Bravura Solutions Limited

BVS Details

Increase in Substantial Shareholding: Bravura Solutions Limited (ASX: BVS) offers software solutions to life insurance, wealth management, and funds administration companies. On 4 January 2022, BVS declared that Connor, Clark & Lunn Financial Group Ltd. (CCL Ltd) and its associated entities increased their voting power from ~10.47% to ~11.93% in LVT.

On the same date, BVS announced the appointment of Mr. Brent Henley as the CFO, Executive Director, and Joint Company Secretary, effective from 1 February 2022. Brent will replace Mr. Martin Deda and work through the transition period until Mr. Martin retires on 11 March 2022.

FY21 Results:

• In FY21, BVS invested ~$41 million in the R&D of the Wealth Management division to develop a suite of microservices, Sonata Alta, Australian wrap functionality, et It invested ~$9 million for product improvements to GFAS to boost the product revenue.
• BVS entered a 7-year contract with Aware Super, a superannuation fund, for the implementation of Sonata Alta and Digital Advice. It entered new or renewed agreements with firms in the UK, New Zealand, and Australia in FY21.
• The company is witnessing favourable key business drivers such as increasing structural demand for microservices, SaaS, cloud, and subscription-based services, COVID-19 led digital transformation, and increased market confidence in the UK post-vaccination drive.

Net Operating Cash Inflows, Highlights; (Analysis by Kalkine Group)

Key Risks: The company faces competition from industry peers and a continuously evolving technological landscape.  Operating in multiple geographies, BVS faces the negative impact of forex rate changes.

Outlook:

• The company expects to restore its growth trajectory in FY22 and estimates NPAT growth in the mid-teens compared to the adjusted NPAT of ~$32.3 million in FY21. It plans to release its 1HY22 results in February 2022.
• BVS expects restoration of demand in South Africa and the UK as the vaccines roll out in FY22.
• The strategic measures and R&D investment undertaken in FY21 are also expected to develop componentisation of products.
• The firm aims to significantly expand the TAM (total addressable market) via the launch of microservices.

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 BVS gave a negative return of ~16.84% in the past three months and a negative return of ~30.29% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $2.310 - $3.980. 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 decline in the FY21 top-line and NPAT, continuing COVID-19 impact on projects, and the risk of synergies from the recent acquisitions.  For this purpose of valuation, few peers like Tyro Payments Limited (ASX: TYR), Livetiles Limited (ASX: LVT), Bigtincan Holdings Limited (ASX: BTH) have been considered. Considering the low trading levels, new clients & contracts in FY21, R&D investment, strengthened demand outlook for products and expected NPAT growth in FY22, an indicative upside in valuation, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the current market price of $2.350, as of 6 January 2022, 10:40 AM (GMT+10), Sydney, Eastern Australia.

BVS Daily Technical Chart, Data Source: REFINITIV  

Bigtincan Holdings Limited

BTH Details

AGM Presentation Takeaways: Bigtincan Holdings Limited (ASX: BTH) provides an online, secured, and integrated platform solution Bigtincan Hub which delivers relevant content to the users directly across any network and device. It offers product solutions to retail, life sciences, technology, financial services, telecom, energy sectors, etc.

• BTH has developed a comprehensive suite of sales enablement solutions on its platform in FY21. The deployment of a Multi-Hub Product strategy is enhancing opportunities for cross sell/upsell and new logo wins.
• The market for the sales enablement platform is expected to reach ~US$3.08 billion by the end of FY26 (CAGR of ~17.4% from 2021-2026) while the sales engagement platform market is anticipated to expand to ~US$5.59 billion by FY23.

Q1FY22 (30 September 2021):

• With the recent acquisition of Brainshark Inc., BTH has added customers such as Metlife, IBM, PepsiCo, JP Morgan, AstraZeneca, etc. It has integrated the Brainshark products into its Bigtincan Learning Hub product line. BTH now has a complete sales enablement platform and expanded its capabilities in sales learning and coaching.
• BTH continued investing in long-term development projects and allocated ~$2.6 million of costs towards software development in Q1FY22.
• With Brainshark business in hand, BTH reported growth in its market position in the sales enablement market in Q1FY22 as per the recent Aragon Research report for Globe Sales Coaching and Learning, published in October 2021.
• BTH held ~$55.7 million cash and cash equivalents as of 30 September

The Gross Profit Trend from FY15-FY21; (Analysis by Kalkine Group)

Key Risks: The company faces reliance on third-party IT suppliers, over dependence on the Bigtincan Hub product, expansion to new overseas markets, and new customer acquisition. 

