Pushpay Holdings Limited

PPH Details

Latest Updates: Pushpay Holdings Limited (ASX: PPH) provides a platform for mobile payments solutions to consumers. Its solutions include Event Registration, Pushpay Fastpay, echurch Apps, etc. PPH serves small medium enterprises (SMEs), the faith sector, non-profit organizations, and corporate organizations.

FMA Court Proceedings for Insider Trading: Recently, FMA (Financial Markets Authority) has filed court charges against two individuals regarding insider trading in shares of PPH. FMA alleges that these two individuals misused the information regarding the resignation and sale of shareholding of the Co-founder and Director Eliot Crowther. Mr. Eliot’s trading was legal, and he is not a party to the charges. However, one of the two individuals advised the other person to trade in the lead up to the market declaration who acted upon it. The names of the employees have been uncovered until their first court appearance. PPH is cooperating with the regulators for investigation. Its conduct has neither been the subject of the examination nor it is a party to any FMA proceedings.

CGO Appointed: Mr. Jason Rupert was announced to join as the CGO (Chief Growth Officer) effectively from 14 February 2022. He will undertake strategy planning & execution, and sales and marketing functions.

Reduced Shareholding: On 26 January 2022, Mawer Investment Management Ltd. ceased to be a substantial shareholder in PPH by selling off ~1.94 million ordinary shares for NZ $2.23 million. It now holds 4.98% shares in the company (versus 6.04% held previously).

Performance Highlights of 1HFY22 (Ended 30 September 2021):

• The total product purchased by customers increased by ~43% YoY from 12,725 to 18,229 in 1HFY22.
• The net operating cashflows generated rose by ~14% YoY from US$26.98 million in FY20 to US$30.82 million in FY21.
• The company delivered growth in total processing volume and earnings (revenue, net profit, and EBITDAFI) growth in 1HFY22 on pcp. It maintained sustainable underlying operating metrics and gross margins of 69% during the period.
• On 25 August 2021, PPH completed the acquisition of the US-based Resi Media and made considerable improvements to the existing product suite. The acquisition a further widens the core product offering of PPH and solidifies the digital technology strategy while executing the goals.
  

Growth of Customers, Highlights; (Analysis by Kalkine Group)

Key Risks: The company faces a host of financial risks such as credit risk, liquidity risk, and market risk. It faces the risk of technological investment due to advancements, and foreign currency risk due to operations in the US, Australia, and New Zealand.

Outlook:

• PPH estimates an underlying EBITDAFI of ~US$60.0 - $65.0 million excluding the investment costs linked with the expansion of the Catholic segment.
• The company anticipates continued revenue growth as it implements its strategy, delivers increased efficiencies, and expands market share in the US faith sector.
• Post the acquisition of Resi Media, PPH expects significant synergy opportunities via product bundling and merger with its sales and marketing engine.

Stock Update: The stock of PPH gave a negative return of ~35.88% in the past three months and a negative return of ~41.02% in the past six months. The stock is currently trading close to its 52-weeks’ low level of $0.912. Considering the FMA filing and insider trading charges against the individuals in connection with the sale of shares of a former Director of PPH, and associated key business risks, we suggest investors wait for further market update. The stock closed at the market price of $0.920, down by ~1.076%, as of 14 February 2022.

PPH Daily Technical Chart, Data Source: REFINITIV  

Openpay Group Limited

OPY Details

Latest Updates: Openpay Group Limited (ASX: OPY) offers BNPL (buy now, pay later) payment solutions and caters to merchants and customers across healthcare, home improvement, automotive, education, memberships industries. OPY operates in New Zealand, Australia, the US, and the UK. On 4 February 2022, OPY transferred ~582,328 performance rights (ASX: OPYAO) to an employee as part of an employee incentive scheme.

OPY issued ~337,514 shares on 31 January 2022 and ~247,711 shares on 4 February 2022 (collectively, the new shares) upon conversion of fully vested performance rights.

Growth Acceleration & Reduction in Cost Base in Q2FY22 (Ended 31 December 2021):

• OPY posted record growth in TTV (total transaction value) of ~22% Y-o-Y to ~$118 million in Q2FY22. The ANZ TTV increased by ~41% Y-o-Y to ~$87 million during December 2021.
• The total net bad debts improved to ~1.9% in Q2FY22 from ~2.3% in Q2FY21 (and from a high of ~4% in Q1FY21). The arrear levels of the Group portfolio fell to 1.4% in Q2FY22 versus 2.0% in Q1FY22.
• In the US, OPY started the initial controlled product launch of the brand ‘OpyPay’ across the automotive and healthcare verticals. It has partnered with Cross River in the US and brought trained vets, auto dealerships, and dentists onboard in eight (8) US states. 
• The company held a $32 million cash balance and had $501 million of undrawn corporate and receivables funding line as of 31 December 2021.

