Xero Ltd

Robust growth in ARPU:Xero Limited (ASX: XRO) had posted its numbers for the 1H 2019 wherein its top line grew by 37% on a YoY basis and came in at $256.50 Mn. This expansion was on the back of subscriber’s growth, particularly in the Australia & New Zealand regions. Also, the ARPU has increased by 6% from September 2017 and came in at $31.1. EBITDA witnessed a growth of 7.69% on a YoY basis and came in at $16.80 Mn for the 1H 2019. This growth was on account of the continuing proficiencies & operating leverages achieved in the processes.

What To Expect From XRO: In the upcoming business cycles, the company will concentrate upon growing its small business platform.Post the achievement of the break-even in the Cash flows, the company has plans to plough in any surplus cash as per the drawn investment criteria so as to drive long-term shareholder value.


XRO’s 1H 2019 Highlights (Source: Company reports)

Meanwhile, the stock has risen by 2.53% in the past six months and is trading close to the higher level. The company has got decent margins. Its gross margin was 82.8% at the end of September 2018 implying the rise of 2.6% YoY and its EBITDA margin was 14.1% at the end of September 2018 reflecting YoY improvement of 4.6%.

Hence, considering the healthy subscriber growth and steadily mounting ARPU, we maintain our “Hold” recommendation on the stock at the current market price of $48.330 per share.
 

Wisetech Global Limited

Acquisition of Systema AS:Wisetech Global Limited (ASX: WTC) had lately announced the acquisition of Systema AS, a leading customs management solutions provider in Norway. Systema’s valuable customs and cross-border expertise will deepen the company’s footprint in the Nordic region’s three largest markets, Norway, Denmark and Sweden.
 
The purchase cost comprises ~$3.0m upfront, with a further expected multi-year earn-out potential of ~$2.7m in relation to business and product integration, and revenue performance. Systema is expected to be consolidated into WiseTech Global accounts from February 2019.
 
What To Expect From WTC: The strong momentumand significant growth across the global operations, the power of CargoWise One platform, with its annual customer attrition rate of less than 1%, and the continued relentless investment in the innovation as well as expansion gives management the needed confidence to expect FY19 revenue growth of 44% to 50%, which will result in top line in the range of $320m to $333m, and EBITDA growth of 31% to 37%, that will range between $102m-$107m, subject to currency movements.

WTC’s FY18 Financial Highlights (Source: Company reports)

Meanwhile, the stock has risen by 44.94% in the past six months and is trading close to the higher level. As per ASX, the company is having the PE ratio of 162.880x.

Hence, considering that all the positives have already been priced into the current market price, we advise the market players to closely watch the stock at the current market price of A$23.390 per share and wait for more growth catalysts, ahead of the interim result due on February 20, 2019.
 

Altium Ltd.

Decent Outlook, however trading at higher levels:Altium Limited (ASX: ALU), has reported its 1HY FY19 numbers. The company has achieved a strong revenue growth of 24% and thus it was clocked at US$78.1 million. Revenue growth was on account of the growth seen in the Altium Board and Systems business unit across all regions. The earnings before interest, tax, depreciation and amortization (EBITDA) grew by 49% to US$28.4 million resulting in an EBITDA margin of 36.3%.
 
 

ALU’s 1HY FY19 Highlights (Source: Company Reports)

What to Expect From ALU: Going further, the company is committed to become the PCB design software market leader & expects to achieve US$200 million in revenue by 2020. The company would continue to pursue the partnership as well as M&A opportunities to support the long-term vision of creating the product design as well as realization platform that is centered around electronics. 
 
Meanwhile, the stock price has risen by 25.32% over the past six months and is trading close to the higher level. The company has a trailing P/E multiple of 69.320x and the stock has an annual dividend yield of 1.11%. The company has a net margin of 29.9% at the end of December 2018 which implies the rise of 6.4% on the YoY basis.
Hence, considering that all the positives has already been priced into the current market price, we advise the investors to watch at current price juncture of $32.560 per share and look out for further growth drivers.
 

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.