Stocks’ Details

Altium Limited

Growth Led by Revenue Boost in China:Altium Limited (ASX: ALU) develops computer software for the design of electronic products.

Highlights of 1HY19: During the period, China reported a record growth with an increase of 49% in revenue and a new office opening in Beijing planned for the second half. The company reported a revenue of US$78.1 million, up 24% on pcp. EBITDA margin for the period also went up to 36.3% from 30%. Net profit after tax during the period stood at US$23.4 million, up 58% on prior corresponding period. The company announced an interim dividend of 16 cents per share, up 23% on pcp.


Key Financial Metrics (Source: Company Reports)

By the end of the period, the company had 39,179 subscribers, up 9% on pcp. Operating cash flow for the period amounted to $26.8 million, up 80% on pcp.

Long-term Outlook: The company is expecting 2020 revenue of US$200 million. EBITDA margin for the period is expected to be 35%. It aspires to generate $500 million revenue in 2025 along with 100,000 Altium Design subscribers. To support its long-term vision, the company will continue to pursue partnership and M&A opportunities.

Stock Recommendation: The stock of the company generated returns of 64.46% and 61.84% over a period of 6-months and 1-year, respectively. Currently, the stock is priced close to a 52-week high level of $36.080. During the first half of FY19, the company witnessed a strong performance across key metrics including revenue, EBITDA and NPAT. The period also saw a rise in the number of subscribers. With the excellent performance of financials along with the higher returns gained in the recent past, we presume that the majority of the positive factors have been factored in at the current level. Given the backdrop of the aforesaid factors and current trading level, we give an “Expensive” rating to the stock at a current market price of $35.660, up 0.338% on 02 July 2019.
 

Appen Limited

Strong Performance in FY18:Appen Limited (ASX: APX) is engaged in the provision of quality data solutions and services for machine learning and artificial intelligence applications for technology companies. The company updated the exchange that the earnings update for the half year ended 30 June 2019 will be released on 29 August 2019.

In the month of March 2019, Appen Limited completed its fully underwritten A$285 million Institutional Placement at an offer price of A$21.50 per share to fund the consideration payable for acquisition of Figure Eight Technologies Inc., a machine learning software platform. The company expects the acquisition to add to revenues and expand its customer base.

The company reported revenue amounting to $364.3 million for the period, up 119% on the prior corresponding period. Underlying EBITDA for the period stood at $71.3 million, up 153% on the previous year. Underlying NPAT reported an increase of 148% on the previous year, at $49 million.High revenue growth and margin expansion across the Content Relevance division led to a strong performance in the last quarter of the year.


Financial Summary in $AM (Source: Company Reports)

Stock Recommendation: The stock of the company generated high returns of 115.61% over a period of 1 year, YTD 127.73%. Currently, the stock is priced close to a 52-week high of $29.890. The company is continuously investing to enhance its delivery model with technology and build a competitive stand in the market. During FY18, the company witnessed a rise in its key metrics along with the exceptional performance by Content Relevance division in the last quarter. Currently, the stock is trading at price to earnings multiple of 74.27x. Considering the stretched valuations and substantial gains over the recent period, we believe that most of the positive factors have been accounted for at the current level. Hence, we give an “Expensive” rating to the stock at a current market price of $29.160, up 0.034% as on 02 July 2019.
 

WiseTech Global Limited

CargoWise One in Limelight:WiseTech Global Limited (ASX: WTC) is engaged in providing software to the logistics services industry, globally. The company recently updated about the issuance of fully paid ordinary shares to WiseTech Global Limited Employee Share Trust. The issue comprised of 850,000 shares for an issue price of $28.72 per share. In April 2019, the company also completed the acquisition of Xware, a provider of messaging integration solutions, to improve its messaging gateway and enhance control over future development.

Key Highlights of 1H19: During the period, total revenue amounted to $156.7 million, up 68% on pcp. Net profit attributable to shareholders was reported at $23.1 million, up 48% on 1H18.Performance during the first half demonstrated an annual attrition rate of less than 1% by CargoWise One customers, a rise in EBITDA by 52% and recurring revenue of 100% for CargoWise One platform, against the prior corresponding period.


