Stocks’ Details

Credit Clear Limited

Successful Listing on ASX: Credit Clear Limited (ASX: CCR) is a fintech company that provides receivables management solutions. The market capitalisation of the company stood at ~$160.23 Mn as on 30^th November 2020. On 27^th October 2020, the company got listed on ASX after a successful Initial Public Offer (IPO) of $15 million at an offer price of $0.35 per share. The company would utilise all the funds raised from IPO to further enhance its base of over 800 Government and Corporate clients. Recently, the company has appointed Christine Christian on the role of independent non-executive director.

Revenue Model: The company generates its revenue through the technology platform, receivables management and legal services. CCR further added that its business has continued to grow rapidly, with messaging volume rising over three-fold in the last twelve months to reach over 2.6 million messages in the September quarter. Revenue for the quarter ended September 2020 witnessed a rise of 22% as compared to the previous quarter. For the year ended 30^th June 2020, the company reported revenue amounting to $6,474,516 as compared to $972,099 in FY19. Loss for the year amounted to $4,286,627 against $3,546,667 in FY19.

Clients by Sector (Source: Company Reports)

Growth Strategy: The growth strategy of the company revolves around making investments in technology development, cross selling the credit clear digital technology platform throughout the traditional client base, enhancing its client base and exploring international opportunities with scalable and transportable technology.

Stock Recommendation: As on 30^th June 2020, the cash and cash equivalents of the company stood at ~$2.72 million against ~$1.47 million as on 30^th June 2019. The 52-week low-high range for the stock stood at $0.440 - $1.200, respectively. In the last one month, the stock of CCR has given a negative return of 22.9%.  In addition, the stock is currently trading at a premium level as compared to the listing price of $0.480. On a technical analysis front, the stock has a support level of ~$0.707 and resistance of ~$0.772. Hence, considering the recent listing on ASX, and losses in business, we advise investors to avoid the stock at the current market price of $0.720 per share, up by 1.408% 30^th November 2020.

Cash Converters International

Decent Growth in Online Retail Sales Volume: Cash Converters International (ASX: CCV) is a franchisor of second-hand goods and financial services stores and a provider of secured and unsecured loans and the operator of several corporate stores in Australia. The market capitalisation of the company stood at ~$135.61 Mn as on 30^th November 2020. During Q1 FY21, the company recorded online retail sales volume of $3.1 million, reflecting a rise of 60% over Q1 FY20 and gross loan book value for the quarter amounted to $135.8 million. For the year ended 30^th June 2020, CCV reported revenue amounting to $279.0 million as compared to $281.6 million in FY19. Operating EBITDA for the year witnessed a rise of 51.5% to $62.1 million.

Q1 FY21 Performance (Source: Company Reports)

Outlook: The company believes that its business model and integrated, multi-channel store and online network are unique in the sector in which it operates. In addition, the company is in a decent position to be benefited from the expected rise in consumer spending and general economic recovery. This is likely to be supported by a new securitisation facility agreed with its financier and strong levels of available cash.

Stock Recommendation: As on 30^th June 2020, the cash & cash equivalents of the company stood at $106.5 million. During FY20, the provisions of the company rose up to 19.0% of Gross Loan Book value, indicating a conservative risk overlay due to uncertainty surrounding the current economic climate. The 52-weel low-high range for the stocks stood at $0.100 - $0.260, respectively. In the last one month, the stock of CCV has provided a return of 12.50%. CCV has an EV/Sales multiple of 0.5x as compared to the industry median (Consumer Cyclicals) of 1.7x on TTM basis. In addition, the stock is trading at a price to book value multiple of 0.4x against the industry median (Consumer Cyclicals) of 1.8x on TTM basis. On a technical analysis front, the stock has a support level of ~$0.15 and resistance of ~$0.230. Therefore, considering the growth in online retail sales volume, decent outlook, and current trading level, we give a “Hold” recommendation on the stock at the current market price of $0.220 per share as on 30^th November 2020.

Quickfee Limited

Growth in US Lending Supported by Activation of New Firms: Quickfee Limited (ASX: QFE) is engaged in the operation of payment platform and SME lending via provisioning of finance. The market capitalisation of the company stood at ~$111.06 Mn as on 30^th November 2020. The company achieved a fourth consecutive quarter of record lending in the United States with the lending of US$4.1 million in Q1 FY21, reflecting a rise of 91% over pcp despite challenges led by COVID-19 pandemic. This growth was supported by a combination of new firm activations as well as increased lending from existing firms. However, the Australian operations lending has been impacted by government stimulus measures in response to the COVID-19 pandemic. QFE witnessed growth in signing up new firms on the QuickFee US platform with 457 active firms as on 30^th September 2020.  During the same quarter, the company wrapped up share placement and SPP of A$15 million and A$2.5 million, respectively. The fund raising may allow the company to add significant scale to its customer acquisition team and finance the anticipated growth of the receivables book.  During FY20, the company recorded revenue amounting to A$8.5 million, reflecting a rise of 47% over FY19. In addition, payment portal transaction revenue soared by 301% to A$1.3 million in FY20.

Revenue (Source: Company Reports)

Future Growth: The company’s future business growth is likely to be supported mainly by strategic alliance partnerships, more accounting and law firms on the QuickFee platform and investment in technology advancements to capitalise on structural shifts.

Stock Recommendation: As on 30^th June 2020, the cash balance of the company stood at $15.0 million as compared to $2.8 million as on 30^th June 2019. In the last one and three months, the stock of QFE has corrected by 0.99% and 38.88%, respectively. As a result, the stock is trading towards its 52-week low level of $0.130. On a technical analysis front, the stock has a support level of ~$0.477 and resistance of ~$0.544. Thus, considering the growth in lending, decent outlook, current trading level and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.495 per share, down by 1.001% on 30^th November 2020.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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