Stocks’ Details

Increase in Quarterly Sales: Xref Limited (ASX: XF1) is into the development of human resources technology that automates the candidate reference process for employers. The market capitalisation of the company stood at ~A$72.01 Mn as on 20^th Aug 2019. Recently, the company announced that West Riding Investments Pty Ltd has made a change to its substantial holdings in the company and its current voting power stood at 18.64% as compared to the previous voting power of 20.9%. In another update, the company announced that it has issued 1,583,442 fully paid ordinary shares at a price of $0.568 per share to the two vendors of Rapid ID Pty Ltd in consideration for the payment of the purchase of Rapid ID and its related technology. Additionally, the company also issued 300,000 shares to Ashley Hoey, who has joined the company along with his project development team of two staff members. The company reported sales with a rise of 38% to $3.6 Mn in Q4 FY19, and credit usage has increased by 40% to $2 Mn on a YoY basis.
 
Credit Usage (Source: Company Reports)

What to Expect: The company continues to manage its expenses tightly and, as a result, its cash outflows are anticipated to remain consistent with the previous quarter-on-quarter expenditures. The company would scale through continued growth in client acquisition, organic growth in ARPA and additional revenue streams from new products and services sold by account managers.

Stock Recommendation: During Q4 FY19, the receipts from the customers stood at $2.704 Mn, which represent a significant rise on the previous record set in Q1 FY18 amounting to $2.660 Mn. The cash on hand of the company stood at $8.04 Mn and is debt-free. Coming to the stock’s performance, it produced returns of -10.42% and -34.85% in the time period of one month and three months, respectively. Hence, considering the above-stated facts and current trading levels, we give a “Speculative Buy” recommendation on the stock at the current market price of A$0.430 per share on 20^th Aug 2019.
 

Zip Co Limited

Full-Year Results to be released on 22 August 2019: Zip Co Limited (ASX: Z1P) is offering point-of-sale credit and payment solutions to consumers. It also provides a variety of integrated retail finance solutions to merchants throughout several industries. The market capitalisation of the company stood at ~A$1.06 Bn as on 20^th Aug 2019. Recently, the company via a release announced that it has entered into an agreement to acquire 100% shares in PartPay Limited, which is a global instalment technology platform. The agreement provides exposure to four key geographies such as New Zealand, United Kingdom, United States, and South Africa. It was also mentioned that the company has concurrently agreed to acquire a direct strategic equity interest in “buy now, pay later provider, QuadPay Inc. The total upfront consideration of PartPay’s acquisition amounted to NZ$50.8 Mn with an earn-out of up to a further NZ$15.0 Mn, which is based on certain prescribed performance milestones being achieved during FY20 and FY21. The company would be paying a total maximum consideration of around NZ$65.8 Mn through the issue of new fully paid ordinary shares in the company, which is subject to the shareholder approval.

As per the release dated 19^th Aug 2019, the company will be releasing its full-year 2019 results on 22^nd August 2019.The company reported a record quarterly revenue amounting to $27.0 Mn, reflecting a rise of 17% in comparison to the third quarter.


Key Operational Metrics (Source: Company Reports)

Future Aspects: The Company is well-positioned to continue its rapid growth, which might attract the attention of market players. The company has continued to expand its merchant base, and there are now more than 16,200 partners that accept Zip digital payments throughout ~36,000 points of presence both online and in-store.

Stock Recommendation: During Q4 FY19, the company reported a strong growth in the merchant base with significant enterprise partners, which includes Kmart Australia, Just Group and Bing Lee joining the payments platform. It delivered a transaction volume of more than $1.1 Bn and posted more than 1.3 Mn Zip active customer accounts. With respect to the stock’s past performance, it produced returns of - 2.27% and -17.98% in the time span of one month and three months, respectively. However, in the time period of six months, the stock delivered a return of 122.96%.  As per ASX, the stock is trading closer to its 52-week higher levels of $3.980. Hence, considering the above stated facts and current trading levels, we advise the investors to closely watch the stock at the current market price of A$3.340 per share (up 10.963% on 20^th Aug 2019, due to the entry of the company into four strategic markets as a result of the acquisition) and wait for better entry levels.
 

