Appen Limited

APX Details

Business Updates: Appen Limited (ASX: APX) operates in the IT services and consulting sector with data solutions and services for machine learning and artificial intelligence provided by the organization.

• APX received an indicative offer (non-binding and conditional) from Telus International, at $9.50, however without providing any rationale Telus revoked its offer to acquire APX.
• The company has strengthened its governance pillar by increasing the maximum number of directors on board from seven to ten and is committed to maintaining a gender diversity of 40% or above.

 Business Strategy, (Source: Analysis by Kalkine Group)

Financial Highlights:

• Driven by a significant surge in global service revenue, APX witnessed a rise of 8.3% in topline to US$447.3 million and EBITDA was up by 12.0% to US$78.9 million relative to FY20.
• New market segment shows a 21% surge in revenue to US$102.5 million, driven by break out revenue growth in China of 422%.

Key Risks: APX operates in the IT sector hence it is prone to cyber security risks however, the company has adopted NIST standards for cyber security risk management framework. The rising competition from low-cost producers may hamper the company’s operational performance.

Outlook: The company expects to double the FY21 revenue of US$447 million by 2026 and diversify its revenue stream with one-third of revenue from non-global customers and target an EBITDA margin of 20%.

Stock Recommendation: The stock is currently trading below its average 52-week low-high level of $6.080-$14.670, respectively. The stock has been corrected by ~6.76% in the past month. The stock has been valued using a P/E multiple-based illustrative relative valuation and arrived at a target of low double-digit upside (in % terms). The company can trade at a slight discount to its peers considering the competitive environment, customer expectations, technological innovation, and market disruption. For valuation, peers such as DATA#3 Ltd (ASX: DTL), Computershare Ltd (ASX: CPU), Link Administration Holding Ltd (ASX: LNK), and others have been considered. Considering the better financial performance, expected growth in market share, improvement in governance pillar, current trading levels, expected upside in valuation, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on this stock at the closing market price of $6.200, down by -1.743% as of 2^nd June 2022.

Markets are trading in a highly volatile zone currently due to certain macroeconomic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

APX Daily Technical Chart, Data Source: REFINITIV 

Bigtincan Holdings Limited

BTH Details

Business Updates: Bigtincan Holdings Limited (ASX: BTH) operates in the application software industry and is engaged in providing a collaborative and secure solution that automatically delivers the relevant content to the right users. BTH issues 2,786,094 ordinary fully paid shares as of 30^th May 2022 at $0.513 per share, where 355,148 shares were issued for employees’ remuneration, 2,430,946 issued for immaterial acquisition of all issued capital of the Bigitincan reseller company.

Insights of Q3FY22: The below picture provides an overview of the company’s cash performance:

Q3FY22 Cash Summary, (Source: Analysis by Kalkine Group)

Key Risks: BTH operates in a highly competitive environment that leads to multiple risks like failure to retain existing customers, disruption in technology, and reliance on a third party for IT supplies.

Outlook: The company believes that also its new products Bigtincan for Salesforce and VR Showrooms will open new revenue streams in the near future. BTH is currently on track to achieve or excel at $119m in Annual Recurring Revenue (ARR) and $109m in revenue for FY22.

Stock Recommendation: The stock is trading near its 52-week low of $0.480, offering a decent opportunity for accumulation. The stock of BTH has been corrected by ~19.01% in the past month. The stock has been valued using an EV/Sales multiple-based illustrative relative valuation and arrived at a target of low double-digit upside (in % terms). The company can trade at a slight discount to its peers considering the competitive environment, technological disruption, and external factors. For valuation, peers such as Livetiles Ltd (ASX: LVT), Damstra Holdings Ltd (ASX: DTC), Iress Ltd (ASX: IRE), and others have been considered. Considering the indicative upside in valuation, improvement in net cash, decent outlook, new product launches, current trading levels, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on this stock at the closing market price of $0.490, down by -3.921% as on 2^nd June 2022.

Markets are trading in a highly volatile zone currently due to certain macroeconomic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

BTH Daily Technical Chart, Data Source: REFINITIV 

Note 1: The reference data in this report has been partly sourced from REFINITIV

Note 2: Investment decisions should be made depending on the investors’ appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock price

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