV/Sales and EV/EBITDA metrics are undervalued against the Beverages industry.

Risk Assessments

• The Covid-19 pandemic might continue to hurt the economic conditions and result of operations, with the change of consumer behaviour.
• The Company also face varied competitive pressure, and it may fail to sustain a market position.
• With lockdown easing, consumer demand for stay-at-home orders is likely to decrease.
• Net loss aggravated in Q1 FY21, which can create liquidity issues amid credit risk.

Recent News

Product Launch: On 3 May 2021, NewAge launched Nutrifii Kids™ Chewable Multivitamin to address the global dietary supplements market.

Financial Highlights for the quarterly period ended 31 March 2021 (as on 10 May 2021)

 (Source: Company Website)

• During Q1 FY21, revenue surged 97% year-on-year, mainly driven by the acquisition of ARIIX combined with the organic growth.
• Besides the synergies arising from the ARIIX acquisition, NBEV delivered double-digit organic growth in Q1 FY21 and returned positive EBITDA.
• Similarly, gross profit jumped 111% year-on-year, which improved the net loss from operations by US$6.9 million in Q1 FY21 against Q1 FY20.
• The Company ended the Q1 FY21 with US$102 million in total cash and US$33 million in debt.

Share Price Chart    

 (Analysis done by Kalkine Group)

Valuation Methodology: EV/Sales Approach (FY21) (Illustrative)

Conclusion

NewAge has delivered a robust start to FY21 with considerable organic growth and acquisition synergies. The ARIIX acquisition is expected to deliver additional cost synergies while the Company is exploring more acquisition opportunities. Carrying this momentum, solid growth is anticipated in Q2 FY21 as well, while the Company has a solid business model and brand partners to support the long-term growth. The stock made a 52 week High and Low of USD 4.55 and USD 1.42, respectively. On the technical chart, the next important support level is at USD 2.14.

Based on the robust revenue growth, improved financials, favourable market dynamics, with support from valuation conducted above, we have given a “SPECULATIVE BUY” stance on NewAge Inc at the closing price of USD 2.38 (as on 1 June 2021), with a lower double-digit upside potential based 0.67x EV/Sales (approx.) on FY21E Sales (approx.).

*All forecasted figures and Industry Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached or if the price closes below the support level (indicative stop-loss price).

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine do not hold interests in any of the securities or other financial products covered on the Kalkine website.