Audinate Group Limited

Change of Address: Audinate Group Limited (ASX: AD8) provides professional audio networking technologies globally. The market capitalisation of the company stood at ~A$468 Mn as on 20^th Aug 2019. Recently, the company with the help of a release announced that it has issued 8,000 fully paid ordinary shares at the consideration of $0.26 per share. In the release dated 9^th Aug 2019, the company announced that the registered office and principal place of business happen to be Level 7, 64 Kippax Street, Surry Hills NSW 2010 which got effective from 12^th Aug 2019. The company further stated that AustralianSuper Pty Ltd has ceased to become a substantial holder in the company from 11^th July 2019.

In another update, the company stated that the Dante AV Module™ and the Dante AV Product Design Suite™ products are now commercially available for order by manufacturers. It further added that Patton Electronics has become a first customer to sign a purchase order and it would be among the first to adopt Dante AV by adding the platform into a new generation of AV-Over-IP products. The following picture provides an idea of competitive landscape:


Total Products Per Protocol (Source: Company Reports)

Future Strategies: The company’s core business growth strategy revolves around increasing market awareness of Dante products, increasing penetration of Dante throughout each OEM brand’s product portfolio and to increase the number of OEMs adopting Dante.

Stock Recommendation: The company delivered a net margin of 6.0% in 1H FY19 as compared to the industry median of 8.0%.  It posted an asset to equity ratio of 1.20x in 1H FY19 against 1.17x in 1H FY18. On the stock’s performance front, in the time period of one month, the stock produced negative returns of 8.27% and, in the time frame of past six months, the stock rose 64.61%. Currently, the stock of AD8 is trading closer to its 52-week high price of $8.66 with higher PE multiple of 367.86x. Hence, considering the aforesaid facts and current trading levels, we have a wait and watch stance on the stock at the current market price of A$7.470 per share (up 3.606% on 20^th Aug 2019) and wait for better entry levels.
 

IPH Limited

Key Takeaways from FY19 Results Presentation: IPH Limited (ASX: IPH) is into the provisioning of intellectual property services. The market capitalisation of the company stood at ~A$1.82 Bn as on 20^th Aug 2019. In FY19, the company witnessed double-digit organic growth for the third consecutive half, which has been driven by the take up of Asian offering. The company successfully wrapped up the acquisition of Xenith IP Group, which enhances the competitive platform for growth, with compelling benefits for people, clients and shareholders. The company reported revenue, EBITDA and NPAT amounting to $259.5 Mn, $85.9 Mn and $53.1 Mn, reflecting YoY growth of 15%, 23% and 31%, respectively. The following picture provides a broader overview of the underlying key metrics of the company:


Underlying Revenue and EBITDA (Source: Company Reports)

Future Priorities: For the financial year of 2020, the company is planning a successful integration of Xenith IP and to maintain a market leading position in Australia/New Zealand and continued margin expansion. The other primary strategic priorities of the company for FY20 includes digital platform development and continued focus towards potential overseas acquisitions in secondary IP markets. 

Stock Recommendation: The bank borrowings of the company stood at $65.5 Mn in FY19. The Board of the directors declared a final dividend of 13 cps, 60% franked, which brings the full year dividend to 25 cents per share, reflecting a rise of 11% on the previous year. The full year dividend amount is in accordance with the dividend policy to pay 80-90% of cash NPAT as dividends. The final dividend will be paid on 18 September 2019 with a record date of 26 August 2019.

As per ASX, the stock of IPH is trading closer to its 52-week higher levels of $9.530 with PE multiple of 37.30x. Hence, in view of aforesaid facts and current trading levels, we have a wait and watch stance on the stock at the current market price of A$9.450 per share (up 10.397% on 20^th August 2019, owing to the release of FY19 results) and suggest investors to wait for better entry levels.


Comparative Price Chart (Source: Thomson Reuters)   

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