Stocks’ Details
 

Audinate Group Limited

 
Audinate Group Unveils New Dante Products, Expands Portfolio: Audinate Group Limited (ASX: AD8) is a provider of professional digital media networking technologies in commercial installed systems, broadcasting, corporate systems, transportation, live sounds, etc.  In June this year, the company unveiled the Dante AV module and Dante AV Product Design Suite. Dante is a software that runs operating systems. The company’s Dante platform offers digital audio signals with high quality and flexible solutions and ensures interoperability between audio devices.
 
Issuance of Shares: On 22 November 2019, the company issued 2,901 fully paid ordinary shares priced at $0.26 per share, along with 99 unlisted options, exercisable at $0.26 per share to the shareholders of the company.Further, the company announced the issuance of 100,000 and 12,000 fully paid ordinary shares at a price of $0.062 and $0.26 per share, respectively.
Financial Results for the Year Ended 30 June 2019: In FY2019, the company reported revenues of $28.3 million, up 44% on the previous year. EBITDA for the period came in at $2.8 million, up from $0.6 million reported in the previous year. The company raised $24 million via placement and SPP. The company recorded a 29% increase in Dante units shipped annually and 22% growth in the OEMs shipping Dante product. At the end of the period, 2,134 Dante-enabled products were accessible in the market. Operating cash flow in FY19 came in at $3.6 million as compared to $1.0 million in FY18.
 

Financial Highlights (Source: Company Reports)
 
What to Expect: In FY20, the company expects to invest more into its engineering and R&D functions in the upcoming two years. The company plans to put in place the business infrastructure platform to achieve its long-term goals.The company is focused on the development of next generation Dante audio as well as video software applications. Going forward, the company expects to increase its total addressable market by incorporating video and software products on its platform.
Valuation Methodology: Price to Book Value Multiple Approach
 

P/BV Based Valuation (Source: Thomson Reuters)
Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months
 
Stock Recommendation: As per ASX, the company’s stock is trading above the average of its 52-weeks trading range of $3.200 - $9.300. As on 10 December 2019, the company’s market capitalisation stands at ~$577.15 million, with 67.42 million outstanding shares.  The business has attracted further growth opportunities, after the company launched new software products, namely the Dante Application Library and Dante Embedded Platform. Notably, all these products are likely to maintain the performance of the company across the geographical regions served. Considering the aforesaid facts, we have valued the stock using a relative valuation method, i.e., price to book value multiple, and arrived at a target price of lower double-digit upside (in % terms). Hence, we give a “Hold” recommendation on the stock at the market price of $8.400, down 1.869% on 10 December 2019. 

LiveTiles Limited

 
LiveTiles Entered into an Agreement to Acquire CYCL:LiveTiles Limited (ASX: LVT) provides organizations with intelligent workplace software based on cloud technology. The company works across varied sectors with the clients ranging from the United Kingdom, North America, Europe, Asia-Pacific and the Middle East. On 20^th November 2019, the company inked a deal to acquire CYCL, an intelligent intranet software provider. The proposed cash and stock deal will require LiveTiles to pay $19.0 million upfront, with an additional consideration of $13.2m (25% in cash and 75% in shares).The upfront consideration denotes an Enterprise Value/Revenue multiple of 1.3x. The move is likely to boost Intelligent Workplace offering, thereby providing newer opportunities. The company recently released an announcement citing the release of 200,000 fully paid ordinary shares from escrow on 21 November 2019.
 
Quarterly Results for the Period Ended 30 September 2019:During the quarter, annualised recurring revenue (ARR) stood at $42.9 million, up 131% year-on-year. Underlying opex for the quarter came in at $16.4 million. Customer cash receipts stood at $8.5 million, representing continued strong growth. The APAC region during the period witnessed robust growth, partially offset by seasonal buying patterns in the United States and European regions. Transacting partners increased 83% year over year to 185 during the quarter. Cash balance at the end of the quarter was $56.9 million
 

ARR Growth Rate (Source: Company Reports)
 
Outlook: Gross cash operating expenses are expected to be $16.2 million for the coming quarter. The company expects the revenue to grow in FY20, and is focusing on expanding its enterprise customers worldwide, driven by a strong product portfolio, investment in sales and marketing, and channel partners.
 

Enterprise Value to Sales Valuation Multiple (Source: Thomson Reuters), *NTM: Next Twelve Months

Stock Recommendation: As per ASX, the company’s stock is trading below the average of its 52-weeks trading range of $0.265 - $0.610. As on 10 December 2019, the company’s market capitalisation stands at ~ $245.22 million.  The company is targeting an ARR of at least $100 million by 30 June 2021. Considering the aforesaid facts, we have valued the stock using one relative valuation, i.e. EV/Sales multiple and arrived at a target price of lower double-digit upside (in % terms). Hence, we give a “Speculative Buy” recommendation on the stock at the market price of $0.285.

