Stocks’ Details
 

Superloop Limited

 
Business Update: Superloop Limited (ASX: SLC) is betrothed in the construction and operation of independent telecommunications infrastructure and managed services in the Asia Pacific Region. On 18 May 2020, the company stated that it has witnessed robust core fibre connectivity sales performance in third quarter of FY20. The company’s cyber security services also witnessed positive results, due to transition of education providers to a distributed education environment amid COVID-19 outbreak. During the third-quarter, connectivity sales totalled $5.6 million (annualised revenue sold), with contract lengths varying from 1 to 5 years in duration. Additionally, SLC continued to see enhancement in its book-to-bill cycle on the heels of better focus on “on-net” services.
 

Q3FY20 Connectivity Sales Highlight (Source: Company Report)
 
What to Expect: For FY20, the company expects EBITDA to be in the range of $12 million to $15 million, depicting downside risk relating to COVID-19. 
 
Other Recent Updates: The company stated that Renaissance Smaller Companies Pty Ltd has ceased to become a substantial holder of the company, effective from 6 May 2020. In another update, the company announced that Stephanie Lai, a director of the company, has acquired 95,000 fully paid ordinary shares for $73,150 consideration. 
 
 
Stock Recommendation: As per the ASX, the stock is trading close to the average of its 52-week low and high level of $0.435 and $1.878. As on 18 May 2020, the company’s market capitalisation stands at ~$356.72 million. The stock of the company gave positive returns of 14.71% over a period of three months. Moving forward, the company intends to focus more on executing master service agreements, contracts, and orders to offer higher connectivity and broadband services to customers and expects to drive operational productivity. On the valuation front, the stock is trading at a P/CF multiple of 2.6x as compared to the industry median of 10.7x on TTM (Trailing Twelve Months) basis. Considering the aforesaid facts and current trading levels, we recommend a ‘Hold’ rating on the stock at the current market price of $1.15, up by 17.949% on 18 May 2020.
 

WiseTech Global Limited

 
Restatement of FY20 Guidance: WiseTech Global Limited (ASX: WTC) is engaged in providing software solutions to the logistics industry. In a recent update, the company announced that Pinnacle Investment Management Group Limited, a substantial holder of the company, has increased it voting power from 6.38% to 7.41%. In another update, the company issued2,719 fully paid ordinary shares pertaining to previous acquisition, which are due to be released from escrow on 8 May 2020.
 
What to Expect Amid Covid-19 Outbreak: For the three months to 31st March 2020, the business reported continued growth in revenue, operating cashflow and onboarding of additional users. This was however offset by COVID-19 related disruptions, including the deferment of new product rollouts and slowdown in business growth. For FY20, revenue is expected in the range of $420 million - $450 million, representing growth in the range of 21% - 29%. EBITDA is expected in the range of $114 million - $132 million, representing YoY growth in the range of 5% - 22%.
 
1HFY20 Highlights: Total revenue for the six months ended 31st December 2019, increased by 31% to $205.9 million. Net profit went up by 160% to $59.9 million. The management declared an interim dividend of 1.70 cents per share (fully franked). Notably, 99% of the revenues from the CargoWise platform were recurring in nature.
 

1HFY20 Results Highlights (Source: Company Reports)
 
Stock Recommendation: The stock of the company gave positive returns of 22.38% in the last one month. As per the ASX, the stock is trading below the average of its 52-week high and low level of $38.8 and $9.97. As on 18 May 2020, the company’s market capitalisation stands at ~ $6.12 billion, with a dividend yield and P/E ratio of 0.19% and 66.23x. The company remains committed to keep the global supply chains moving across the world with its critical logistics execution technology and will continue to build its competitive position by serving the world’s largest logistics providers. Considering the above factors along with the impact of COVID-19 on the business, we give a “Hold” recommendation on the stock at the current market price of $20.23, up 5.695% on 18 May 2020.
 

Engage:BDR Limited

 
Trading Update: Engage:BDR Limited (ASX: EN1) operates as a cross-device advertising solution company, which provides publishing, digital marketing, media management, integrated display, and other related services. The company recently updated the market with its interim May 2020 financial performance. During the period, the company reported strong revenues of $630K, up 105k on previous month. The company expects revenues to increase throughout the balance of the month and greater through the end of the second quarter. Daily revenue analysis demonstrates more than 20% growth over the past 16 days (over April).
 
