Stocks’ Details

Appen Ltd (ASX: APX)

Tapping more growth: Appen Ltd, a player in machine learning and artificial intelligence, has stormed up over 22.5% on November 30, 2017 and is trading at high levels post the news on successfully completing fully underwritten A$25.0M institutional Placement, finding support from existing shareholders with rising demand from new ones. The group had planned for the placement and a share purchase plan in view of the lately announced acquisition of Leapforce for a total consideration of US$80.0m. On completion of the acquisition (expected to be at least 35% accretive to underlying earnings per share), the company indicated to pay Leapforce a cash consideration of US$64.0m and issue company shares worth US$16.0m, subject to voluntary escrow arrangements.
 

Margin Improvement (Source: Company Reports)
 
The group’s half year 2017 result was also outstanding with NPAT growth of 50%. The group has been winning growth and new customer in key markets that relate to technology, automotive, security; and has highlighted that its year to date revenue plus orders in hand for delivery in 2017 have been worth ~$140M at end July 2017 with full year FY17 EBITDA trending at the upper end of 40% to 50% above the prior year’s result. However, at the prevailing trading scenario, the stock looks “Expensive” at the current price of $7.14, and investors might want to wait for a dip.
 

Afterpay Touch Group Ltd (ASX: APT)

Growing customer base: Afterpay, leading “buy now, pay later” service provider in the Australian and New Zealand market, has been able to maintain payments service relationships with its biggest consumer facing organisations and financial institutions in Australia and overseas. The group has over 1.3 million customers with support from on-boarding of new customers (over 3k per calendar day), and over 80% of transactions by value per month are now made by repeat Afterpay customers. With Millennials comprising approximately 75% of Afterpay’s customer base and retail partnerships extending beyond 10,000, the group is seen to be tracking well on strategic milestones. The launch of Afterpay “in-store”, “App”, and pilot programme with Jetstar, have helped the group diversify its services. APT also witnessed October underlying sales growth of over 15% against September. While the group has indicated for stable revenue margins going forward, the net transaction loss (NTL) is expected to increase in Q2 FY18 with an impact from seasonality. APT aims to otherwise manage NTL within a range between 0.6% and 1% as the group continues with its rapid growth profile. While the group seems to have a good growth trajectory; we give a “Hold” at the market price of $5.00, taking account of the transaction losses anticipated to be brought back on track and current trading scenario.
 

Momentum in FY18 (Source: Company Reports)
 

eServGlobal Ltd (ASX: ESV)

Moving towards operational EBITDA breakeven for Core Business: eServGlobal provides innovative financial technology solutions for developing markets with regards to mobile payments, recharge, data analytics and consulting. The 35% owned HomeSend (which has underlying technology within the Mastercard Send suite of digital products) is on the point of significant sales expansion with annual volumes from signed opportunities to be US$3bn-$5bn in the medium term. On the other hand, core business is said to be capable of realising M&A value in 2018 with operational EBITDA breakeven expected in quarter to December 2017 (breakeven point of €12m). ESV is also aiming for reducing its Lombard Odier debt while maintaining HomeSend stake at 35% with flexibility for future investment. The group has also raised funds to achieve its short- and medium- term goals.


Forecast for Core Business (Source: Company Reports)
 
While the group is yet to report a healthy financial result, the growth prospects with short to medium term goals appear to provide upside. The stock has moved up 74.4% in last three months (as at November 29, 2017) and we give a “Speculative Buy” on the stock at the current price of $0.185

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