Stocks’ Details

Nearmap Limited

Chairman’s Comments on 2019 AGM:Nearmap Limited (ASX: NEA) is in the provisioning of geospatial map technology for businesses, enterprises and government customers. The market capitalisation of the company stood at A$1.12 Bn as on 14^th November 2019. Recently, Chairman Peter James addressed the shareholders at 2019 Annual General Meeting and stated that FY19 has been a year of execution for the company. In North America, it delivered growth of 76% in annualised contract value. Currently, North American business represents more than a third of NEA’s total portfolio. The following picture provides an overview of group ACV portfolio by industry:


Group ACV by Industry (Source: Company Reports)

What to Expect:The company stated that FY19 has been another successful period of strong growth, and it is well placed for growth in FY20. It added that Nearmap 3D and the beta release of its Artificial Intelligence (AI) content reflect an exciting time in the evolution of NEA, and in FY20, it would be increasing investment on its people and technology in order to deliver even better content to the customers.

Stock Recommendation:The company continues to focus on the global opportunities for becoming the world’s leading provider of subscription-based location intelligence, with its unique technology and business model, which no other aerial imagery company has been able to replicate at scale. NEA experienced a rise of 11.9% in EBITDA margin on a YoY basis to 21.3%. The stock of NEA delivered a return of 62.75% on YTD basis. Therefore, considering the company’s plan to continue investment in research and development for evolving its product offering, expansion of addressable market and to maintain competitive advantage to place the company at the forefront of location content and intelligence market, we give a “Buy” recommendation on the stock at the current market price of A$2.840 per share, up 14.056% on 14^th November 2019, taking cues from the release related to Annual General Meeting.

NEXTDC Limited

A Rise in Customers Number:NEXTDC Limited (ASX: NXT) is engaged in the establishment, development and operation of data centres facilities with a market capitalisation of A$2.28 Bn as on 14^th November 2019. Recently, CEO of the company, in the AGM 2019, stated that FY19 has been another year of record growth and accomplishments. NXT witnessed a yoy growth of 22% in its customer numbers in FY19, and the continued acceleration of interconnections rose by 27%. CEO added that these key metrics represent the breadth of its premium data centre services business and highlight the unique value of a data centre platform that is increasingly differentiated by the depth of its ecosystem. The below picture depicts an overview of solid growth in revenue and EBITDA:


Solid Revenue and EBITDA Growth (Source: Company Reports)

Future Guidance:For FY20, the company expects revenue in the range of $200 million to $206 million and an underlying EBITDA in the ambit of $100 million to $105 million. It has forecasted capital expenditure to come in between $280 million to $300 million as compared to $378 million in FY19.

Stock Recommendation:Gross margin of the company stood at 76.2% in FY19, in-line with the industry median. However, EBITDA margin of NEA stood at 52.4% in FY19 as compared to the industry median of 28.4%. Current ratio during the same period stood at 7.04x against the industry median of 2.81x. This implies that NEA is in a decent position to address its short-term obligations as compared to the broader industry. On the stock’s performance front, it produced returns of 2.80% and 3.61% in the span of one month and three months, respectively. Considering the strong start to FY20, the achievement of major milestones for the business, and current trading levels, we give a “Buy” recommendation on the stock at the current market price of A$6.660 per share, up 0.909% on 14^th November 2019.
 

Appen Limited

Decent Growth in 1HFY19:Appen Limited (ASX: APX) is in the provisioning of quality data solutions and services for machine learning and artificial intelligence applications for global technology companies, auto manufacturers and government agencies. Recently, the company announced its results for the half -year ended 30th June 2019, in which key personnel of the company stated that the core business has performed decently in the first half. Speech and image data increased by 85% as compared to 1H FY18, relevance revenue by 48%, and underlying EBITDA margins expanded from 16.8% to 18.9%.


