Altium Limited

Altium Limited (ASX: ALU) has acquired board manufacturing company, PCB: NG in 2018. This acquisition has been expected to help Altium to connect its design space to supply chain & manufacturing floor. This together when combined with Ciiva, a cloud based electronic components management system acquired by ALU in the year 2015, has been charted to create the world’s first fully integrated design-to-realization channel.

Strong Financial Metrics: ALU has  posted healthy and strong revenues for FY18 with 26% growth under revenues up to US $140.2m in FY18 (up from $110.9m in FY17). EBITDA margins grew to 32% in FY18 as compared to 30% in FY17. Profit after income tax reported a growth of about 34% up to US $37.5 m in FY18. Cash and Cash equivalents posted 18% growth up to US $52.5m in FY18 in comparison to US $44.3m in FY17. Operating cash flows recorded 35% growth up to US $48.5m in FY18 as compared to US $35.9m in FY17. 15% growth up to 6321 was posted under the new licenses sold category in FY18. Overall, the result was of top notch quality.
Technically, the scrip remained completely bearish from the month of September and continued the trend in the month of October also. In the current month of November, the scrip has slightly shown some recovery which can result in retracement of the previous candle. The scrip is trading near the middle Bollinger band. Relative Strength Index (RSI) with positive divergence but moving average and convergence indicator in the negative territory give a view that the stock might continue the downtrend after touching resistance levels.
Fundamentally, the market cap of ALU was recorded at $3.02bn, with a high P/E of 58.8x and beta of 0.55x as on November 9. At the moment, tech sector sell off is trying to lay down an interesting opportunity, the current levels are still slightly high. The stock also gets impacted from US interest rate scenario. Given the trading levels and tech sector volatility of the past, we have an “Expensive” recommendation at the current price levels of $22.97. We also look forward to the upcoming investor day while any catalyst for further growth is being eyed.
 

Nearmap Limited

Nearmap Limited (ASX: NEA) has witnessed growth that has been underpinned by continued customer retention and growth in the new customer base, and the group even posted 32% rise in the total revenue of $54.1m in FY18 as compared to $41.1m in FY17.The growth in revenue reflects the growth in the annualized contract value (ACV) of the Group’s subscription portfolio. ACV growth has been well supported by the combination of upsell to existing customers and addition of new customers. Australian portfolio posted 22% growth up to $48.8m in FY2018 in comparison to $40m in FY17. US portfolio more than doubled and posted growth of 142% up to $12.9 m in FY18 as compared to $5.3m in FY17. The balance sheet holds strong with no debt and a cash balance of $17.5m at year end.

Technically, the scrip formed inverter hammer pattern in the month of September and showed a complete bearish move in the month of October. At current juncture the scrip is making inside bullish candle and trading above the middle bollinger band. Relative Strength Index and MACD (moving average and convergence indicator are in the positive territory and there may be some retracement of the previous month bearish move. At current juncture, the scrip is good to hold and watch.

Fundamentally, the market cap of NEA was recorded at $656.83m, as on November 9. High retention rates, long term strategy and focus on exploring varied channels and geographies, along with growing number of revenues, subscribers and ACV, and the launch of business operations in New Zealand will help in future growth story of the company.

NEA’s economics are improving at domestic and US front and it still has a global growth story that will likely trade to ACV momentum. FY19 seems to witness continued momentum as well with free cash flow margins expected in double digit. We have a “Hold” on NEA at the current price levels of $1.535, up 3.4% on November 09, 2018.
 

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