Stocks’ Details
 

Appen Limited

 
Negligible Impact from Coronavirus on Revenue & Earnings in FY20: Appen Limited (ASX: APX) is embroiled in the advancement of superior-quality, human-annotated datasets for machine learning & artificial intelligence. Recently, the company stated that Mark Brayan, director of the company, acquired 109,430 indirect fully paid ordinary shares in exchange of 109,430 direct shares.
 
FY19 Key Financial Highlights: During the year ended 31^st December 2019, the company reported strong organic growth, that resulted in significant growth in revenue. Revenue for the period came in at $536 million, which increased 47% on a year over year basis. Underlying EBITDA soared 42% and came in at $101 million in FY19. Organic revenue for FY19 increased 37% year over year and came in at $498.1 million. During the year, dividend amounted to 5 cents per share as compared to 4 cents in FY18.
 

Key Financial Highlights (Source: Company Reports)
 
Outlook: Going forward, the company expects to boost its customer base through investments in sales and marketing, that is expected to result in softer margins in 1HFY20. The company’s China operations are growing fast with rapid pipeline expansion and the team in place. The China operations are young with modest targets, thus Appen foresees almost negligible impact from coronavirus on FY20 group revenue and earnings. Underlying EBITDA for FY20 is expected to be in the range of $125 million - $130 million, given the exchange rate of 1 AUD = 0.70 USD from Feb’20 – Dec’20. 
 
Valuation Methodology:P/E Based Relative Valuation

P/E Based Valuation (Source: Thomson Reuters)
 
Note: All the forecasted figures are taken from Thomson Reuters, NTM- Next Twelve Months
 
Stock Recommendations: The stock of the company gave negative returns of 15.86% over a period of six months and is currently trading below the average of its 52-week trading range of $15.7 - $32.00. The company remains on track to garner additional revenue through investment in sales & technology and is looking forward to expanding its footprints into new geographies. We have valued the stock using P/E based relative valuation method and for the purpose, have taken the peer group - Altium Ltd (ASX: ALU), Iress Ltd (ASX: IRE) and WiseTech Global Ltd (ASX: WTC). We have arrived at a target price with an upside of lower double-digit (in percentage terms). Hence, we give a “Buy” recommendation on the stock at the current market price of $19.96, up 12.96% on 17 March 2020.

 
Pushpay Holdings Limited

 
Revenues up a Whopping 30% year over year: Pushpay Holdings Limited (ASX: PPH) is engaged in providing donor management system to the faith sector, non-profit organisations and education providers in the US, Canada, Australia and New Zealand. As on 17 March 2020, the market capitalisation of the company stood at ~$727.71 million.
 
Interim Results for the Period Ended 30 September 2019: During 1HFY20, the company reported revenue of US$57.4 million, up 30% year over year. NPAT of the company came in at US$6.5 million, up from a loss of US$4.4 million in 1H19. Gross profit for the period increased 49% year over year and came in at US$36.5 million.
 

1H20 Financial Performance (Source: Company Reports)
 
FY20 Outlook: For FY20, the company expects operating revenue to be in the range of US$121 million and US$124 million. It also anticipates gross margin to be more than 63%. EBITDAF is expected to be in the range of US$23 million to US$25 million.
 
Stock Recommendation: As per ASX, the stock of PPH gave a negative return of 15.11% in the past six months and is inclined towards its 52-week low of $2.4. This offers a good opportunity for investors to enter the market. During 1H20, gross margin of the company witnessed an increase over the previous half and stood at 65%, up from 63.1% in 2H19. Net margin of the company stood at 11.6%, higher than the industry median of 7.9%. Considering the returns, current trading levels, improvement in gross margin and FY20 guidance, we recommend a “Buy” rating on the stock at the current market price of $2.7, up by 2.273% on 17 March 2020.
 