Highlights of 1H FY19 (Source: Company Reports)

Future Aspects:The company is strengthening its position in a high growth market via investments in technology, sales & marketing, government markets and China. For the year ending 31^st December 2019, the company’s full-year underlying EBITDA including Figure Eight is trending to the upper end of $85 million- $90 million (at A$1 = US$0.74 Aug-Dec 2019).

Stock Recommendation:APX’s continuing investment in technology places the company to meet the demand of the market for high volumes of quality data at speed throughout multiple data types for a growing number of use cases.  Debt to equity of APX stood at 0.07x in 1HFY19 against the industry median of 0.53x. The company possesses a robust balance sheet with significant improvement in debt leverage ratio from 0.26x in the previous year to net cash positive of $59.2 million in the current period. Thus, considering respectable key metrics, improvement in debt position, a strong CAGR growth of 63.48% in total revenues in the span of FY14-FY18 and robust balance sheet, we maintain a “Hold” rating on the stock at the current market price of A$22.970 per share, up 1.368% on 14^th November 2019.
 

Xref Limited

Xref Reports Sales Increase of 23% During the Quarter: Xref Limited (ASX: XF1) develops human resources technology that automates the candidate reference process for employers. The market capitalisation of the company stood at $59.45 million on 14^th November 2019.Thecompany has released the details of high-growth and development period for the company during Q1FY20. The company reported record credit usage and cash receipts in Q1FY20. Sales registered a growth of 23% to $2.46 million as compared to Q1FY19 and credit usage was reported at $2.24 million, up by 32%.

XF1 announced the acquisition of new 103 clients during Q1FY19. All these clients are active, and revenues generated from them have increased by 188% collectively in the past 12 months.In Q1FY18, these clients have spent $5.431 on an average, and by 30 September 2019, the same clients have spent an average of $15.681.


Past Performance (Source: Company Reports)

Outlook for FY20: The company retains a bold and positive outlook for the future. The future of the company will be transformational as it progresses from being an automated reference checking provider to a platform offering continuous verification of human capital from hire to retire.

Stock Recommendation:As per the ASX, the stock has corrected 23.66% and 49.65% in the past three months and six months, respectively and is currently trading close to the lower band of its 52-week trading range of $0.350 - $0.720. The company also delivered a CAGR growth of 82.24% in revenues over the period of FY16 to FY19. Based on its quarterly performance, growth in channel, sales teams, ARPA, product and integrations, positive outlook for future and current trading levels, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.360 per share, up 1.408% on 14^th November 2019.
 

The Citadel Group Limited

Changes in Board and Management:The Citadel Group Limited (ASX: CGL) is a software and technology company that specialises in secured enterprise information management across health, national security, defence and corporate enterprises. The market capitalisation of the company stood at $166.65 million on 14^th November 2019. Chairman of the company, Mr Kevin McCann AM, has been elected to step down from his position as Chair and Director of the company. A current Non-Executive Director since 2014, Lieutenant General Peter Leahy AC, has been appointed as the new Chairman.

Highlights of AGM: FY19 was a mixed year for the company. The Citadel 2.0 strategy being applied is the right strategy to boost the company’s long-term growth.The company’s financial underperformance was due to delays in customer-controlled project extensions, which were likely to commence during the 2H19 but were delayed. These project extensions have now been approved and would be adding to FY20 and future results.


Software Revenue from Continuing Operations (Source: Company Reports)

Outlook for FY20: The company has reiterated its FY20 targets of returning to revenue and EBITDA growth, backed by low double-digit organic revenue growth, broadly consistent marginswith FY19 (pre Noventus) and full-year contribution from Noventus (approximately $18 million revenue, $2 million EBITDA).

Stock Recommendation: The stock has corrected 23.01% and 49.78% in the past three months and six months, respectively. Based on its mixed FY19 results, new project extensions, the guidance of lower double-digit growth and current valuation, we give a “Speculative Buy” recommendation on the stock at the current market price of $3.380 per share.
 
 
Comparative Price Chart (Source: Thomson Reuters)

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