Praemium Limited

Renewal of contract with Asgard Capital: Praemium Limited (ASX: PPS) is a fin-tech company based out of Australia with offices in Australia, London, Jersey, Armenia, and Hong Kong. It provides managed accounts technology, portfolio administration, CRM solutions, and financial planning tools to the wealth management industry. The company recently got its contractual agreement with Asgard Capital Management Limited renewed for providing portfolio administration services. The contract was to expire in November 2019 which got extended for further six years, with a minimum 3-year period. The agreement retained a minimum contract value of $3 million per year. Further, the company will be adopting accounting standards AASB 9 and AASB 16 from FY19 and FY20 respectively.


Funds Under Administration over past 5 years (Source: Company Report)

Over the past 5 years, although the margins of the company have improved but are still below the industry medians. During FY18, the company reported an EBITDA, Operating and Net margin of 15.9%, 9.1%, and 3.4% respectively as compared to the industry median of 35.2%, 25.9%, and 14.6% respectively. Similarly, the company is unable to generate good returns for its shareholders which is visible from its ROE of 7.6% reported below the industry median of 14.5% in FY18.Only the asset turnover ratio of 1.55x was above the industry median of 0.36x showing that the company is efficiently utilizing its assets to generate revenue.

The company has ~405.07 million shares outstanding with the market cap of $267.35 million and a beta of 2.08x. It reported a higher EV/EBITDA of 22.2x and P/E of 188.57x as compared to the industry median of 5.4x and 9.5x respectively showing that the stock is overvalued.

The company has ~405.07 million shares outstanding with the market cap of $267.35 million and a beta of 2.08x. It reported a higher EV/EBITDA of 22.2x and P/E of 188.57x as compared to the industry median of 5.4x and 9.5x respectively showing that the stock is overvalued.

During the past one year, the stock has generated a negative yield of 7.04%. But today, the stock was up by 6.061% as compared to the previous close, currently trading at the price of level $0.700. The Relative Strength Index along with the Bollinger bands indicates a bearish signal. Improving margins but higher than market multiples along with bearish signal by the charts exhibit a hold position on the stock at the current market price of $0.700.
 
 

EML Payments Limited

Acquisition of Perfectcardalong with improving margins: EML Payments Limited (ASX: EML) is a fin-tech company based out in Australia. The company offers innovative financial technology for pay-outs, gifts, incentives or rewards, and supplier payments. It provides mobile, virtual, and physical card solutions to many big corporate brands making the payment process more efficient and secure. It also manages more than 1,300 programs across many countries in North America, Europe, and Australia. On 4 July 2018, the company acquired 74.86% interest in Perfectcard DAC (Perfectcard) which is expected to generate EBTDA of $400k – $600k in the FY 2019.


FY18 Highlights (Source: Company Report)

Over the past 5 years,the margins of the company have improved but are still below the industry medians. During FY18, the company reported an EBITDA, Operating and Net margin of 20.7%, 7.9%, and 3.1% respectively as compared to the industry median of 28.0%, 20.8%, and 11.2% respectively. Similarly, the company is unable to generate good returns for its shareholders as its ROE of 1.8% was too below the industry median of 11.3% in FY18.The asset turnover ratio of 0.33x was close to the industry median of 0.36x showing that the company is unable to utilize its assets to generate revenue.

The company has ~250.2 million shares outstanding with the market cap of ~$372.8 million and a beta of 1.64x. Although its EV/EBITDA and P/E multiples were above the industry median of 5.4x and 9.5x respectively. During the past one year, the stock has generated a negative yield of 24.75%. Today, the stock was up by 0.671% as compared to the previous close, currently trading at the price of level $1.500. The Relative Strength Index along with the Bollinger bands also reflects a neutral position. With improving margins and higher growth potential through the acquisition of Perfectcard along with neutral position by the charts, we have a “Speculative buy” recommendation for the stock at the current market price of $1.500.
 

Afterpay Touch Group Limited

Negative margins along with higher industry multiples:Afterpay Touch Group Limited (ASX: APT) is a fin-tech payments company based out in Australia. It allows retailers to offer a service called ‘buy now, receive now, and pay later’ helping the end customer to buy the product without entering into a loan agreement, or paying any upfront fee, or interest. The company currently holds a portfolio of more than 2.5 million customers with over 20,000 retail merchants (as per FY18 results). In July 2017, Afterpay merged with the Touchcorp.

Digital Payments NPS (Source: Company Report)

Over the past 3 years,the margins of the company have been reported in the negative values. During FY18, the company reported negative EBITDA, Operating and Net margins. Similarly, the company is unable to generate good returns for its shareholders as it reported a negative ROE.Only the asset turnover ratio of 0.36x was in-line with the industry median of 0.36x, still showing that the company as well as the industry is unable to utilize its assets to generate revenue.

The company has ~234.29 million shares outstanding with the market cap of ~$3.03 billion and a beta of 2.57x. During the past one year, the stock has generated a positive return of 96.06%. Today also, the stock was up by 1.855% as compared to the previous close, currently trading at the price of level $13.180. The Relative Strength Index along with the Bollinger bands indicates a bearish signal. Its 3-month support and resistance levels are marked at $11.00 and $15.00 respectively. With the negative margins and the stock moving towards its resistance level, we have a “Hold” position for the stock at the current market price of $13.180.
 

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