Stocks’ Details

Megaport Limited

 
MRR up 19% Year Over Year in 3QFY20: Megaport Limited (ASX: MP1) is the worldwide top provider of Elastic Interconnection services. The company’s market capitalisation as on 6 May 2020 stood at $1.84 billion. Recently, the company stated that it has issued 50,000 fully paid ordinary shares on 5 May 2020, under the employee share option plan.In another update, the company stated that it has successfully completed its $50 million fully underwritten share placement to institutional, sophisticated, and professional investors.
 
3QFY20 Key Financial Highlights for the Period Ended 31 March 2020: During the quarter, the company reported total revenues of $15.19 million, an increase of 10% on a sequential basis. Total monthly recurring revenue for March stood at $5.4 million, up 19% quarter over quarter. Total Installed Data Centres for the period increased 4%, sequentially and came in at 329. The company witnessed robust cloud partnerships and remains focused with continuous execution, network expansion, and achieving operational goals. Receipts from customers during the quarter stood at $13.9 million, down from the previous quarter receipts of $14 million.The company exited the period with a cash balance of $108.7 million. Cash outflow from operating activities for the quarter stood at $9.3 million.
 

Monthly Recurring Revenue Growth Trend (Source: Company Reports)
 
What to Expect: In the forthcoming quarter, the company remains focused to expand its network into new markets and data centres. Going forward, with its cloud-based partnerships and ever-increasing on-ramp density, MP1 aims to aid customers and partners to deploy and scale their hybrid cloud, multi-cloud, and direct cloud-to-cloud connections quickly and easily.
 
Valuation Methodology:EV/Sales Multiple Based Relative Valuation Method (Illustrative)

EV/Sales Multiple Approach (Source: Refinitiv, Thomson Reuters)
 
Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: As per ASX, the stock of MP1 gave a return of 127.14% in the past one year and a return of 16.38% in the last one month. The stock is also trading very close to its 52-week high level of $13.54. During 1HFY20, gross margin of the company stood at 50.9% as compared to the industry median of 74.8%. Moreover, the company has a negative ROE of 14.1%. Considering the high returns, trading levels, and growth targets, we have valued the stock using EV/Sales multiple based illustrative relative valuation approach and arrived at a downside of low single digit (in percentage terms). For the said purposes, we have considered NEXTDC Ltd (ASX: NXT), Xero Ltd (ASX: XRO) and Appen Ltd (ASX: APX) as peers. Hence, we suggest investors to book profit and give a “Sell” recommendation on the stock at the current market price of $13.22, up by 8.183% on 6 May 2020.

 
MP1 Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Pushpay Holdings Limited

Revenues up 32% Year Over Year in FY20: Pushpay Holdings Limited (ASX: PPH) is engaged in providing donor management system, which consist of donor tools, finance tools and a custom community app, in the US, Canada, Australia and New Zealand. As on 6 May 2020, the market capitalization of the company stood at $1.2 billion.
 
FY20 Key Highlights: During FY20, the company reported solid growth of 32% in total revenue to US$129.8 million and a growth of 5% in gross profit margin to 65%. Growth during the period was supported by targeted implementation of strategy, investment into product design and development, and growing team capabilities and expertise. NPAT for the period stood at US$16 million, down from US$18.8 million in pcp. Total processing volume went up by 39% to US$5 billion, which is expected to grow further on the back of a large proportion of new, medium and large customers, increased operations in the US, and further development of the product set to promote higher adoption and usage. The company exited the period with a cash balance of US$7.2 million. Cash flow from operating activities for the period stood at US$23.5 million, up 953% year over year.
 

FY20 Financial Highlights (Source: Company Reports)
 
Outlook: The company had earlier stated that COVID-19 will not impact its performance for the year ended 31 March 2020. PPH is experiencing a clear shift to digital, whereby the customers are utilizing mobile technology solutions to communicate. The company is expecting an overall increase in demand for its services. For FY21, PPH expects EBITDAF to be between US$48 million and US$52 million.
 
Valuation Methodology: EV/Sales Multiple Based Relative Valuation Method (Illustrative)

EV/Sales Multiple Based Approach (Source: Refinitiv, Thomson Reuters)
 
Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months.
 
Stock Recommendation: As per ASX, the stock of PPH gave a return of 24.15% in the past one year and a return of 14.1% in the last one month. The stock is also trading very close to its 52-week high level of $5.24. The company is exposed to foreign currency fluctuation risk. During 1HFY20, gross margin and EBITDA margin of the company stood at 65% and 16.8% as compared to the industry median of 74.8% and 29.7%, respectively. Considering the high returns, trading levels, and negative impact of currency fluctuation, we have valued the stock using EV/Sales multiple based illustrative relative valuation approach and arrived at a downside of lower double-digit (in percentage terms). For the said purposes, we have considered EML Payments Ltd (ASX: EML), Bravura Solutions Ltd (ASX: BVS) and NEXTDC Ltd (ASX: NXT) as peers. Hence, we suggest investors to book profit and give a “Sell” recommendation on the stock at $5.22, up by ~19.45% on 6 May 2020.

 
PPH Daily Technical Chart (Source: Refinitiv, Thomson Reuters)
 

MSL Solutions Limited

 
Revenues Down 7.1% on Year Over Year Basis in 1HFY20: MSL Solutions Limited (ASX: MPW) is a worldwide provider of hosted, software as a service and on-site implemented solutions to clients in the sport, leisure, and hospitality sector. The company has a market capitalisation of $11.6 million as on 6 May 2020. Recently, the company stated that David Edward Usasz, a director of the company, acquired 500,000 ordinary shares for a consideration of $15,137.50.
 
COVID-19 and Q3FY20 Update: During the quarter, the company reported net cash from operating activities of $37k. The company exited the quarter with cash and cash equivalents of $4.359 million. Going forward, the company’s cash inflows might reduce due to the COVID-19 led outbreak. However, the company has taken the necessary measures to curb the impact and ensures the preservation of cash. In doing so, the company’s Australian staff and the MSL Board have agreed to a minimum reduction of 20% of current remuneration. The company has also terminated all contracting staff agreements existing outside the UK, Denmark, and Australia.
 
1HFY20 Key Financial Highlights: The company reported revenues of $12.9 Mn in 1HFY20, down from $13.9 Mn reported in 1HFY19. We believe that the financial performance of the company was impacted by the lower non-recurring revenues, which declined 22.4% year over year. Gross margin for the period stood at $9.2 million, down from $9.9 million reported in 1HFY19. The company reported an EBITDA loss of $1.56 million, whereas net loss for the period amounted to $15.98 million.
 

1HFY20 Key Highlights (Source: Company Reports)
 
What to Expect: For FY20, the company focuses on managing operating expenses as a ratio of recurring revenues. Further, MPW will take necessary steps to review its non-core products and businesses as well as assessing opportunities to transition from a reseller model to owning its own intellectual property. The company will also work towards improving the quality and strength of its pipeline and focus on its core products.
 
Stock Recommendation: As per ASX, the stock of MPW corrected by 71.2% in the past one year and went up by 28.57% in the last one month. In 1HFY20, gross margin of the company stood at 71.3% as compared to the industry median of 84.1%. Further, the company has posted a negative EBITDA margin as compared to the positive industry median of 26.6%. Moreover, the company has a negative ROE of 80.2%. Considering the price movements, COVID-led uncertainties, current trading levels, and tepid margins, we suggest investors to book profit and give a “Sell” recommendation on the stock at the current market price of $0.037, up by ~2.778% on 6 May 2020.

 
MPW Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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