Other Recent Updates: Recently, the company stated that Kurtis Rintala, became a substantial holder of the company, with voting power of 5.36%. In another update, the company stated it has received approval from the U.S. Small Business Administration regarding a recent application for the U.S. CARES Act stimulus program. The first disbursement will be ~US$435K or A$675K and is entirely forgivable. The company expects the funding to continue and surge, provided the U.S. continues to be in ‘stay in place’ after May 15, 2020.
 

Interim Financial Highlight (Source: Company Reports)
 
Stock Recommendation: As per the ASX, the stock is trading close to its 52-weeks low level of $0.009. As on 18 May 2020, the company’s market capitalisation stands at ~ $9.22 million. The stock of the company gave negative returns of 37.5% over a period of three months. The company is witnessing daily improvement across its key metrics, to build closer relationships with its shareholders and stronger ties to the country. Further, it looks forward to experiencing astronger demand in the coming weeks, which will translate to greater results, going forward. On the valuation front, the stock is trading at an EV/Sales multiple of 0.8x as compared to the industry median (technology) of 3.7x on TTM (Trailing Twelve Months) basis. Considering the aforesaid facts, and current trading levels, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.01 as on 18 May 2020.
 

Village Roadshow Limited

 
Revised Offer from BGH: Village Roadshow Limited (ASX: VRL) is engaged in offering cinema exhibition, production and distribution of film, theme parks and marketing solutions. The market capitalisation of the company stood at ~$344.54 million as on 18 May 2020. The company recently updated the market that BGH Capital Pty Ltd has given an unsolicited, non-binding indicative proposal for acquiring all of the shares in the company with the help of a scheme of arrangement with a revised offer price of up to $2.40 cash per share. VRL added that this indicative price reflects a 25-36% premium to the closing share price amounting to $1.765 on 15 May 2020. However, the proposal is subject to numerous conditions, which comprises the arrangement of financing, approval of the Foreign Investment Review Board (FIRB), recommendation by the Board of the company, and completion of due diligence. The company has advised shareholders to take no action in relation to the BGH Revised Proposal at this stage and informed that there is no certainty that the proposal will result in a transaction.
 
COVID-19 Update:Due to the COVID-19 related uncertainties, the company’s Gold Coast theme parks, Topgolf, Australian Outback Spectacular and the Film Studios will remain closed. VRL’s entire cinema circuit, including those sites operated by VRL’s partner Event, will also continue to remain shut down. The company expects its underlying operating cash costs to be in the range of $10-15 million per month. As at 30 April 2020, VRL had a net debt position of ~$284 million, with undrawn debt facilities of around $5 million. The company expects a net debt position of approximately $315 million at 30 June 2020. 
 
1HFY20 Key Highlights: During the period, the company reported EBITDA (including AASB16) of $83.6 million, up from $65 million reported in the year-ago period. NPAT, including AASB16 decreased from $12.8 million in 1HFY19 to $7.1 million in 1HFY20.
 

Financial Summary (Source: Company Reports)
 
Valuation Methodology: P/Sales Based Market Multiple Approach (Illustrative)
 
 
P/Sales Based Market Multiple Valuation Approach (Source: Refinitiv, Thomson Reuters)
 
Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: As per the ASX, the stock is trading below the average its 52-week low and high level of $0.770 and $4.100. As on 18 May 2020, the company’s market capitalisation stands at ~ $344.54 million, with an annual dividend yield of 2.83%. The stock of the company gave negative returns of 55.65% over a period of three months.  The company remains focused on improving its business by delivering outstanding guest experiences. We have valued the stock using Price to Sales based  market multiple valuation method and arrived at a target of lower double-digit growth (in percentage terms).  Thus, considering a favourable valuation, decent long-term outlook, and improvement in key margins, we give a “Speculative Buy” recommendation on the stock at the current market price of $2.130 per share, up 20.68% on 18 May 2020, possibly due to the revised proposal from BGH Capital Pty Ltd.
 
 
Comparative Price Chart (Source: Refinitiv,Thomson Reuters)

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