Stocks’ Details

Audinate Group Limited

Raised $20 Million Via Institutional Placement: Audinate Group Limited (ASX: AD8) is engaged in the development and sale of digital Audio Visual ('AV') networking solutions. Dante is the Group’s technology platform that distributes uncompressed digital audio signals over computer networks. The company recently confirmed that it has successfully completed an institutional placement of $20 million. As a result, the company will issue ~2.86 million new fully paid ordinary shares in the company (New Shares) to sophisticated and professional investors. The issue price is set at $7.00 per New Share.

Proposed Deployment of the Raised Funds: The company will use this raised fund to expand global sales penetration, accelerate recent product initiatives, develop the next generation Dante platform, and provide additional balance sheet strength and flexibility. New Shares issued under the Institutional Placement will rank equally with existing shares on issue and are expected to be allotted on 13 June 2019.


Indicative Placement timetable (Source: Company Reports)
 
Share Purchase Plan (SPP): With thecompletion of the Institutional Placement, existing eligible shareholders of the company can subscribe for New Shares at $7.00 per share for a maximum of $15,000 per shareholder. The SPP aims to raise a maximum of $4 million, comprising of ~571,429 shares to be issued. Important date for the SPP is given in the table below:


Indicative SPP timetable (Source: Company Reports)
 
Appendix 4C For The Three Months Ended 31 March 2019:Cash collection (reported) at A$6.3 million in 3Q FY19 was up 40% backed by the ongoing growth in the core business. Revenue (unaudited) of A$6.6 million for the quarter surpassed cash collections. Higher revenue growth in the quarter was seen on account of the number of Dante enabled products made available by OEM customers. Dante enabled products, in the quarter, grew by 197 to 1,946 products from 241 OEM customers.

Stock Recommendation:At the current market price of $7.910, the market capitalisation of the company stood at ~$456.76 million. On the price to book value front, the stock is trading at 19.9x of its book value, well above the industry average of 8.9x. In 1HFY19, EBITDA margin and net margin at 11.9% and 6.0% came in below the industry median of 16.3% and 8.0%, respectively.

Having said that, it can be seen on the ASX that the stock price of the company is trading closer to its 52-week higher levels of $8.150.Additionally, the stock has gained ~109% on a YTD basis and ~48% in the last 3-months. Hence, we give an “Expensive” rating on the stock at the current market price of $7.910 per share (up 6.317% on 06 June 2019).
 

Integrated Research Limited

Strong Financial Position During 1HFY19: Integrated Research Limited (ASX: IRI) deals in systems and applications management computer software. In the latest announcement to the exchange on 15 April 2019, the company notified about the appointment of the new CEO, John Ruthven with effect from early July 2019.

Financial Highlights:In the briefing on the half-year financials for the period ended 31 December 2018, the company reported a profit after tax amounting to $11.7 million, up 26% on the prior corresponding period. The profit came in at the top end of the guidance provided. Revenue during the period amounted to $50.3 million, reporting an increase of 10% in the prior corresponding period, over 95% of which was derived from Australia. During the period, the overall license sales totalled to $31.3 million, recording an increase of 22%. The EBITDA margin during the period was higher at 42% as compared to 40% in the prior corresponding period. Cashflow from operations reported an increase of 19% on the prior period at a value of $9.6 million, driven by cash receipts from customers. The quarter reported strong results on the back of growth in Europe and stellar growth in Payments product.


Half Year Results (Source: Company Reports)
 

2019 Outlook (Source: Company Reports)

The company is well placed to deliver sustainable growth with big deals in pipeline and historic pipeline in conversion, a defined market approach for various segments and revenue trending collectively at a favourable level.

Stock Performance and Recommendation:The stock yielded returns of 7.55% and 26.67% over a period of 1 month and 3 months, respectively. Currently, the stock is trading at price to earnings multiple of 22.620x. The first half of financial year 2019 was characterised by a strong financial position. The balance sheet remained debt-free with a good cash position. Hence, considering the above factors, we give a “Buy” rating on the stock at the current market price of $2.870 (up 0.702% on 6 June 2019).
 