Key Performance Indicators (Source: Company Reports)

FY19 Guidance: The company revised the earlier FY19 revenue guidance range of $322 million - $335 million to $326 million to $339 million, with a growth rate between 47% to 53%. EBITDA guidance was also revised from $102 million - $107 million earlier, to $100 million to $105 million, with growth in the range of 28% - 35%.The guidance was revised to incorporate the impact of acquisition of Containerchain, a container optimisation solutions provider.
Stock Recommendation:The stock of the company generated returns of 79.68% over a period of 1 year, and 70.29% on YTD basis. The stock is presently trading close to its 52 weeks high level of $29.590. The period ended 31 December 2018 was characterised by significant and high-quality growth while expanding technology lead and global footprint.  The stock is trading at a higher price to earnings multiple of 179.01x. EV-to-Sales multiple (TTM basis) comes in at 26.2x, which is superior to the industry median of 4.2x. Hence, considering the aforesaid parameters, valuation, and current trading level, we give an “Expensive” rating to the stock at a current market price of $28.860, down 0.483% on 02 July 2019.
 

Nearmap Ltd

Strong Growth in Key Metrics:Nearmap Ltd (ASX: NEA) provides online aerial photomapping services through its wholly owned subsidiaries, Nearmap US, Inc, Nearmap Remote Sensing US, Inc., and Nearmap Australia Pty Ltd. The company recently updated that it has reduced the number of options on issue by a total of 12,500 options due to the lapse of unexercised employee share options. As on 01 July 2019, the company had 16,337,184 options on issue.

Financial Highlights:During the first half of FY19, the Group’s annualised contract value went up by 44% to $78.3 million. Revenue for the period stood at $35.5 million, up 45% on the prior corresponding period revenue of $24.4 million. EBITDA for the period amounted to $8.1 million, reporting an increase of more than 100% on the prior corresponding period. The increase in EBITDA is attributable to operating leverage of the SaaS business model and positive margin impact of the prior year investments.

During the period, the company raised over $15 million of capital to implement growth initiatives including expansion to Canada, expansion of product & content and sales & marketing in the US.


1HY19 Financials (Source: Company Reports)

Outlook:On the outlook front, the company is focusing on product enhancement to increase the workflow utility and release of cutting-edge 3D visualisation and export tools. The company reaffirmed cash flow break-even for FY19 and will continue to invest for sustained growth.

Stock Recommendation: The stock of the company generated returns of 244.14% over a period of 1 year and 149.67% on YTD basis.The first half of FY19 was a period of strong growth with revenues and profits going up on pcp. With the new product launched planned in the second half of the year, the company is well positioned for continued growth in H2. Considering the above factors and growth prospects, going forward, we give a “Hold” recommendation to the stock at the current market price of $3.810, down 0.262% on 02 July 2019.
 

NetComm Wireless Limited

Removed from Official List:NetComm Wireless Limited (ASX: NTC) is a leading developer of Fixed Wireless broadband, wireless M2M/Industrial IoT and Fibre and Cable to the distribution point technologies.

The company, as on 1 July 2019, announced that the scheme of arrangement between NetComm and its shareholders has been implemented. Pursuant to the conditions of the arrangement, Casa Systems, Inc. (Casa) hold the entire shares in NetComm.The purchase value of A$1.10 for each NTC share held on the Record Date of 26 June 2019 was paid to NetComm shareholders on 01 July 2019.

As informed by the company, NTC will be delisted from the official list of ASX Limited at the close of trading as on 02 July 2019.

On 20 June 2019, the company had updated that Federal Court of Australia approved the scheme of arrangement between Casa Systems, Inc. and NetComm, under which Casa will acquire the entire issued ordinary shares in NetComm.
We had advised to the investors to keep track on the stock and were of the view that shareholders might think of voting in favour of this resolution and the stated scheme of merger, to avail the benefit of the lucrative consideration being offered by the Casa Systems. In-line with our view, the Scheme was passed by the Court and hence, pursuant to the terms of the Arrangement, the stock has been delisted from 02 July 2019. With this update, we close our coverage on NTC.


Comparative Price Chart (Source: Thomson Reuters)   

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