Xref Limited

 

XF1 Details
 
Sales up 31% Year Over Year: Xref Limited (ASX: XF1) is a human resources technology company with a market capitalization of around $32.05 million as on 25 May 2020. In a recent update, the company stated that FIL Limited and the entities have ceased to be a substantial holder of the company, effective from 4 May 2020.
 
Robust Performance in April 2020: For April 2020, the company reported total sales of $0.86 million, which increased 31% from the prior corresponding period, in spite of facing unstable and disrupted market conditions caused by the COVID-19 led crisis globally and the Easter holiday season. Out of these, 18%, 22% and 71% sales came from new client sales, Xref’s international offices in Europe and North America, and clients considered as essential services during COVID-19, respectively. Cash receipts during the month totalled to $0.97 million, increasing 37% on April 2019. Xref credits used during April totalled $0.64 million with solid growth across various essential services sectors globally. Moreover, cash Expenses for the period came in at $1 million, down 27% in April 2019.
 

Robust Credit Sales Growth (Source: Company Reports)
 
XF1 Along With PageUp Announces Live Launch: The company along with PageUp, a top talent management software platform, stated the live launch of their integration which will permit PageUp users to access Xref through their existing dashboard and receive status updates without needing to leave the PageUp platform. In another update, the company with Greenhouse announced the live launch of their integration.
 
Quarterly Update for 31 March 2020: In a recent update, the company revised its cash expenses for estimation for 4QFY20 to be ~3 million.At the end of the quarter, ended 31 March 2020, the company had a cash balance of $3.5 million. Net cash used in operating activities, for the quarter ended 31 March 2020, came in at $1.9 million after making major payments for staff costs and administration, and corporate costs of $2.5 million, and $875K, respectively.
 
Stock Recommendation: In the last six months, the stock of XF1 has declined by 56.1% on ASX and is trading close to its 52-week low, offering investors a decent opportunity for accumulation. The company remains on track to preserve cash by building efficiencies in the acquisition, onboarding, support, and growth of clients, developing a host of channel integrations, multi-regional capabilities, and self-serve features. On TTM basis, the stock is trading at an EV to Sales multiple of 3x, lower than the industry Mean of 22.1x. Considering the company’s recent operational and financial performance, initiatives taken to preserve cash, and current trading levels, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.180 as on 25 May 2020.
 
 
XF1 Daily Technical Chart (Source: Refinitiv, Thomson Reuters)
 
 

Bigtincan Holdings Limited

 

BTH Details
 
Equity Raising Program: Bigtincan Holdings Limited (ASX: BTH) is one of the top providers of enterprise mobility software in the rapidly growing sales enablement market. In a recent update, the company stated that it has raised around $35 million via a Single Tranche Placement followed by a Share Purchase Plan. The proceed from the placement will aid BTH to accelerate its key strategic priorities, make higher investments in technology to continue product leadership along with strengthening its balance sheet to take advantage of increasing pipeline of M&A prospects.
 
Other Recent Update: The company recently updated that the voting power of Regal Funds Management Pty Ltd was reduced to 13.7% from 14.76% earlier.
 
March Quarter Highlights: During the quarter ended 31 March 2020, the company reported customer cash receipts amounting to $14.9 million, soaring 178% year over year. In response to the outbreak of COVID-19, the company reviewed its operations, adjusted the operating cost base, and focussed on efficiency and productivity in sales and marketing, product development and general administration, across all its worldwide operations. The company remained focused on expanding its existing customers and signing in new ones to support business growth. During the quarter, the company announced DXC Technologies as a new customer on the platform. Cash and cash equivalents at the end of the quarter came in at $31.5 million.
 

Cash Balance (Source: Company Reports)
 
FY20 Guidance Reaffirmed: The company reiterated its outlook for organic revenue growth between 30-40% in FY20, with stable retention as shown by new wins and ongoing market implementation.
 
Valuation Methodology:EV/Sales Multiple Based Relative Valuation (Illustrative)

EV/Sales Multiple Based Relative Valuation Approach (Source: Refinitiv, Thomson Reuters)
 
Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: The stock gave positive returns of 28.95% in the last one month and is currently trading above the average of its 52-week low and high level of $0.265 - $1.080. The company remains on track for product development and customer support through its research and development teams and has delivered on its key growth initiatives. In 1HFY20, the company had a gross margin of 85.5% as compared to the industry median of 84.2%. We have valued the stock using EV/Sales multiple based illustrative relative valuation method and arrived at a target price with an upside of higher single-digit (in percentage terms). Hence, we give a “Hold” recommendation on the stock at the current market price of $0.750, up 2.041% on 25 May 2020.
 
 
BTH Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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