Volpara Health Technologies Limited

 
Favourable Results from DENSE Trial:Volpara Health Technologies Limited (ASX: VHT) is a SaaS company which provides health solutions relating to breast cancer.
 
Issue of Shares: On 2^nd December 2019, the company issued 257,487 new fully paid ordinary shares with respect to the Employee Share Option Plan. Thiscomprised an issue of 66,000 shares at a price of A$0.50 per share and 191,487 shares for NZ$0.1567 per share.
 
Results of DENSE Trial to be Published in New England Journal of Medicine: On 28 November 2019, the company announced the results of its DENSE breast screening trial, demonstrating favourable results.  The trial engaged around 40,000 women and highlighted medical efficiency of breast MRI supplemental screening for women with enormously dense breasts.
 
Results for Six Months Ended 30 September 2019: Total revenue for the half increased 197% year over year and came in at NZ$6.84 million. Annual Recurring Revenue (ARR) for the period stood at NZ$15.7M as compared to NZ$4.8M in the prior corresponding year. SaaS revenue came in at NZ$2.93M, up 63% on pcp. Cash balance at the end of the period was NZ$40.2M. Operating cash outflow during the September quarter came in at NZ$4.2 million as compared to NZ$3.0 million in the previous quarter.
 

Financial Highlights (Source: Company Reports)
 
What to Expect:VHT continues to be on the track and expects ARR for the year to be approximately NZ$17.1 million (US$11.5 million). Volpara expects that 27% of US women will apply the group’s product on their data and images. The company will make efforts to enhance its R&D and product expansion. In the coming quarter, the company is expecting net cash outflow amounting to NZ$8.970 million.
 
Stock Recommendation: As per ASX, the company’s stock is trading above the average of its 52-weeks trading range of $0.924 - $2.170. As on 10 December 2019, the company’s market cap stands at $399.05 million. During Q2FY20, the company’s cash receipts rose heavily by 190%. In the coming quarter, the company is planning for the delivery of new integrated products at Radiological Society of North America (RSNA), publication of DENSE results and a possible breast density announcement from the FDA. Considering the recent financial results, update on DENSE Trial and a decent outlook, we give a “Hold” recommendation on the stock at the market price of $1.765, down 3.552% on 10 December 2019. 
 

Zoono Group Limited

Collaboration with Chinese Players:Zoono Group Limited (ASX: ZNO) is a global biotech company that develops, manufactures and distributes a suite of scientifically validated, long-lasting and environmentally friendly antimicrobial solutions. On 10 December 2019, the company informed its collaboration with a group of leaders in the Chinese agribusiness/veterinarian and animal feed sector and formed a new entity which will act as an exclusive distributor for the animal health and agribusiness sector in China. The initial term was fixed for ten years. The collaboration includes minimum purchase volumes of NZD$3.1m in year one, including NZD$1m in instalment payments between execution of the agreement and 30 June 2020; NZD$4.6m in year two and NZD$9.3m in year three.

Updates for the Quarter Ended 30 September 2019:ZNO declared its quarterly result for the financial year 2020, wherein the company reported cash on hand of NZ$3.298 million, up NZ$173K on the previous quarter.The company reported total revenue of NZ$835,000, up 25% on y-o-y basis. During the quarter, the company signed new distributor and supply agreements with multiple countries like Denmark, Sweden, Bosnia and Herzegovina, Germany, UK, South Africa, New Zealand, Australia, and USA.  The company reported initial product sale from Zoono Poultry into the Poultry and Pig industry during the quarter.

Guidance:The company has cash resources and stock levels of ~NZ$527,000 and is well-funded to execute its strategic growth plan in FY20 and beyond. The business will be opening an office in the UK in order to cater to the growing from UK and Euro regions. In Q2FY20, the company expects cash outflows amounting to NZ$1.056 million.


Q2FY20 Estimated Cashflow (Source: Company Reports)

Stock Recommendation:The stock of ZNO is quoting at $0.40 with a market capitalization of $52.26 million.The stock is trading at the upper band of its 52-week trading range of $0.063 to $0.450. The stock has delivered exponential return of 377.61% and 220% in the last three months and six-months, respectively. On the valuation front, the stock is available at an enterprise value to sales multiple of 21.9x on trailing twelve months (TTM) basis as compared to the industry average of 4.6x. Considering the aforesaid facts, price movements, current trading levels, and valuation, we believe that most of the positives are factored in at the current juncture. Hence, we have a watch stance on the stock at the current market price of $0.400, up 25% on 10 December 2019 on account of the recently announced collaboration.
 
 
Comparative Price Chart (Source: Thomson Reuters)

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