Stocks’ Details
 

LiveTiles Limited

Decent Increase in ARR: LiveTiles Limited (ASX: LVT) is engaged in the development and sale of business software in Australia and overseas. As on 29 April 2020, the market capitalization of the company stood at $189.47 million. The company has recently released its results for the quarter ended 31 March 2020 wherein it reported an increase in annualized recurring revenue to $55.2 million from $52.7 million. In the same time span, total customer cash receipts went up by 109% on the pcp to $10.9 million. The company has also received $5.6 million from the Australian Tax Office in relation to research & development tax refunds.

 
Growth in ARR (Source: Company Reports)

What to Expect: LiveTiles is well positioned to pursue growth through its multiple channels. The company is accelerating its efforts to reach breakeven operating cash flow and has reaffirmed that there is no further requirement to raise additional capital to fund operating cash burn. The rapid growth of Microsoft Teams is creating additional opportunities for LiveTiles. The company is also working with various government organizations to implement relevant technologies to support current operating challenges due to COVID-19.

Stock Recommendation: As per ASX, the stock of LVT gave a return of 40% in the last one month and is trading close to its 52-weeks’ low level of $0.110, proffering a decent opportunity for the investors to enter the market. During 1H20, EBITDA and net margin of the company witnessed an improvement over the previous half. On TTM basis, the stock is trading at a price to book value multiple of 2.2x, lower than the industry average (Technology) of 3.8x. Considering the returns in the past one month, attractive trading levels, decent financial performance and positive outlook, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.215, up by 2.381% on 29 April 2020.

Catapult Group International Ltd

Continued Strong Revenue and EBITDA Growth: Catapult Group International Ltd (ASX: CAT) is engaged in the development and sale of wearable tracking solutions, digital video coaching, athlete management platform to elite sporting teams, leagues and associations. As on 29 April 2020, the market capitalization of the company stood at $196.62 million. During 1H20, the company witnessed a growth of 20% in ARR to $68.8 million and a substantial increase of 512% in EBITDA to $5.7 million. This was mainly due to sales in new elite wearables subscription. 


1H20 Financial Highlights (Source: Company Reports)

Growth Opportunities: The company is committed to growing ARR and is focused on bringing forward the positive free cash flow target. With the growing operating leverage, the company is well positioned as it transitions through positive free cash flow. It is well capitalized and maintains a strong cash position. CAT believes that COVID-19 is not going to have a long-term impact on its sales trajectory. 

Valuation Methodology: EV/Sales Multiple Based Valuation (Illustrative)

EV/Sales Multiple Based Approach (Source: Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: As per ASX, the stock of CAT gave a return of 71.67% in the past one month and is inclined towards its 52-weeks’ low level of $0.5. During 1H20, gross margin of the company stood at 72.4%, higher than the industry median of 26.3%. In the same time span, Assets/Equity ratio of the company was 1.53x, lower than the industry median of 2.06x. Considering the returns, current trading levels and positive outlook, we have valued the stock using EV/Sales multiple based illustrative relative valuation approach and have arrived at a target price with an upside of lower double-digit (in percentage terms). Hence, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $1.090, up by 5.825% on 29 April 2020.

Whispir Limited

Increased Demand for Communications Software: Whispir Limited (ASX: WSP) is a software-as-a-service (SaaS) company, which provides a communications workflow platform that automates interactions between businesses and people. As on 29 April 2020, the market capitalization of the company stood at ~$198.19 million. The company has recently provided an update on its quarterly activities for the period ended 31 March 2020, wherein it reported strong growth of 29.4% in recurring revenues to $40.5 million. This was supported by increased demand for communications software, increased use of the platform and improved productivity and operating efficiency. The company added 49 net new customers in Q3 FY20 and reported a reduction in net cash used in operating activities to $1.4 million from $2.1 million in Q2 FY20. 


Quarterly Cash Flow Statement (Source: Company Reports)

Future Expectations: The company remains on track to meets its FY20 forecast, following another strong quarter of growth. It is focused on its long-term strategy of developing innovative communications technologies, accelerating the digital transformation of critical communications using AI and machine learning.

Stock Recommendation: As per ASX, the stock of WSP gave a return of 22.44% on the YTD basis and a return of 73.64% in the last one month. The stock is also trading very close to its 52-weeks’ high level of $2.01. During 1H20, gross margin of the company stood at 61.9%, lower than the industry median of 84.1%. On TTM basis, the stock is trading at an EV/Sales multiple of 4.8x, higher than the industry median (Technology) of 3.4x. Considering the returns, higher trading levels and decent outlook, we have a watch stance on the stock at the current market price of $1.890, down 1.047% on 29 April 2020. 

Dubber Corporation Limited

Dubber Raises $10 Million: Dubber Corporation Limited (ASX: DUB) is a cloud-based software technology company which provides call recording and audio asset management in the cloud. As on 29 April 2020, the market capitalization of the company stood at ~$195.41 million. The company announced that it had received commitments to raise $10 million through a placement to existing institutional and sophisticated investors. 

During 1H20, revenue of the company witnessed an increase of 125% to $4.5 million and a growth of 79% in end user subscribers to 122,549. In the same time span, Contracted Annualized Recurring Revenue of the company stood at $10.66 million.


Growth in Revenue (Source: Company Reports)

What to Expect: The company expects substantial opportunities to be realized in the second half, with several verticals approaching the revenue generation stage. It is also likely to witness strong growth in its key metrics in the second half.

Stock Recommendation: As per ASX, the stock of DUB gave a return of 17.39% in the last one month. The company has seen massive user growth over the past four years. The company also stated that its core strategies have not been adversely affected from the outbreak of the virus. During 1H20, gross margin of the company stood at 29.5%, higher than the prior corresponding period margin of 5.7%. In the same time span, current ratio of the company was 5.86x, higher than the industry median of 1.72x. Considering the returns, decent financial performance and positive outlook, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.995, up by 5.291% on 29 April 2020.  
 
 
Comparative Price Chart (Source: Thomson Reuters)

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