Stocks’ Details

The Citadel Group Ltd

Margin expansion witnessed: The Citadel Group Ltd (ASX: CGL) had disclosed in a release that it intends to release its half year results for the six months ended 31 December 2018 on Tuesday 19 February 2019. Also, the company had earlier announced that Vanessa Chidrawi had assumed the office of company secretary on and from the 5th of February 2019.

The company achieved a revenue of $108.5 Mn for FY 2018 vis-à-vis $98.8 million in FY 2017, up 10% on a YoY basis. This growth was on the back of signing & progression of new contracts and cross-selling of products. The Gross margins grew to 50% from 46.70% a year ago. This rise was on account of the rollout of scalable solutions, the quality on execution front and the management’s cost optimisation initiatives.

What to Expect Moving Forward: Going forth, the management continues to see robust prospects in the public and the commercial space for the FY19. The company’s exclusive technology and scalable software solutions along with the health offerings are estimated to drive growth in the upcoming years.


CGL’s Key Financial Metrics (Source: Company Reports)
 
On the financial metrics front, the company registered a robust ROE performance of 20.5%, which substantially outperformed than the Industry median of 13.3%.Meanwhile, the stock has risen by 21.42% in the past six months as on 13 February 2019 and trading slightly towards a 52-week higher level of $9.30.

Hence, considering the strong gross margins achieved through organic & inorganic expansion as well as better than Industry ROE, we maintain our “Hold” recommendation on the stock at the current market price of $8.450 per share (down 1.285% on 14 February 2019).
 

LiveTiles Limited

Robust growth in ARR: Livetiles Limited (ASX: LVT) had lately disclosed and informed the market players that it had completed the acquisition of Wizdom, the leading digital workplace software business in Europe.LiveTiles has issued 49,715,598 shares as part of the upfront consideration for the purchase.
 
What to Expect From LVT: Going forth, the company will continue to focus on improving its operating cash flows. The gross cash operating expenses are expected to be significantly lower in 2H FY19 as compared to the 1H FY19. Moreover, the ARR growth would be primarily driven by the focused direct sales & marketing strategy targeting larger enterprises, continued growth in partner/reseller distribution channel & cross-sell opportunities.
 
For the FY ended 30 June 2018, the company’s annualised recurring revenue (ARR) saw a 275% increase on FY17 & came in at $15 million. This was on the back of growing sales and marketing footprint, development of the Company’s partner channel, ongoing product innovation and strengthening brand awareness. Also, the Average ARR per customer grew by over 154% for the financial year.


LVT’s ARR Growth trends (Source: Company reports)

Meanwhile, the stock has fallen by 43.20% in the past six months and trading close to a 52-week low level of $0.275, signifies an attractive opportunity for the investors to acquire the stock at the current juncture. In our view, the company has a favorable outlook on the back of decent ARR growth and constant growth in subscribers. Hence, we maintain our “Speculative Buy” recommendation on the stock at the current market price of $0.350 per share (down 1.408% on 14 February 2019).
 

Xero Ltd

Robust growth in ARPU & continued operational efficiencies: 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 4.37% in the past six months and is trading close to the higher level. The company is standing in a decent position with regards to the margins. Its gross margin at the end of 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 $48.60 per share (up 1.823% on 14 February 2019).


 
Stock Price Comparative Chart (Source: Thomson Reuters)   
 

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