OFX Group Limited

OFX Details
·         Results in line with the earlier guidance: OFX Group Limited (ASX: OFX) saw a stock price surge of 15.5% on May 23, 2017 at the back of its FY17 result update. OFX reported a turnover of $19.4b in line with FY16, driven by growth in active clients (up 3.7% to 157k) and transaction volumes (up 8.7% to 852k) supported by good momentum in the US. However, the company witnessed lower average transaction values (ATVs down 8.8% to $22,800) from Individual customer transactions, especially in the UK due to challenging operating conditions. Underlying EBTDA and underlying NPAT stood at $27.8m and $19.6m, respectively, in line with the earlier guidance. Further, global rebrand was completed in key US and UK markets during the year. It also diversified revenues with good growth in North America and corporate segment to offset lower individual transaction numbers and ATVs, especially from the UK due to the decline in GBP. The company has declared a fully franked final dividend of 2.9 cents per share in line with the company’s policy to maintain a payout ratio of 70- 80% NPAT, which will be distributed on 23 June 2017.

·         Recommendation: The stock has declined about 39% over the last twelve months owing to past performance (decline in transaction volumes etc.). Although OFX reported better FY17 results, the challenging business environment is still expected to pose some pressure. We maintain an “Expensive” recommendation on the stock at the current price of $ 1.54

iSentia Group Limited

ISD Details 
·         Recovering on growth: Isentia Group Limited’s (ASX: ISD) stock moved up 5.9% on May 23, 2017 with improving sentiments and investors might be considering positions in the stock based on the company’s latest updates. During H1FY17, Isentia reported an NPAT growth of 82.51% supported by a revenue growth of 5% year on year (yoy) to $79.6 million, while EBITDA declined by 13% yoy to $20.5 million impacted by EBITDA loss of $2 million in content marketing. In turn, underlying PAT witnessed a de-growth of 17% yoy to $12.4 million. However, SaaS and VAS businesses in ANZ and Asia delivered attractive revenue growth of 15% yoy supported by higher demand for Insights products. For FY17, ISD expects the ANZ and Asia SaaS/VAS business to deliver mid to high single digit revenue growth and low single digit range EBITDA growth. During Q3FY17, the company has launched the improved Mediaportal and 97% of users have migrated to the new platform reflecting positive response to the new product release while the client churn has returned to historic norms.

·         Recommendation: The stock has moved up 13.1% over the last one month (as on May 22, 2017) while it was down by 8.6% for the past three months, and is still trading at low levels. We give a “Speculative buy” recommendation on the stock at the current price of $ 1.73
 

Content and Services in ANZ (Source: Company Reports) 

Technology One Limited

TNE Details
·         Robust performance in H1FY17: Australia’s largest enterprise software company, Technology One Limited (ASX: TNE) reported revenue growth of 13% yoy to $113.9m driven by robust growth in Initial License Fees (up 30%) and Annual Contract Value (ACV) for Cloud Services (up 93% to $19.9m). PBT grew by 10% to $10.3m (excluding the impact of the Evolve customer conference, PBT would have been up 41%).  Further, the company is on track to achieve ACV of $28 million by financial year end from cloud services and expects strong momentum to generate ACV of $143 million of annual recurring revenue by 2022.

·         Notably, for the first time, Technology One Cloud contributed a profit of $937k in H1FY17 against a loss of $922k during H1FY16, led by mass production Software as a Service (SaaS) architecture which is starting to deliver significant economies of scale.  Moreover, the company is moving away from perpetual licenses to subscription licenses to create a strong longer term annuity business. During H1FY17, TNE achieved over 80% all new business from subscription licenses. On investments front, the company continued to spend intensely in Research and Development. Particularly, TNE has spent about $23.6 million (up 9% yoy), which represents 21% of revenue, which can be a concern going forward. However, the company is expecting to report 10%-15% yoy profit growth for FY17.

·         Recommendation: TNE stock moved up 4.2% on May 23, 2017 and surged 10.4% in the last three months (as at May 22, 2017). We believe that the stock is still “Expensive” at the current price of $ 5.78

Vocus Group Limited

VOC Details
·         Recovery in sentiments post the recent heavy fall: Vocus Group Limited (ASX: VOC) posted gains of about 3.7% on May 23, 2017 at the back of improving sentiments. Recently, the company slashed its underlying NPAT to $160-165m against earlier guidance of $205-215m, while expecting capital expenditure (pre-ASC payments but inclusive of IRU payments) to be ~$182m. However, the stock still seems to hold long-term potential at the back of fully integrated infrastructure footprint and improved margins for NBN.

·         Recommendation: The stock has fallen 70% in the last twelve months as on May 22, 2017 and is currently trading at low levels. We maintain a “Hold” recommendation on the stock at the current price of $ 2.82

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