Bravura Solutions Limited

 
Strong Pipeline Opportunities & Synergies from Acquisitions are Key Positives: Bravura Solutions Limited (ASX: BVS) is engaged in offering software products and services to the Funds Administration and Wealth Management sectors. Recently, the company announced that UBS Group AG and its related bodies corporate became a substantial holder of the company, with a voting power of 5.35%. In another update, the company stated that Wellington Management Group LLP and its related bodies corporate, a substantial holder of the company, has decreased its voting power from 9.61% to 8.56%.
 
1HFY20 Key Highlights for the Period Ended 31st December 2019: During the period, group revenues increased 6% year over year and came in at $135.1 million. Excluding the contribution from acquisitions, revenue increased 3% on a year over year basis. Group EBITDA went up by 7% year over year and came in at $25.5 million, up from $23.7 million in 1HFY19. NPAT for the period soared 21% to $19.8 million. The company declared an interim dividend of 5.5 cents per share, representing a payout of 68% of NPAT. The Wealth management business witnessed an increase of 1% in revenue 1HFY20. 
 

1HFY20 Key Metrics (Source: Company Reports)
 
What to Expect: The Wealth Management business presents substantial opportunities from new clients and continued project activity. In FY20, the company expects NPAT growth to be in the mid-teens (excluding the impact of acquisitions). Acquisitions are likely to make a further contribution of ~$3m of FY20 NPAT.
 
Valuation Methodology:Price to Cash Flow Based Valuation

Price to Cash Flow Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months
 
Stock Recommendation: The stock of the company gave negative returns of 19.26% over a period of 6 months. The stock of the company is currently trading below the average of its 52-week trading range of $3.07 and $6.27. The stock of BVS is having a market capitalization of $847.76 million, with a P/E multiple of 22.45x. We have valued the stock using Price to cash flow based relative valuation method. For the purpose, we have taken the peer group - Hub24 Ltd (ASX: HUB), EML Payments Ltd (ASX: EML), Pushpay Holdings Ltd (ASX: PPH), to name few, and arrived at a target price of lower double digit upside (in % terms). Hence, we recommend a “Buy” rating on the stock at the current market price of $3.52, up 1.149% as on 17 March 2020.
 

EML Payments Limited

 
Growth Across All Segments & Acquisition Synergies are Key Positives: EML Payments Limited (ASX: EML) is an issuer of prepaid financial cards and delivers prepaid payment services in Australia, Europe and North America. As on 17 March 2020, the market capitalisation of the company stood at ~$673.62 million. Recently, the company announced that 82,192 fully paid ordinary shares are presently held under its ASX escrow account, which is scheduled to be released on 30 March 2020. In another update, the company stated that Greencape Capital Pty Ltd, a substantial holder of the company, has increased its voting power from 5.26% to 6.27%.
 
1HFY20 Key Highlights for the Period Ended 31st December 2019: The company in its interim results reported a growth of 60% in group GDV (Gross debit volume), which stood at $6.62 billion. Group revenues for the period increased 25% year over year and came in at $59.2 million. The company’s gross profit soared 30% year over year, whereas EBITDA increased 42% from 1HFY19. This was mainly due to increase in global gaming programs, mall programs and use of instant gift. Further, the company witnessed revenue growth in all segments on the back of synergies from acquisitions & organic growth.
 
 
Key Highlights (Source: Company Reports)
 
What to Expect: The group has updated its guidance for FY20 and expects revenue to be in the band of $120 million to $129 million. EBITDA is expected in the range of $39.5 million to $42.5 million, representing a rise of 36-43%. NPATA for FY20 is expected to be in the range of $27.5 million to $30.5 million.
 
Stock Recommendation: As per ASX, the stock of EML is inclined towards its 52-weeks’ low level of $1.630, proffering a good opportunity for investors to enter the market. During 1H20, gross margin of the company stood at 75.7%, higher than the industry median of 73.3%. On the valuation front, the stock is trading at a price to book multiple of 1.7x as compared to the industry average of 2.9x on TTM (Trailing Twelve Months) basis. Considering the current trading levels, higher gross margin and future expectations, we recommend a “Buy” rating on the stock at the current market price of $2.02, down by 2.415% on 17 March 2020. 
 
 
Comparative Price Chart (Source: Thomson Reuters)

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