Outlook:

• BTH is advancing with the integration of Brainshark and ahead of its implementation plan and plans to deepen cross sell and up sell avenues across its expanded customer base.
• BTH remains on track to deliver or surpass ARR of ~$119 million and revenue of ~$109 million during FY22.

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 BTH gave a negative return of ~19.91% in the past three months and a negative return of ~14.66% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $0.761 - $1.530. 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 a slight discount than its peers’ median EV/Sales multiple, considering the decline in current ratio, realisation of synergies with the Brainshark integration, COVID-19 risk, and the ongoing software development costs, etc. For this purpose of valuation, few peers like Iress Limited (ASX: IRE), Nitro Software Limited (ASX: NTO), Class Limited (ASX: CL1), and others have been considered. Considering the current trading levels, increase in cash receipts, new customer wins, the start of cross sell/up sell opportunities to customers, ongoing investment in innovation, a growing sales intelligence market, indicative upside in valuation, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the closing market price of $0.945, down by ~6.436%, as of 6 January 2022.

BTH Daily Technical Chart, Data Source: REFINITIV  

LiveTiles Limited

LVT Details

Change in Directors’ Shareholding: LiveTiles Limited (ASX: LVT) markets a cloud-based Employee Experience (EXP) platform that helps employers (customers) to collaborate and communicate with their employees. On 29 December 2021, Director, Jesse Todd, acquired ~557,777 shares at ~$0.0894 per share in LVT and increased his shareholding to ~733,677 ordinary shares.

• On 24 December 2021, Director, Fiona Le Brocq, purchased ~302,325 shares at ~$0.086 per share in LVT.
• Director, Marc Stigter, acquired ~287,040 shares at ~$0.0870 per share and held ~405,145 fully paid ordinary shares in LVT.

Q1FY22 (30 September 2021) Results:

• The company reported ~1,026 customers as of 30 September 2021.
• The average ARR (annual recurring revenue) per customer increased by ~23% YoY to ~$62.8K at the quarter end as the business continued to move towards the larger mid-market and enterprise segment. The company achieved ~49% CAGR over 4 years in the average ARR per customer.
• As of 30 September 2021, the net operating cash outflows improved ~58% compared to pcp on a TTM basis due to continued disciplined cost management practices.
• It held ~$20.85 million cash as of 30 September 2021.
  

Growth in Average ARR per Customer, Highlights; (Analysis by Kalkine Group)

Key Risks: The company faces the risk of adverse forex movements, higher investment in technology, regulatory reforms, technical issues, and continued COVID-19 uncertainty.

Outlook:

• LVT plans to expand its Employee Experience (EXP) platform offering and capabilities in FY22.
• It is poised to leverage the emerging employee experience avenues on the back of positive industry trends and a diverse and robust pipeline.
• The company aims to maintain financial discipline and focus on rational growth to achieve profitability.
• LVT will keep investing in R&D and product development based on the success of LiveTiles Reach Mobile last year.

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 LVT gave a positive return of ~23.99% in the past three months and a positive return of ~45.71% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $0.082 - $0.303. 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 a slight discount than its peers’ average EV/Sales multiple, considering its continuing net losses, & net operating cash outflows, the risk of technological & forex changes, etc. For this purpose of valuation, a few peers like 99 Technology Limited (ASX: 99L), Adacel Technologies Limited (ASX: ADA), ReadCloud Limited (ASX: RCL), and others have been considered. Considering the low trading levels, increase in operating revenue, cash receipts, new customer wins, improving cash cycle, continued focus on cost discipline, indicative upside in valuation, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.095, as of 6 January 2022, 1:08 PM (GMT+10), Sydney, Eastern Australia.

LVT 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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