Class Limited

CL1 Details

Quarterly Rebalance of the S&P/ASX Indices: Class Limited (ASX: CL1) develops and distribute cloud-based accounting, investment reporting and administration software. It has a market capitalisation of A$168.85 Mn as on 19^th September 2019. The company has recently announced that Pinnacle Investment Management Group Limited and its subsidiaries have made a change to their substantial holdings on 12^th September 2019 and the current voting power stood at 10.28% as compared to the previous voting power of 9.22%. As per the release dated 6^th September 2019, S&P Dow Jones Indices announced changes in the S&P/ASX indices, wherein, it was mentioned that Class Limited would be removed from S&P/ASX 300 Index, effective at the open on 23^rd September 2019. The following picture provides an idea of the financial performance of the company for FY19:


Financial Metrics (Source: Company Reports)

What to Expect:With respect to Class Portfolio, it was mentioned that the company will continue to evolve its portfolio as an investment reporting product in FY20.The company will launch a new product in the Trust space, which will increase its addressable market by a similar size as SMSF (Self-managed super funds). CL1 will be increasing its investment in product development and technical capability by 33% to $12 Mn in FY20 to set a platform for growth. The company anticipate a material uplift in revenue and EBITDA performance in FY21 and beyond.

Stock Recommendation:  For the year ended 30 June 2019, the Board of Directors declared a fully franked final dividend amounting to 2.5 cents per ordinary share. The payment date for the final dividend is 27^th September 2019.  The current ratio of the company stood at 4.86x in FY19 against the industry median of 1.82x. This implies that the company is in a decent position to address its short-term obligation as compared to the broader industry. Currently, the stock is trading slightly below the average of 52 weeks high and low levels of $2.23 and $1.15, respectively. Therefore, considering the above-stated facts and current trading levels, we maintain our “Hold” recommendation on the stock at the current market price of A$1.545 per share (up 7.666% on 19^th September 2019).

 
CL1 Daily Technical Chart (Source: Thomson Reuters) 
 
 

Wattle Health Australia Limited

WHA Details

Update on Funding for the Acquisition: Wattle Health Australia Limited (ASX: WHA) is into the business of food and beverage with the market capitalisation of A$76.83 Mn as on 19^th September 2019. The company with the help of a release announced that Industry Super Holdings Pty Ltd has ceased to become a substantial holder in the company on 12^th September 2019. WHA through a release dated 2^nd September 2019 provided an update on funding for the proposed acquisition of Blend & Pack. It was mentioned that the company is in the final stages of finalisation of negotiations on a debt funding facility for its proposed acquisition of Blend & Pack. In FY19, the company along with its partners in the Organic Dairy Farmers of Australia and Niche Dairy commenced construction of Australia’s first dedicated organic nutritional spray dryer, with WHA having the first right to all product produced at CBDG. The following picture depicts an overview of financial performance of the company:


Profit & Loss Statement (Source: Company Reports)

Future Guidance:Wattle Health Australia Limited would be focusing on producing and selling a wide range of certified organic-based and produced dairy products, thisbeing one of the fastest growing segments of the nutritional dairy products sector both domestically and internationally.The company has a strong balance sheet with net assets of around $51 Mn with $28 Mn cash at bank that would support the future growth strategy of WHA.

Stock Recommendation:As per the release dated 30^th August 2019, the company stated that FY19 was a challenging year for the group but a transformative one with the company to become one of the few vertically integrated organic nutritional dairy companies in the world.

As per ASX, the stock of WHA is trading towards its 52-week lower levels and, thus, it can be said that current levels are offering a decent opportunity for accumulation. Hence, considering the above-stated facts and current trading levels, we give a “Speculative Buy” recommendation on the stock at the current market price of A$0.450 per share (up 13.924% on 19^th September 2019).

 
WHA Daily Technical Chart (Source: Thomson Reuters) 
 
 

LiveHire Limited

LVH Details

Robust Growth in Revenue:LiveHire Limited (ASX: LVH) is into the provisioning of cloud-based human resources software and platform services. It has a market capitalisation of ~A$81.22 Mn as on 19^th September 2019. The company recently announced that Christy Lyn Forest has made a change to the holdings by acquiring 75,137 fully paid ordinary shares at the consideration of $0.3327 per fully paid ordinary share on 10^th September 2019. In FY19, the company witnessed solid revenue growth of 59% on a YoY basis. LVH added that the scaling through partnerships would bring speed to generating revenue growth. The following picture provides an idea of the key financial numbers for FY19:


Financial Highlights (Source: Company Reports)

Future Aspects:The company has scope to pursue organic growth, both domestically and internationally. LVH’s SaaS revenue model has generated more than 85% growth in Annualised Recurring Revenue for the past two financial years, and 100% cash conversion, as customers pay annually in advance. The contract terms are 1–3 years, with a greater weighting to three-year contracts expected going forward.

