Stocks’ Details

Bigtincan Holdings Limited

FY20 Guidance Reaffirmed:Bigtincan Holdings Limited (ASX: BTH) is a leading provider of enterprise mobility software in the rapidly growing sales enablement market. The company recently updated that the voting power of Regal Funds Management Pty Ltd was reduced to 14.76%, from 15.88% earlier.

March Quarter Highlights: During the quarter ended 31^st March 2020, the company reported customer cash receipts amounting to $14.9 million, up 178% on the prior corresponding quarter.In response to the outbreak of COVID-19, the company reviewed its operations, adjusted the operating cost base, and focussed on efficiency and productivity in sales and marketing, product development and general administration, across all its operations. The company remained focused on expanding its existing customers and signing in new ones, to support business growth. During the quarter, the company announced DXC Technologies as a new customer on the platform. Cash and cash equivalents at the end of the quarter stood around $31.5 million.


Cash Balance (Source: Company Reports)
 
Guidance:The company reaffirmed its guidance for organic revenue growth between 30-40% in FY20, with stable retention as demonstrated by new wins and ongoing market execution.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation Approach (Illustrative) 

EV/Sales Multiple Based Relative Valuation Approach (Source: Refinitiv, Thomson Reuters)
 
Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: The stock gave positive returns of 29.36% in the last one month and is currently trading above the average of its 52-week low and high level of $0.265 - $1.080. The company is engaged in continuous product development and customer support through its research and development teams and has delivered on its key growth initiatives. In 1HFY20, the company had a gross margin of 85.5% as compared to the industry median of 84.1%. We have valued the stock using EV/Sales multiple based illustrative relative valuation method and arrived at a target price with an upside of higher single-digit (in percentage terms). Hence, we give a “Hold” recommendation on the stock at the current market price of $0.750, up 6.383% on 7^th May 2020.
 

Vault Intelligence Limited

Strong Cash Position:Vault Intelligence Limited (ASX: VLT) is a SaaS Software Technology business specialising in the development of workforce performance technologies.

Quarterly Highlights for the Period Ended 31^st March 2020: At the end of the period, contracted annual recurring revenue (CARR) stood at ~$11.1 million, representing an increase of 133% from the same period last year. Total cash inflows during the quarter came in at ~$1.5 million, comprising record customer receipts of ~$1.2 million derived out of the initiatives for generating additional cash flows from new and existing contracts.The company informed that all material contracts reported, have either commenced and are delivering revenue and cash flow or will begin in the fourth quarter.

The company has also launched a new capability named Solo Crisis Management, that provides an industry leading and out-of-the-box capability to assist in businesses meeting the challenge of connecting, communicating and protecting their workers during and beyond the COVID-19 crisis.

The company holds a strong cash position with ~$3.9 million of cash at the end of Q3FY20, which will be utilized in funding its growth initiatives. Same cash levels are expected to be maintained by the end of the year. The business also improved significantly in terms of operating cash-burn, with the most significant impact seen in March due to reductions in expenditure and higher customer receipts. During March, the company reported strong cash receipts of ~$550k, up 34% on the same period last year. 
 

Growth in CARR (Source: Company Reports)
 
Outlook:Given the current performance scenario, the company expects to deliver over 100% YoY CARR growth in FY20, which amounts to CARR of $12 million for the year. The above target is strongly supported by the new contract negotiations with several large organisations, expected to be signed during Q4FY20. Due to the rising impact of COVID-19, the company’s expense control initiatives resulted in the removal of $1M+ annualised expenses from the cost structure, which is expected to be maintained, going forward.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative) 

EV/Sales Multiple Based Relative Valuation Approach (Source: Refinitiv, Thomson Reuters)
 
Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: The stock gave positive returns of 28.13% in the last one month and is currently trading below the average of its 52-week low and high level of $0.090 and $0.540, respectively. We have valued the stock using EV/Sales multiple based illustrative relative valuation method and arrived at a target price with an upside of lower double-digit (in percentage terms). Considering the performance in Q3, anticipated CARR growth, a strong pipeline ofcontracts, and current trading levels, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.210, up 2.439% on 7^th May 2020. 
 

Buddy Technologies Limited

Equity Financing Agreement to Fund Growth:Buddy Technologies Limited (ASX: BUD) is a leader in IoT and cloud-based solutions. The company has recently entered into a share purchase agreement with CST Investments Fund, a New York based institutional global small cap investor, to provide financing by way of a tranche equity-backed finance facility over a period of 24 months. The facility will provide working capital funding of $12.5 million and will be used to fund manufacturing and supply growth.

March Quarter Highlights: Customer revenue for the quarter ended 31^st March 2020 stood at $4.3 million, up 7x on pcp, due to LIFX acquisition. Customer cash receipts went down by 21% from the previous quarter but went up 17x over pcp. Overall, the results were significantly impacted by the pandemic with the closure of almost all LIFX’s U.S. and European bricks & mortar retail locations, leading to a substantial reduction in revenue and EBITDA. The company has responded to the crisis by cutting costs by reducing salary and operational expenditure.


Cash Receipts and Gross Operating Cash Outflows (Source: Company Reports)
 
Outlook: The company expects continued disruptions to the business on account of the pandemic in the coming quarter. While early results for April have been encouraging, management and the Board are continuing to take a reserved and careful approach.
Stock Recommendation:The stock of the company corrected by 73.53% in the last three months and is currently trading close to its 52-week low level of $0.006. The recent equity financing agreement provides the company with the necessary capital to emerge from the pandemic in a strong position, along with access to significant growth capital. Considering the mixed scenario in light of the Q3FY20 performance, outlook, price correction, and current trading levels, we have a watch stance on the stock at the current market price of $0.009 as on 7^th May 2020.
 
 
Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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