Stocks’ Details

Bravura Solutions Limited

Continued Expansion of Operating Leverage:Bravura Solutions Limited (ASX: BVS) is engaged in the development of highly specialised administration and management software applications and provision of professional services to the Wealth Management and Funds Administration sectors.

1HFY20 Results:The company recently released its financial results for the six months ended 31^st December 2019. During the half, revenue came in at $135.1 million, up 6% on prior corresponding period revenue of $127.4 million. Excluding the contribution from acquisitions, revenue reported a rise of 3% on pcp. NPAT, including acquisitions, went up by 21% to $19.8 million. The company declared an interim dividend of 5.5 cents per share, representing a payout of 68% of NPAT. The Wealth management business saw revenues increase by 1%, with the recently acquired businesses, Midwinter and FinoComp delivering results as per expectations. Revenue of the Funds Administration segment grew by 19%, drawing benefits out of higher licence fees due to expansion on the client front.


1HFY20 Key Metrics (Source: Company Reports)

Outlook & Guidance: In FY20, the company expects an NPAT contribution of ~$3 million from the acquisitions made, with a strong sales pipeline and strategic opportunities lying ahead. Overall, NPAT for FY20 is expected to report growth in mid-teens.The Wealth Management business offers significant opportunities from new clients and continued project activity.

Valuation Methodology:Price to Earnings Based Valuation

Price to Earnings Based Valuation (Source: Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: The stock of the company gave positive returns of 43.70% and 24.22% over a period of 3 months and 6 months, respectively. In 1HFY20, the company depicted a strong financial position with net cash of $100.3 million at the end of the period, to support future acquisition and growth opportunities coming its way. We have valued the stock using Price to Earnings based relative valuation method. For the purpose, we have taken the peer group - Hub24 Ltd (ASX: HUB), Netwealth Group Ltd (ASX: NWL), TechnologyOne Ltd (ASX: TNE), to name few, and arrived at a target price of lower double digit upside (in % terms). Hence, we recommend a “Buy” rating on the stock at the current market price of $5.260, down 5.903% as on 25^th February 2020.
 

Audinate Group Limited

Management Optimistic about Long-term Growth:Audinate Group Limited (ASX: AD8)develops digital Audio-Visual networking solutions through its technology platform, Dante®.

1HFY20 Performance Highlights: During the half year ended 31^st December 2019, the company reported robust results on the back of continued growth in software sales. The company has expanded the reach of its Dante enable products, with 147 new products released recently at a tradeshow, taking the number of products available in the market up by 35%. During the half, revenue came in at $16.1 million, up 14% on the prior corresponding period. During the period, the company marked a shift in the product mix to a larger proportion of high margin software sales, that provided a boost to gross margin.


Income Statement (Source: Company Reports)

Outlook: As per the management, the above positives, including increased software sales and expansion in the product base, are a clear indication of the long-term success of the company that will deliver attractive returns to shareholders. Going forward, the company will continue to see the impact of macro-economic conditions and US tariffs on its results, along with the potential impact of coronavirus. Despite the above challenges, the company expects to report an upward movement in revenue during 2HFY20.

Stock Recommendation: The stock of the company generated returns of32.45% over a period of 1 year and is currently trading close to the mid-point of its 52-week trading range of $4.810 - $9.300. Considering the financial performance in 1HFY20, expansion in the product range, continued operational development, anticipated growth in software sales, and current trading levels, we give a “Buy” recommendation on the stock at the current market price of $6.650, up 2.465% on 25^th February 2020.
 

Splitit Payments Limited

New Agreement Signed in North America:Splitit Payments Limited (ASX: SPT) is engaged in providing cross-border credit card-based instalment solutions to its customers.

Q4FY19 Performance: During the quarter ended 31^st December 2019, the company saw merchant sales volume (MSV) grow to US$27.1 million, representing an increase of 20% on the previous quarter. Revenue for the period came in at US$433,000, down 7% on the previous quarter. However, the company also notified about US$71,000 of additional revenue from funded plans that will be recognised in the coming quarter. During the quarter, the company signed in new merchants and partners and remained well funded for further capitalising on growth opportunities, with a cash balance of US$16.3 million at the end of the period.


Performance Metrics (Source: Company Reports)

Outlook: Going forward, the company expects to build a strong foundation by continuously investing in its technology to provide the best services to customers. Streamlined merchant onboarding and new credit facilities are expected to boost the MSV, revenue and 12-month active merchants, going forward.

Stock Recommendation: The stock generated positive returns of 15% over a period of 6 months and is currently trading very close to its 52-weeks low level of $0.395. During Q4FY19, the company reported strong growth driven by significant MSV growth in North America, which will continue to be a growth driver along with the UK. Continued growth in North America is evident in the recently signed agreement with Resident Home, LLC, in the US, to deploy SPT’s payment solutions on the US website of the latter’s flagship brand, Nectar. Given the performance in Q4FY19, decent outlook, and current trading levels, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.445, down 3.261% on 25^th February 2020.

Smart Parking Limited

Growth in Management Services Revenue:Smart Parking Limited (ASX: SPZ) provides technology and services related to the parking industry, with its offices in Australia, New Zealand and the UK.

First Half Performance: During the half year ended 31^st December 2019, the company reported revenue amounting to $14 million, supported by growth in management services revenue. Growth in management services resulted in a strong adjusted EBITDA margin of 23.4%, up 660 basis points excluding the impact of IFRS 16. Due to customer delays in smart city project delivery the company reported a fall in technology revenue for the period. At the end of the period, the company was well funded to deliver on its growth strategies and reported $8.7 million of net cash.


P&L Statement and Ratios (Source: Company Reports)

Outlook: The company expects to report annualised savings of $1 million as a result of restructure of the management team in December 2019. The business kick started 2FY20 with new business wins and is continuously focused on technology led solutions to promote portfolio optimisation.

Valuation Methodology:Price to Earnings Based Valuation

Price to Earnings Based Valuation (Source: Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation:The stock of the company gave negative returns of 16.67% over a period of 1 month.In 1HFY20, the company reported adjusted EBITDA growth of 41% in UK Managed Services and is focused on gaining further market share through continued investment in sales capabilities, new sites, management restructuring, etc. On the technology front, the company sees significant market opportunities and has come up with initiatives to drive the demand for SPZ technology. We have valued the stock using Price to Earnings based relative valuation method and arrived at a target price of lower double-digit upside (in % terms). Hence, we recommend a “Speculative Buy” rating on the stock at the current market price of $0.185, down 7.5% as on 25^th February 2020.
 
 
Comparative Price Chart (Source: Thomson Reuters)

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