Stocks’ Details
 

Wisetech Global Limited

High Quality Growth in Revenue and EBITDA: Wisetech Global Limited (ASX: WTC) provides software solutions to the logistics industry globally. As on 11 March 2020, the market capitalisation of the company stood at ~$4.54 billion. The company has recently released its interim results for the period ending 31 December 2019, wherein it reported significant and high-quality growth while expanding technology lead and global footprint. During 1H20, the company witnessed an increase of 31% in revenue to $205.9 million and a growth of 29% in EBITDA to $62.5 million. Over the period of FY16 to FY20, the company reported a CAGR of over 43% in revenue, reflecting the strength of business and execution on strategy. The decent financial performance enabled the Board to declare a fully franked dividend of 1.7 cents per share which is to be paid on 3 April 2020.


Growth in Revenue (Source: Company Reports)

What to Expect: The company is moving swiftly to grow its market position and has a powerful strategy for growth. WTC has provided guidance for FY20 and expects revenue to range in between $420 million to $450 million, reflecting a growth of 21% - 29% on FY19. The company also anticipates FY20 EBITDA to be in between $114 million - $132 million. WTC will focus on its potent growth strategy in FY20 driving innovation and global expansion.

Stock Recommendation: As per ASX, the stock of WTC is trading close to its 52-weeks’ low level of $12.640, proffering a decent opportunity for accumulation. During 1H20, net margin of the company stood at 29.1%, higher than the industry median of 27.5%. In the same time span, ROE witnessed an increase over the previous year and stood at 7.5%, up from 5.4% in 2H19. Considering the trading levels, higher Net margin and decent growth opportunities, we recommend a “Buy” rating on the stock at the current market price of $13.430, down by 5.754% on 11 March 2020.

Pushpay Holdings Limited

Business Combination of PPH and Church Community: Pushpay Holdings Limited (ASX: PPH) provides donor management system to the faith sector non-profit organisations and education providers in the US, Canada, Australia and New Zealand. As on 11 March 2020, the market capitalisation of the company stood at ~$926.17 million. The company has acquired 100% of the ownership interests in the Church Community Builder for total cash consideration of US$87.5 million. This combination will deliver fully integrated church management system, custom community app and giving solution for customers in the US faith sector.

During 1HFY20, revenue of the company witnessed an increase of 30% to US$57.4 million and NPAT of the company stood at US$6.5 million, up from a loss of US$4.4 million in 1H19. 


1H20 Financial Performance (Source: Company Reports)

FY20 Guidance: The company has provided guidance for FY20 and expects operating revenue between US$121 million and US$124 million. It also anticipates gross margin of over 63% with EBITDAF between US$23 million to US$25 million.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

EV/EBITDA Multiple Based Approach (Source: Thomson Reuters), *1USD = 1.53 AUD

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

Stock Recommendation: As per ASX, the stock of PPH gave a return of 8.39% in the past six months and is inclined towards its 52-week low of $2.785. This offers a good opportunity for investors to enter the market. During 1H20, gross margin of the company witnessed an increase over the previous half and stood at 65%, up from 63.1% in 2H19. In the same time span, net margin of the company stood at 11.6%, higher than the industry median of 7.2%. Considering the returns, current trading levels, improvement in gross margin and FY20 guidance, we have valued the stock using EV/EBITDA based relative valuation method and arrived at a target upside of higher single-digit (in percentage terms). Hence, we recommend a “Buy” rating on the stock at the current market price of $3.41, up by 1.488% on 11 March 2020.

ELMO Software Limited

Increase in ARR and Customer Base: ELMO Software Limited (ASX: ELO) is one of the leading providers of software-as-a-service (SaaS), cloud-based human resources and payroll solutions in Australia and New Zealand. As on 11 March 2020, the market capitalisation of the company stood at ~$511.56 million. During 1HFY20, the company continued to deliver on growth strategy with an increase of 42.8% in Annualised recurring revenue (ARR) to $52 million, as compared to pcp. In the same time span, the customer base of the company went up to 1,478 from 1,129 in 1H19.