WiseTech Global Limited

Trading at Higher Level: WiseTech Global Limited (ASX: WTC) is engaged in the business of providing software services to the logistics industry.

1HFY19 Financial Highlights: During 1HFY19, the company reported significant growth in revenue and low customer attrition. The phase was characterised by high innovation, product development and investment. The revenue for the period amounted to $156.7 million, up 68% on the prior corresponding period, EBITDA for the period amounted to $48.5 million, recording a 52% hike in comparison to the prior corresponding period. The marketing and sales expenses during the period were also low at 11% of the revenue earned. An amount of $260 million was solely spent on innovation and product spend. In the last 5 years, the company has added 3,000 new products enhancing its portfolio.

Outlook: Looking at the performance during 1HFY19, WiseTech has a decent growth outlook for the financial year.FY19 revenue guidance is between $326 million - $339 million which will lead to a growth of 47% - 53% on FY18. The guidance for EBITDA is between $100 million - $105 million with an expected rise over FY18 to be between 28% - 35%.


Snapshot of performance during 1HFY19 (Source: Company Reports)
 
Stock Recommendation: The stock yielded returns of 12.95% and 20.11% over the period of 1 month and 3 months, respectively. The stock has gained ~63% in the last 1-year. The stock is currently, available at a higher price-to-earnings multiple of 153.4x.Although the company has been a consistent performer and value generator for the investors, thus, we presume that the current price might have discounted all the recent positive developments. Based on the foregoing and looking at current trading level, we give an “Expensive” rating on the stock at a current market price of $26.270 (up 5.714% on 6 June 2019).
  

LiveTiles Limited

Exuberant Growth in ARR: LiveTiles Limited (ASX: LVT) is engaged in the development and sale of digital workplace software. The company recently announced that it has launched AI-driven, data-centric security solution in conjunction with alliance partner Nucleus Cyber. The company will provide a single security layer solution across Microsoft’s collaboration channels on Office 365. The addressable market for the companyis over 400,000 customer organisations, and over 85% of Fortune 500 companies that leverage Microsoft’s SharePoint Online as part of their Office 365 subscription.

Updates for the quarter ending 31 March 2019: Annualised recurring revenue(ARR) came in at $34.5 million as at 31 March 2019, up 208% in the last 12 months. In the quarter, the company was able to achieve a significant organic ARR growth of $3.6 million.

Annualised Recurring Revenue ($m) (Source: Company Reports)

Strong growth in the customers was continued during the quarter with 879 paying customers as at 31 March 2019, up from 472 (on y-o-y basis).Enterprise customers are growing, primarily driven by LiveTiles’ sales and marketing investments. The average ARR per customer also witnessed strong growth during the March quarter and was up 65% over the last 12 months, driven by ongoing substantial growth in the enterprise customer base and other factors. The company generated customer cash receipts of $5.2 Mn in the quarter, displaying a growth of 256% on pcp basis. With net cash outflow from operating activities at $7.8 million in the quarter, the cash balance as at 31 March 2019 stood at $21.1 million.

Strong growth in customer cash receipts (Source: Company Reports)

Outlook and Stock Recommendation: The company expects FY19 to be another year of strong revenue growth, driven by the continued investment in sales and marketing, AI products launched in 2018, high-impact co-marketing initiatives with Microsoft and a strong organic growth contribution from Wizdom. The company aims to organically grow its ARR to at least $100 million by 30 June 2021. With the given optimistic outlook, recent growth seen in ARR and a higher proportion of enterprise customers, the company is poised to grow further. In three months, the returns were 7.41% while, in the past one month, the return was -4.40% which reflects the stock’s volatility. Hence, considering aforesaid facts and current trading level, we give a “Speculative Buy” rating on the stock at the current market price of $0.450 per share (up 3.448% on 6 June 2019).


Comparative Price Chart (Source: Thomson Reuters)    

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