Stock Recommendation:The company is building a pipeline of clients via direct sales in Australia, and partnerships in Australia and the US, and focusing on new client wins in both markets. It has a strong balance sheet with a cash balance of $34 million and no debt. As per ASX, the stock of LVH is trading closer to its 52-week low levels of $0.240. Thus, in light of above-stated facts and current trading levels, we give a “Speculative Buy” recommendation on the stock at the current market price of A$0.285 per share (up 1.786% on 19^th September 2019).

 
LVH Daily Technical Chart (Source: Thomson Reuters)
 

Clover Corporation Limited

CLV Details
Trading at Higher Levels:Clover Corporation Limited (ASX: CLV) is a manufacturer and supplier of functional food ingredients. It has a market capitalisation of A$353.49 Mn as on 19^th September 2019. The company recently announced that Challenger Limited and its entities have become an initial substantial holder in the company with the voting power of 5.13% on 19^th August 2019. When it comes to financial performance for 1H FY19, the company reported a net profit after tax amounting to $4.5 Mn, reflecting a rise of 40% on the YoY basis, which was driven by increased volume and improved trading terms. The below provides an overview of the company’s half-yearly results:


Half-Yearly Results (Source: Company Reports)

Future Prospects:The company continues to enjoy strong demand for its products with excellent opportunities developing in Europe. It added that these opportunities are emerging with enhanced marketing efforts by CLV, after new infant formula legislation requiring the addition of 20mg/100 Kcal of DHA to come into effect from late February 2020. The company has a focus on new product applications across nutrition segments. It is planning to establish additional raw material sources.

Stock Recommendation:As per ASX, CLV is trading at the P/E multiple of 39.850x as compared to the industry median (Consumer Non-Cyclicals) of 12.8x on TTM basis. According to the same source, it was seen that the stock of CLV is trading towards its 52-week high levels of $2.44. Therefore, in view of aforesaid facts and current trading levels, we give an “Expensive” recommendation on the stock at the current market price of A$2.260 per share (up 5.607% on 19^th September 2019).

 
CLV Daily Technical Chart (Source: Thomson Reuters)

 

Splitit Payments Ltd

Interim Finance Facility: Splitit Payments Ltd (ASX: SPT) provides a credit card-based instalment solution to businesses and merchants and has a market capitalisation of A$158.38 Mn as on 19^th September 2019. Recently, the company announced that its Co-Founder, Gil Don, has decided to step down from his role as CEO. It was mentioned that Mr Don would take up the position as General Manager, EMEA. Mr Don, who will remain on the company’s Board, will be replaced as Chief Executive Officer by Brad Paterson, currently Splitit’s Managing Director, North America. The above-stated changes would take effect on 1^st October 2019. In another update, the company announced that it has inked an agreement with Shaked Partners Fund, L.P. to provide the company with an interim finance facility to allow it to continue to grow its funded merchant business model. The company further added that the facility is for up to US$8 Mn and has the flexibility to be drawn down in three tranches over the next 11 months, to 10 August 2020, maturing 24 months after each draw down. The following picture provides an idea of the key financial metrics of the company:


Key Metrics (Source: Company Reports)

A look at 2H FY19 Guidance:The company stated that during 1H FY19, it continued to lay strong foundations for future growth. SPT has a growing sales pipeline of over 700 potential merchants and is in discussions with numerous new potential strategic partners throughout its target geographies. It expects to continue to deliver strong growth in unique customers and transaction volumes, which would support growth in merchant fees in 2H FY19 and beyond.

Stock Recommendation:As per the 1H FY19 results presentation, the company has a decent balance sheet after the initial public offering, raising AU$12 Mn and subsequent Placement and SPP raising AU$30.3Mn. As per ASX, the stock of SPT is trading towards its 52-week lower levels and, thus, it can be said that the stock is offering a decent opportunity for accumulation. Hence, considering the above-stated facts and current trading levels, we give a “Speculative Buy” recommendation on the stock at the current market price of A$0.505 per share (down 1.942% on 19^th September 2019).

 
SPT Daily Technical Chart (Source: Thomson Reuters)

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