Stocks’ Details

EML Payments Limited

Decent Performance in 1HFY19: EML Payments Limited (ASX: EML) is a payment solutions company that serves its businesses or consumers while making the payment experience to be an efficient and secured one. Recently, the company disclosed that Tribeca Investment Partners Pty Ltd ceased to be a substantial holder of EML since 13 March 2019. It has also announced that one of its substantial holders, IOOF Holding Limited and its subsidiaries has cut down its stake in the company from an earlier 8.096% which comprised of 20,261,322 votes to 16,261,322 votes, which ultimately resulted into 6.498% holding.

1HFY19 Performance Overview (Source: Company Reports)

EML’s revenues increased by 23% over the prior corresponding period to $47.2 million in the first half of 2019, with growth driven by all segments including G&I up 49%, GPR up 13% and VANS up 100%. The Group generated EBTDA of $13.74 million for the half year due to strong revenue growth driven by organic and acquisitive business development.

What to Expect From EML: The company has updated the revenue guidance for the 2019 financial year and now expects it to be between $88-94 million as compared to the previous guidance of $82-88 million. The company has narrowed the EBTDA guidance to between $27-28 million compared to previous guidance of $26-28 million.

Meanwhile, the stock has generated a YTD return of 14.33%. EML remains debt free with $50.1 million of cash at hand. The group revenue growth is a positive reflection of the inherent diversification in the business and the lack of reliance on any one customer, segment or geography. As of now, the stock is trading slightly towards the 52-week higher level of $1.920 with PE multiple of 153.13x which is higher than the industry median. Hence, considering the aforesaid facts, we maintain our “Hold” recommendation on the stock at a current market price of $1.760 per share (up 2.624% on April 03, 2019).
 

Splitit Payments Limited

Significant growth in top-line: Splitit Payments Limited (ASX: SPT) is a technology company giving cross-border credit card based instalment solutions to the retailers and businesses. The sales income for the financial year was USD$789,920, up from USD$260,409 in 2017. Sales income comprised of merchant fees. However, the net loss of the company after income tax was USD$4,642,975 compared to USD$3,422,285 in FY17.
 

FY 2018 Income Statement (Source: Company Reports)

However, the current ratio stood at 0.20x in FY18 as compared to 0.10x in FY17, an increase of 93.0%, which reflects that the company is in a better position to meet its short-term obligations.

What to expect going forward: Going forward, the company will continue to invest and build strong partnership networks with eCommerce platforms, payment processors, technology services and point of sale providers, banks and large multinational corporations. It will also promote financial freedom and responsible spending for every lifestyle, by developing new advanced product features.

Meanwhile, the stock has generated returns of 9.82% over the past month. However, over the last five days, there was a negative return of 6.11%.Although the sales have improved significantly over the year and the stock is trading slightly towards the 52-week higher level. Hence, considering the aforesaid parameters and looking at current trading level, we maintain our “Speculative Buy” recommendation on the stock at the current market price of A$1.355 per share (up 10.163% on April 03, 2019).
 

Appen Limited

Significant NPAT growth: Machine learning and artificial intelligence developer, Appen Limited (ASX: APX) has announced the completion of its acquisition of Figure Eight Technologies, Inc. The company’s revenues stood at $364.3 million in FY 18 which reflects an increase of 119% on the Y-o-Y basis and the growth was primarily driven by current and new projects with existing customers and the addition of Leapforce. The underlying net profit grew by 148% to $49.0 million in FY18 as compared to $19.7 million in FY17.
 

Financial Summary (Source: Company Reports)

The EBITDA margins of the company improved from 16.9% to 19.6% due to Leapforce and economies of scale.

EBITDA guidance going forward: Appen is uniquely positioned and continues to execute strongly in a high growth market. The company is investing in engineering to meet the demand for data. The company forecasts its full-year underlying EBITDA for the year ending December 31, 2019 to be in the range of $85 million - $90 million, after engineering investment (at A$1 = US$0.74 Feb-Dec 2019).

Over the past six months, the stock has witnessed a rise of 61.54% and, in the span of the previous three months, it encountered the rise of 78.20%. It can be said that these increases have pushed the stock towards its 52-week higher level. Hence, we maintain our “Expensive” recommendation on the stock at the current market price of A$23.650 per share (up 3.683% on 3 April 2019).
 

Stock Price Comparative Chart (Source: Thomson Reuters)       
 

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