Pushpay Holdings Limited

PPH Details

Operational Business Update: Pushpay Holdings Limited (ASX: PPH) offers donor management suite consisting of finance tools, donor tools, a custom community application, and a church management system (ChMS) to education providers and non-profit organisations situated primarily in the US and other jurisdictions. As on 22^nd January 2021, the market capitalisation of the company stood at ~$1.62 billion. On 22^nd January 2021, the company announced that Harbour Asset Management Limited now holds 4.064% voting shares and Jarden Securities Limited holds 0.496% voting rights in Pushpay Holdings Limited. It has also recently announced the appointment of Molly Mathews as the new CEO from 1^st March 2021. During December 2020, the company surpassed its performance expectations and delivered performance volume slightly more than the November 2020 forecasted guidance.

1H20 Results: The company earned a revenue of US$85.55 million for 1H20, up by 53% from 1H19. This was due to the increase in subscription and processing revenue. PPH recorded US$13.4 million net profit in 1H20, more than double during 1H19. Its net debt reduced by 51% to US$24.5 million in 1H20. The company registered a 203% increase in net cash flows from operations to US$26.98 million and had cash reserve balance of US$23.11 million as on 30 September 2020.  

Financial Highlights, 1H20 (Source: Company Reports)

Outlook: Due to the higher processing volume in December 2020 and operating leverage growth continued, PPH has provided a revised guidance of expected EBITDAF ranging US$56-$60 million for the year closing 31^st March 21.

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: The stock of PPH gave a negative return of 32.10% in the past three months and a negative return of 19.008% in the past six months. The stock is currently trading lower than the average 52-weeks price level band of $0.60-$2.27. The stock of PPH has a support level of ~$1.40 and a resistance level of ~$1.55. We have valued the stock using Enterprise Value to Sales based illustrative relative valuation method and have arrived at a target price of low double-digit upside (in % terms). For the purpose, we have taken peers like Hansen Technologies Limited (ASX: HSN), OFX Group Limited (ASX: RRL), Afterpay Limited (ASX: APT) and others. Considering the current trading levels, decent 1H20 results and revised EBITDAF outlook for FY21, reduced debt levels in 1H20, and valuation, we give a ‘Speculative Buy’ rating on the stock at the current market price of $1.470 on 22^nd January 2021.

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

Nitro Software Limited

NTO Details

Issue of 27k plus Unquoted Securities: Nitro Software Limited (ASX: NTO) offers eSignature, integrated PDF productivity, and BI tools through a SaaS based Nitro Productivity Suite™. It caters to large scale corporate, government bodies and retail users & small firms. As on 22^nd January 2021, the market capitalisation of the company stood at ~A$599.61 billion. On 24^th December 2020, the company issued 27k fully paid ordinary shares under an Employee Incentive Plan to Ana Sirbu, a registered holder for nil consideration.      

1H20 Result Highlights: The company recorded revenue growth of 14% to US$19.1 million during 1H20 on pcp basis. Its subscription revenue grew by 60%, and ARR grew by 57% during 1H20 on pcp basis. It incurred a loss of US$1.6 million of EBITDA for 1H20.

Q3FY20 Update: During September 2020, the company recorded US$11.63 million cash from customers, up by 17% on QoQ. Its’ income from subscription rose to 56% of total revenue, up by 39% on pcp basis. Its net cash inflows from operating activities stood at US$384k in Q3FY20. It closed the quarter with US$44.39 million cash and cash equivalents and no long-term debt barring office leases. The company hired a few strategic officials during the quarter, including CFO and others. The company secured new customers and had 9K new licensed users during the quarter. It achieved high customer retention and delivered product enhancements during Q3FY20. 

Cash Flow from Operations, September 2020 (Source: Company Reports)

Outlook: The company has shared a revised outlook for FY20. It reaffirmed estimated revenue of US$40.5 million and higher estimated subscription ARR of between US$26–$27 million versus US$24.4 million given in the IPO prospectus due to higher demand of its subscription offering. Its revised EBITDA loss guidance is between US$8.1-US$8.6 million versus US$5.3 million stated previously in the IPO prospectus.

Stock Recommendation: The stock of NTO gave a negative return of 13.12% in the past three months and a positive return of 57.07% in the past six months. The stock is currently trading inclined towards its 52-weeks’ high level of $3.66. The stock of NTO has a support level of ~$3.01 and a resistance level of ~$3.28. On a TTM basis, the stock of NTO is currently trading at an EV/Sales multiple of ~9.9x as compared to industry (Technology) median of ~6.6x and is thus overvalued. Considering the aforesaid facts, stock’s decent performance in the last six months, and valuation on TTM basis, we are of the view that most of the positives are factored in at the current levels. Hence, we give an ‘Expensive’ rating to the stock at the current market price of A$3.110, down by 1.270% on 22^nd January 2021.

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

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