Stocks’ Details
 

Link Administration Holdings Limited

A Quick Look at Full Year Results:Link Administration Holdings Limited (ASX: LNK) is a provider of technology-enabled administration solutions. It is also in the business of fund administration and securities registration. Recently, the company via a release announced that National Australia Bank Limited and its associated entities have ceased to become a substantial holder in the company, effective from 26^th August 2019. In addition, the company has updated the market with results of the full year 2019. It reported revenue amounting to $1.403 Bn and statutory NPAT of $320 Mn. The operating NPATA of the company stood at $202 million, reflecting a fall of 3% on a pcp basis. The company added that statutory NPAT includes significant items such as costs relating to business combinations, integration, client migrations, and gains realised on the acquisition of PEXA as well as the divestment of CPCS.

In another update, the company announced on-market buy-back of up to 10% of its issued share capital, representing up to around 53 Mn shares with a current market value of circa $262 million, based on the company’s closing share price on 28 August 2019.The company further stated that the buyback would not commence earlier than 16 September 2019 and it would not cease later than 15 September 2020. In addition, it was stated that LNK will be conducting its Annual General Meeting on 15^th November 2019.


Revenue Trend (Source: Company Reports)

What to Expect:The company’s priorities revolve around focusing towards client retention and investment in new products. It is also exploring opportunities for further jurisdictional expansion and entry into the UK pensions market. The company stated that the Global transformation is expected to deliver $50 Mn of annualised savings by the end of FY 2022. It added that, for FY20, Operating EBITDA of the continuing business is anticipated to be stronger in 2H and overall, broadly in accordance with FY19. LNK is expecting operating EBITDA in the range of $60 Mn-$70 Mn for FY20.

Stock Recommendation:  The Board of the company has declared a final dividend amounting to 12.5 cents per share, 100% franked. The record date and payment date for the dividend are 5 September 2019 and 10 October 2019, respectively. Link Administration Holdings Limited reported operating cash flow conversion of 118% for 2H FY19. Currently, the stock is priced its 52-week low levels of $4.50 with reasonable PE multiple of 9.73x, proffering a decent opportunity for accumulation. Hence, considering the aforesaid facts coupled with current trading levels and decent outlook, we give a “Buy” recommendation on the stock at the current market price of A$5.370 per share. The stock was up 9.369% at market close on 29 August 2019, on account of decent set of results for FY19.

 

Appen Limited

Decent Performance in 1HFY19:Appen Limited (ASX: APX) is into the provisioning of quality data solutions and services for machine learning and artificial intelligence applications for global technology companies, auto manufacturers and government agencies. Recently, the company has released its results for 1H FY19, wherein it reported revenue amounting to $245.1 Mn, reflecting a rise of 60% on a YoY basis. The company further stated that, in addition to high revenue growth, it grew margins from relevance data as the system and process upgrades took effect after the completion of the integration of Leapforce, along with other efficiency and scale benefits. The company posted underlying and statutory NPAT of $29.6 Mn and $18.6 Mn with a YoY rise of 67% and 33%, respectively.


Financial Summary (A$M) (Source: Company Reports)

Future Aspects:The company stated that the government interest is growing in Artificial Intelligence (AI) space.The company is well-positioned by combining Figure Eight’s leading position with its secure data annotation capabilities. It is investing in resources, facilities and technology to respond to government needs.

Stock Recommendation:APX witnessed a rise of 98% in cash flow from operations. The Board of the company has declared an interim dividend amounting to 4.0 cents per share, partially franked in accordance with the same period last year. Currently, the stock is trading towards the higher end of its 52-week trading range of $9.60 - $32.0 and has generated a good return of 82.35% in the past one year. Hence, we advise investors to closely watch the stock at the current market price of A$24.270 per share (down 11.326% on 29^th August 2019) and wait for better entry levels.
 

NEXTDC Limited

Growth in Revenue and EBITDA:NEXTDC Limited (ASX: NXT) is into the development and operation of independent data centres in Australia. The market capitalisation of the company stood at ~A$2.26 Bn as on 29^th August 2019. Recently, the company has released its results for the financial year 2019, wherein it highlighted about operational and financial performance for the said period. The company stated that it has raised an amount of $500 Mn of senior unsecured debt and refinanced its $300 million syndicated senior secured debt facility, which remains undrawn. During the year, the company wrapped up the acquisition of the land and buildings at P1, M1, S1 and B1. It delivered revenue amounting to $179.3 Mn, reflecting a rise of 15% on a YoY basis and posted a statutory net loss after tax amounting to $9.8 Mn.


Revenue and EBITDA growth (Source: Company Reports)

Financial Year 2020 Outlook:The company is anticipating revenue in the ambit of $200 Mn to $206 Mn and underlying EBITDA to be between $100 Mn to $105 Mn. The company is expecting capital expenditure in the vicinity of $280 Mn to $300 Mn.

Stock Recommendation:The cash and cash equivalents of the company was $399 Mn as of 30 June 2019. The balance sheet position of the company is being supported by over $1.8bn of total assets. On the stock’s performance front, it produced returns of 5.13% in the time frame of six months. It is presently trading below the average of 52 weeks high and low level of $7.60 and $5.61, respectively. Hence, considering the above-stated facts and decent outlook, we give a “Buy” recommendation on the stock at the current market price of A$6.120 per share (down 6.707% on 29^th August 2019).
 
 
Comparative Price Chart (Source: Thomson Reuters)

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