Stocks’ Details
 

The Citadel Group Limited

Cash & Cash Equivalents Reported at $14 Mn:The Citadel Group Limited (ASX: CGL) is involved in the provision of software and services, product sales and installation, and consulting and professional services in the technology sector throughout Australia. Recently, company’s director Anne Templeman-Jones acquired 3,333 ordinary shares at $3.60 per share, taking the final holdings to 11,089 shares, effective from November 15, 2019.

FY19 Key Highlights for the period ended June 30, 2019:Statutory total revenue from continuing operations stood at $99.2 Mn, as compared to $106.5 Mn in FY18. Gross profit for the company decreased from $55.5 Mn in FY18 to $45.0 Mn in FY19. Profit before income tax from continuing operations decreased from $25.3 Mn in FY18 to $14.3 Mn in FY19. Net Profit After Tax (NPAT) from continuing operations for the period was reported at $10.9 Mn, as compared to $19.4 Mn in FY18. Cash and cash equivalents as on June 30, 2019 stood at $14.0 Mn, as compared to $24.9 Mn as on June 30, 2018, following the investment in product research and development, acquisitions and repayment of debt. The Board of Directors declared a fully franked final dividend of 6.0 cents per share, with record date and payment date on August 24, 2019 and September 27, 2019, respectively.


FY19 Key Metrics (Source: Company Reports)

What to expect:The company is executing well on the Citadel 2.0 strategy, which is expected to deliver a business with a high percentage of recurring SaaS and software-based services revenue across a diverse client base, over time.Investments made by the company are expected to place it as a leading provider of secure enterprise information management in Australia. With availability of several opportunities in Australia and globally, the company is looking forward to organic growth along with value addition through strategic mergers and acquisitions.

Stock Recommendation:CGL’s share generated a negative YTD return of 45.54%. The stock is currently trading on the lower band of its 52-weeks trading range of $2.940 - $8.900. Its debt to equity multiple for FY19 stood at 0.15x, lower than the industry median of 0.56x. On the valuation front, its EV/Sales multiple on TTM basis stands at 1.7x, lower than the industry median of 2.3x, indicating an undervalued position at the current juncture. Hence, considering the development in SaaS business,Citadel 2.0 products gaining traction, new contract wins, international opportunitiesand current trading levels, we recommend a “Speculative Buy” rating on the stock at the current market price of $3.850, down 1.535% on November 26, 2019.

Adacel Technologies Limited

ADA’s Share Surged ~18% Post Positive Profit Guidance:Adacel Technologies Limited (ASX: ADA) is involved in providing air traffic management and air traffic control simulation and software applications and services in the global civil and military aerospace sector. Recently, the company concluded its annual general meeting, where it highlighted that revenues from its FAA Advanced Technologies & Oceanic Procedures are in-line with FY19. Moreover, ATC Military contracts with USAF are expected to deliver recurring revenues as planned.ATM projects in Fiji and Portugal are expected to be completed in FY2020, within the stated budget. Moreover, the company also has incremental orders of over $1 Mn to expand ATM products in Guadeloupe beyond FY2020. The company anticipates FY20 profit before tax to be in the range of $4.3 Mn and $4.7 Mn.

FY19 Key Highlights for the period ended June 30, 2019:The company delivered a loss before tax of $1.95 Mn, as compared to profit before tax of $9.5 Mn in the previous year. Systems revenues decreased by $6.6 Mn while Services revenues decreased by $3.2 Mn. Earnings before interest, tax, and depreciation (EBITDA) decreased from $8.4 Mn in FY18 to a loss of $0.6 Mn. Net loss after tax for FY19 was reported at $2.7 Mn, as compared to a profit of $7.7 Mn in FY18. Net cash balance at the end of the period was reported at $2.5 Mn, where cash outflow included $6.6 Mn of dividends to shareholders and payment of $1.9 Mn for purchase of shares through on-market share buybacks.


FY19 Key Metrics (Source: Company Reports)

Stock Recommendation:ADA’s share generated a negative YTD return of 23.31%. Its gross margin for FY19 stood at 84.1%, better than the industry median of 83.7%. Its EV/Sales on TTM basis stands at 0.9x, lower than the industry median of 5.0x, indicating an undervalued position at the current juncture.Considering the company’s revised positive profit guidance, underpinned by expected delivery of Fiji and NAV Portugal Approach and Tower control systems in 2020, incremental orders of over $1.0 Mn, strong pipelineand current trading levels, we recommend a “Speculative Buy” rating on the stock at the current market price of $0.605, up 18.627% on November 26, 2019, taking cues from the AGM 2019.

Bravura Solutions Limited

BVS’ Share Surged 11% Over Positive Outlook:Bravura Solutions Limited (ASX: BVS) is involved in the development, licensing and maintenance of highly specialised administration and management software applications and the provision of professional consulting services for the wealth management and funds administration sectors of the financial services industry.

Recently, the company concluded its annual general meeting where it highlighted strong operating and financial performance for FY19. Starting with recent achievement, BVS admitted into the S&P/ASX 200 Index in October 2018 and now ranks among the top 200 listed companies in Australia. Business revenue for the FY19 grew by 16% to A$257.7 Mn. EBITDA grew by 27% to A$49.1 Mn, compared to A$38.6 Mn in the previous period. NPAT increased by 21% to A$32.8 Mn, up from A$27.0 Mn in the prior corresponding period. Net cash position of the company as on June 30, 2019 was reported at A$194.8 Mn, placing the company in an excellent position to take advantage of a pipeline of compelling investment opportunities, both organic and acquisitive. The Board of Directors declared a final unfranked dividend of 4.8 cents per share, with record date and payment date on September 4, 2019 and September 27, 2019, respectively.


FY19 Key Financial Metrics (Source: Company Reports)

What to expect:The company’s products functionality supports the pensions, life insurance, investment products, and wrap platform markets across its key markets in the UK, Australia, New Zealand and South Africa, which comprises a large number of financial services companies. It has a strong sales pipeline across its key markets and across its geographic regions, driven by sales opportunities from new clients and significant project activity from existing clients. It has good visibility of its sales pipeline over a period of 12 – 18 months.

Stock Recommendation:BVS’ share posted a positive YTD return of 2.37% and is currently trading below the average of 52-week high and low of $6.270 and $3.470, respectively. With a healthy sales pipeline, a broad suite of products complemented by enhanced digital solutions and compelling acquisition opportunities, Bravura is well placed to continue its growth trajectory. Moreover, FY19 result was driven by robust demand across the Bravura product suite, combined with operating leverage expansion. It has performed well on its profitability margins, where its gross margin improved from 92.2% in FY18 to 92.6% in FY19. EBITDA margin improved from 18.2% in FY18 to 20.0% in FY19 and net margin improved from 12.2% in FY18 to 12.7% in FY19. ROE for FY19 stood at 16.2%, better than the industry median of 12.6%. Current ratio for FY19 stood at 3.08x, better than the industry median of 1.75x. Its EV/sales multiple on TTM basis stands at 2.8x, lower than the industry median of 5.0x, indicating an undervalued position at the current juncture. Considering the aforesaid facts and current trading levels, we recommend a “Buy” rating on the stock at the current market price of $4.350, up 11.825% on November 26, 2019, taking cues from the AGM 2019.
 
 
Comparative Price Chart (Source: Thomson Reuters)

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