Growth in ELMO’s customer base (Source: Company Reports)

What to Expect: ELO is following a disciplined approach in growth with a strong track record of M&A execution. The company has upgraded its guidance for FY20 and expects ARR to be in the range of $62.5 million to 64.5 million. It further anticipates revenue between $53.3 million to $55.3 million.

Stock Recommendation: As per ASX, the stock of ELO gave a return of 7.77% on the YTD basis and a return of 4.62% in the past three months. During FY19, gross margin of the company stood at 86.5%, higher than the industry median of 81.7%. This indicates that the company is managing its costs well and is able to convert its revenue into profits. Considering the returns, higher gross margin and modest outlook, we recommend a “Buy” rating on the stock at the current market price of $6.70, down by 1.471% on 11 March 2020. 

EML Payments Limited

Significant Increase in GDV and Revenue: EML Payments Limited (ASX: EML) is an issuer of prepaid financial cards and provides prepaid payment services in Australia, Europe and North America. As on 11 March 2020, the market capitalisation of the company stood at ~$872.12 million. The company has recently released its interim results for the period ending 31 December 2019, wherein it reported a growth of 60% in group GDV (Gross debit volume) to $6.62 billion and an increase of 25% in group revenue to $59.2 million. EML also reported a growth of over $5.8 million in EBITDA to $19.7 million with a CAGR of 59% in the past five years. This was mainly due to expansion in global gaming programs, mall programs and use of instant gift. 

 
Growth in EBITDA (Source: Company Reports)

Future Expectations: The group has upgraded its guidance for FY20 and expects revenue to be between $120 million to $129 million and EBITDA in the range of $39.5 million to $42.5 million. The company also anticipates NPATA in between $27.5 million to $30.5 million.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

EV/EBITDA 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 EML is inclined towards its 52-weeks’ low level of $1.630, proffering a good opportunity for investors to enter the market. During 1H20, gross margin of the company stood at 75.7%, slightly higher than the industry median of 74%. In the same time span, net margin was broadly in line with the industry median and stood at 7.3%. Considering the trading levels, higher gross margin and future expectations, we have valued the stock using EV/EBITDA based relative valuation method and arrived at a target upside of lower double-digit (in percentage terms). Hence, we recommend a “Buy” rating on the stock at the current market price of $2.690, up by 0.373% on 11 March 2020. 

Praemium Limited

12^th Consecutive Half of Profit Growth: Praemium Limited (ASX: PPS) is one of the leading providers of scalable managed accounts technology, portfolio administration and CRM & financial advice software for the wealth management industry. As on 11 March 2020, the market capitalisation of the company stood at ~$128.67 million. During 1H20, the company reported an increase of 12% in net revenue of $24.2 million and a rise of 24% in underlying EBITDA to $7 million. This resulted in a substantial increase of 122% in NPAT to $1.4 million, reflecting 12^th consecutive half of profit increase.


Underlying EBITDA and EBITDA Margin (Source: Company Reports)

What to Expect: The company has expanded its sales team in Australia and is recruiting for the UK and the key offshore markets. PPS will continue its brand awareness activities in order to raise its profile.

Valuation Methodology: Price to Earnings Multiple Based Relative Valuation

Price to Earnings 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 PPS is trading close to its 52-week low of $0.280, proffering a decent opportunity for accumulation. During 1H20, EBITDA margin of the company stood at 20.8%, up from 13.6% in 1H19 and net margin of the company went up to 6.1% from 2.9% in 1H19. Considering the trading levels, improvement in margins and decent financial performance, we have valued the stock using price to earnings based relative valuation method and arrived at a target price of lower double-digit (in percentage terms). For the said purposes, we have considered OneVue Holdings Ltd (ASX: OVH), Hub24 Ltd (ASX: HUB) and EML Payments Ltd (ASX: EML) as peers. Hence, we recommend a “Speculative Buy” rating on the stock at the current market price of $0.290, down by 7.937% on 11 March 2020. 

 
Comparative Price Chart (Source: Thomson Reuters)

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