Bravura Solutions Limited

BVS Details

Financial Overview of 1HFY22 (ended 31 December 2021) Results: Bravura Solutions Limited (ASX: BVS) provides software solutions for the funds’ administration, wealth management, and life insurance industries across Australia, New Zealand, Asia, Africa, the UK, and Europe.

• EBITDA improved by ~$9.6 million on 1HFY21 in 1HFY22 due to revenue increase and efficient operational costs management.
• Operating cash flows before income tax deduction amounted to ~$17.51 million in 1HFY22 versus ~$9.40 million in 1HFY22. These cashflows depict a cash conversion (operating cashflow to EBITDA) rate of ~69% in 1HFY22 versus ~61% in 1HFY21 and are consistent with the long-term trend.

Long-Term Trend of Earnings; (Analysis by Kalkine Group)

Key Risks: The company faces the risk of technological shifts, new market expansion, higher investment, and acquisition risk.   

Outlook:

• BVS is accelerating business investment in opportunities for Sonata Alta, cloud capabilities, and resources to drive revenue growth in the mid-term. It continues to build a sales pipeline with some opportunities moving to FY23.
• BVS expects FY22 revenue growth of more than ~10% against FY21. EBITDA guidance remains between ~$45 - $50 million and NPAT within ~$25 - ~$30 million for FY22, with a rise in operating costs being witnessed at a similar rate to revenue.

Valuation Methodology: P/E 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 BVS gave a negative return of ~22.81% in the past three months and a negative return of ~40.44% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $1.372 - $3.980. The stock has been valued using the P/E-multiple-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’ average P/E multiple, considering its high-debt-to-equity ratio, expected rise in operating costs, and risk of acquisition synergies. For this purpose of valuation, a few peers like Pushpay Holdings Ltd (ASX: PPH), Reckon Ltd (ASX: RKN), Hansen Technologies Ltd (ASX: HSN) have been considered. Considering the current trading levels, strengthening structural demand for microservices, cloud, and consumption-based services in the industry, improving demand conditions in the UK, continued strategic initiatives and R&D, growth in recurring revenue, 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 $1.590, up by ~5.298%, as of 16 May 2022. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

BVS Daily Technical Chart, Data Source: REFINITIV

Airtasker Limited

ART Details

Capital Raising Highlights: Airtasker Limited (ASX: ART) offers a technology-driven online marketplace platform for local services connecting customers (users) with taskers (community members) for deliveries, cleaning, office admin, IT support, etc. On 4 May 2022, ART declared entering a binding contract to acquire the assets of Oneflare Pty Limited (Oneflare) for ~$9.8 million.

• Deal Benefits & Synergies:
• Acquisition of Oneflare provides ART with a footprint in high value service categories of home improvement, trades, and professional services. The deal will create a single technology platform for a more extensive user base and result in data, financial, and tech synergies.
• The deal price depicts a lucrative ~1.6x forecasted revenue above ~$6.0 million and GMV of ~$35 million in FY23.
• Deal Funding:
• ART plans to fund the acquisition of assets via ~$2.25 million cash and ~$7.55 million ART shares at ~$0.43 per share.
• On 5 May 2022, ART raised ~$6.25 million via an institutional placement at ~$0.43 per share. ~23.87 million shares have been issued under Listing Rule 7.1. and will be used for the cash component of the deal, more investment in Oneflare acquisition, and placement costs.
• ART also planned to conduct an SPP (share purchase plan) to raise up to ~$1.2 million at ~$0.43 per share to eligible shareholders to strengthen the balance sheet.
• ACCC Enquiry & Equity Settlement Update:
• On 11 May 2022, ART obtained an enquiry from the Australian Competition & Consumer Commission (ACCC) regarding its proposed purchase of the assets of Oneflare. Hence, the company has decided to postpone the equity allotment under the placement (earlier stated on 12 May 2022) and the proposed SPP roll out after the conclusion of its ongoing discussions with ACCC.

ART posted the following financial results for 1HFY22 (ended 31 December 2021): -

Comparative Growth in Key Metrics; (Analysis by Kalkine Group)

Key Risks: The company faces the risk of technological shifts, the realisation of synergies from the acquisition, expansion of taskers, demand for services, and regulatory barriers. 

Outlook: ART focuses on expanding in the US and UK markets, increasing marketing spending, and plans to achieve staged milestones to advance from the early stages. The GMV guidance for 2HFY22 has been increased to ~$107 - ~$110 million (versus ~$105 million stated earlier). FY22 GMV is estimated at ~$191 -~$194 million.

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 ART gave a negative return of ~45.20% in the past three months. The stock is currently trading close to its 52-weeks’ low-level band of $0.395. 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 risk of COVID-19 lockdowns, increased overseas investment for expansion in the US & the UK, continuing negative net margins. For this purpose of valuation, a few peers like Domain Holdings Australia Ltd (ASX: DHG), RMA Global Ltd (ASX: RMY), Rent.com.au Ltd (ASX: RNT) have been considered. Considering the low trading levels, growth in revenue, GMV, robust customer retention, upgraded GMV for 2HFY22, robust demand from the UK, 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 $0.400, down by ~6.976%, as of 16 May 2022. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

ART Daily Technical Chart, Data Source: REFINITIV 

Cosol Limited

COS Details

1HFY22 (ended 31 December 2021) Results in Spotlight: Cosol Limited (ASX: COS) offers software and digital solutions across global enterprise asset management platforms. RPConnect, Copernicus, Evergreen, AddOns, etc., are some of its digital solutions.

• COS recorded a ~40% Y-o-Y increase in EBIT from ~$2.56 million in 1HFY21 to ~$3.57 million in 1HFY22, led by revenue growth and EBITDA increase.
• COS expands its product offering across Hitachi Ellipse, SAP, and IBM Maximo platforms (major EAM software platforms) with the acquisition of Clarita Solutions (CS), a specialist provider of Enterprise Asset Management (EAM) solutions in 1HFY22.
• Notable client wins during 1HFY22 included De Beers Group, Glencore Coal, and Prony Resources (new contracts).

Key Metrics Growth; (Analysis by Kalkine Group)

Key Risks: The company faces the risk of acquisition synergies, peer competition, varying customer preferences, and the risk of recruiting top talent.

Outlook:

• COS expects a robust 2HFY22, mainly with the core business and further acquisitive growth opportunities in the asset management market segments.
• COS focuses on growing IBM Maximo and SAP offerings in North America, leveraging its dominant position in the Hitachi Ellipse market, and increasing its IP portfolio revenue and Next Generation digital capabilities.

Stock Recommendation: The stock of COS gave a negative return of ~18.51% in the past three months and a negative return of ~17.91% in the past six months. The stock is currently trading at par to its 52-weeks’ low level of $0.550. On a TTM basis, the stock of COS is trading at an EV/Sales value multiple of 2.1x, lower than the industry (Professional & Commercial Services) average of 8.2x, thus seems undervalued. Considering the current trading levels, growth in NPAT and top-line in 1HFY22, new clients wins & renewals, synergistic acquisition with Clarita Solutions, valuation on a TTM basis, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the closing market price of $0.550, down by ~6.779%, as of 16 May 2022. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

COS 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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