The Trend of Arrears & Bad Debts; (Analysis by Kalkine Group)

Key Risks: The company faces the risk of technological changes, regulatory compliance, peer competition, and negative forex rate movements. 

Outlook:

• OpyPro, the B2B SaaS platform in Australia is witnessing robust demand and expects to enter more B2B partnerships in the next quarters. OPY plans to develop a pipeline for the OpyPro market in the US also in partnership with Kyriba, targeting customers and a shorter sales cycle for new B2B clients.
• OPY will provide an update on its UK strategy as appropriate post talks with employees and merchants. It is evaluating the implications of its decision to form a partnership with Payment Assist instead of acquisition as previously planned. 
• OPY plans to add more merchants and undertake further controlled pilot launches and pilots in the US in Q3FY22.
• OPY targets to achieve profitability in the next 12-18 months in ANZ (Australia & New Zealand)

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of OPY gave a negative return of ~66.26% in the past three months and a negative return of ~68.19% in the past six months. The stock is currently trading at its 52-weeks’ low level of $0.415. The stock has been valued using the Enterprise Value to Sales based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount than its peers’ median EV/Sales multiple, considering continued negative net margins, negative ROE, and an uptick in the debt-to-equity ratio.  For this purpose of valuation, a few peers like EML Payments Ltd (ASX: EML), Sezzle Inc (ASX: SZL), Douugh Ltd (ASX: DOU) have been considered. Considering the low trading levels, growth in merchants, TTV, active plans, in Q2FY22, plans to grow merchant network, and B2B partnerships on OpyPro platform, a profitable ANZ business, an indicative upside in valuation, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the closing market price of $0.415, down by ~1.191%, as of 14 February 2022.

OPY Daily Technical Chart, Data Source: REFINITIV

Bigtincan Holdings Limited

BTH Details

Recent Developments: Bigtincan Holdings Limited (ASX: BTH) offers artificial intelligence (AI) led learning management solutions and sales enablement software to vertical industries of retail, technology, life sciences, financial services, energy, telecommunications, and government sectors. On 1 February 2022, Director, Mr. David Keane purchased ~60,000 shares at $0.915 per share in an on-market trade and held ~1.06 million shares in the company.

Growth in Key Metrics during Q2FY22 (Ended 31 December 2021):

• BTH reported a ~133% YoY increase in Annualised Recurring Revenue (ARR) to $112 million as the end of Q2FY22. It benefitted from the preliminary gains of the upsell or cross sell opportunities from the acquisition of Brainshark. BTH customers Convatech, Lion, and RevRV purchased technology from Brainshark products and multi-hub solutions.
• BTH invested $4.9 million in the Data Products Group, infrastructure, and Brainshark acquisition linked activities in Q2FY22 to develop future capabilities and technology in the products to create a leading position in the business.

Post-Quarter Highlights:

• Alliance with Salesforce: After the close of Q2FY22, BTH declared its collaboration with Salesforce to deliver suitable content and training to customers on Salesforce’s AppExchange to provide enablement resources within the CRM.
• Award Recognition: In January 2022, BTH was recognised as a gold medalist and leader as per the Sales Enablement Data Quadrant report from SoftwareReviews in 2022, a division of IT research and consulting firm Info-Tech Research Group.

Key Financials, Highlights; (Analysis by Kalkine Group)

Key Risks: Technological upgrades, synergy risk, and failure of new product launches also pose risks to the business.  The company is exposed to stiff rivalry from competitors developing similar product lines and services.

Outlook:

• The company recently updated its plans to develop and integrate all ARR into a unified operating line with the addition of the Brainshark readiness solutions into its multi-hub product offering.
• It foresees avenues to cross sell further to the Brainshark customers. The company is advancing on track to meet or surpass guidance of $109 million in revenue and ~$119 million in ARR for FY22.
• BTH plans to release 1HFY22 results and full details on other key SaaS operating metrics in February 2022.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of BTH gave a negative return of ~23.89% in the past three months and a negative return of ~22.68% in the past six months. The stock is currently trading below the 52-weeks’ average price level band of $0.761 - $1.530. The stock has been valued using the Enterprise Value to Sales based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at some discount than its peers’ average EV/Sales multiple, considering the decline in current ratio, continuing negative net margin, and acquisition & synergy risk. For this purpose of valuation, a few peers like Damstra Holdings Ltd (ASX: DTC), Nuix Ltd (ASX: NXL), Symbio Holdings Ltd (ASX: SYM) have been considered. Considering the current trading levels, decent performance in Q2FY22, growing investments in product & engineering, and sales expansion, combined guidance for ARR & revenue for FY22, an indicative upside in valuation, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.845, as of 14 February 2022, 11:55 AM (GMT+10), Sydney, Eastern Australia.

BTH Daily Technical Chart, Data Source: REFINITIV

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

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

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and 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 prices.

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