Xero Ltd

Settlement of US$300m convertible notes offering: While Xero Ltd (ASX:XRO) has lately stated that the cash outflow (operating less investing cash flows) in the financial year ended 31 March 2019 will be lower than that of financial year ended 31 March 2018, the group still has strong fundamentals and growing customer base. Prior to Gusto strategic alliance, and acquisition of Hubdoc Inc., the FY19 consensus expectations for revenue of between NZ$528m and NZ$558m and EBITDA of between NZ$66m and NZ$94m have been notified. XRO now completed the settlement of US$300 million 2.375 per cent convertible notes, which will be due in 2023 (the “Offering”). The convertible notes were scheduled to be listed on the Singapore Exchange Securities Trading Limited (SGX-ST) on 5 October 2018. Goldman Sachs International and Morgan Stanley & Co. International plc had acted as Joint Lead Managers on the Offering. The net proceeds from the issue of the Notes will be approximately U.S.$292.6 million, after deduction of commissions, professional fees and other administrative expenses. Approximately U.S.$29.9 million of the net proceeds from the issue of the Notes is expected to fund the Call Option Agreements (along with other call options to be acquired by Xero Investments from the Eligible Parties). Further, after the payment of the transaction costs, repaying certain existing term debt and funding the costs of the call option transactions, the net proceeds will be used for the potential acquisitions of, and investments into, strategic and complementary businesses and assets which are in line with XRO’s strategy to drive long-term shareholder value. Meanwhile, XRO stock has fallen 9.27% in three months as on October 24, 2018 to $40.81. The stock has support at $38.4 and resistance at $52.2. Based on the foregoing, we give a “Hold” recommendation on the stock at the current price of $ 39.080.
 

Redbubble Ltd

Fund raising for the acquisition of TP Apparel LLC and TP Apparel Europe Ltd: Redbubble Ltd (ASX: RBL) stock has risen 16.72% in three months as on October 24, 2018 after the company for Q1 2019, has reported 40.7% growth in the Total Revenue to $59.6 million (up 31.3% on a constant currency basis) as Product and Shipping Revenue grew 39.6% to $49.2 million. GTV for Q1 2019 increased 40.5% to $64.1 million. For FY 19, RBL expects Operating EBITDA to be in the range of $2-4 million and cash outflows to be less than $2 million. In FY 19, Revenue growth rates are expected to be at or above 30% on a constant currency basis, GPAPA growth rates will be in line with Revenue growth rates and operating expenses are expected to grow at a rate similar to that of FY 18. Meanwhile, RBL has signed binding agreement to acquire TP Apparel LLC and TP Apparel Europe Ltd (“TeePublic”) for US$41.0 million in cash (A$57.7 million). This acquisition is expected to be funded through a combination of a fully underwritten A$36.0 million institutional placement and a fully underwritten A$24.6 million, 1 for 13 pro rata accelerated non-renounceable entitlement offer (“Entitlement Offer”) (along with, the Equity Raising). As of now, we give a “Hold” recommendation on the stock at the current price of $ 1.675, while it went into a trading halt before announcing for the acquisition.

Details of Sources & Uses of Fund (Source: Company Reports)
 

EML Payments Ltd

For FY 19, the company expects growth from new launches: EML Payments Ltd.’s (ASX: EML) stock has risen 7.53% in three months as on October 24, 2018 after the company for FY 18 has reported 23% growth in the revenue over the prior year to $71.0m. The company has generated 75% of revenues offshore and 92% of revenues were recurring in nature (that excludes one-time establishment fees). The company’s revenue growth was majorly organic in nature, on the back of an increase in Gross Debit Volume (GDV) to $6.75 billion. GDV grew 53% in FY 18 across all regions and sales segments. EML has posted negative operating cash flows of $(3.5m) in FY 18 and its Cash dropped by 2% to $39.0m in 2018. Moreover, for FY 19, the company expects growth from new launches. For Non-Reloadable segment, the company expects GDV to be €90 Million (A$142 million). EML has signed 5 year agreement for a Non-Reloadable consumer gift card in 87 German mall. Factors influencing future performance include launch of GVC plc (a GBP 6bn, UK Listed Gaming Group) expected in FY 19, Neobank & crypto currency programs expected to be launched in FY19, and first Reloadable product being introduced in the Nordics. Meanwhile, EML stock is trading at a very high P/E. We give a “Speculative Buy” recommendation on the stock at the current price of $ 1.550.

FY 18 Financial Performance (Source: Company Reports)
 

Dubber Corp Ltd

Signed an Embedded Solution Agreement  with IBM: Dubber Corp Ltd (ASX: DUB) has very recently signed an Embedded Solution Agreement (ESA) with IBM to combine IBM’s Watson Artificial Intelligence (Watson) with Dubber’s cloud-based call recording solution. Their combined solution is called Cognitive Listening & Recording (CCL&R), which is expected to deliver an innovative Software as a Service (SaaS) solution to customers. From this solution, they will able to meet industry compliance requirements, understand & capture the sentiment of all customer interactions, improve Net Promoter Scores. Further the solution will help identify new revenue opportunities from improved business processes. Both the companies are targeting clients globally, in conjunction with telecommunications service providers, and initially are promoting the solution in the Asia Pacific region. Meanwhile, DUB stock has risen 4.40% in three months as on October 24, 2018. The stock is trading at the price of level $0.46, and has support at $0.37 and resistance at $0.49. Based on the fact that the group is still in the establishment phase, we have a wait and watch view on the stock at the current price of $ 0.46.
 
 

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