5 Technology Players – NEA, RXP, XRO, NXT and NTC

Nearmap Ltd

NEA Details

Expanding Operation to New Zealand Market: Nearmap Ltd.’s (ASX: NEA) stock climbed up 4.18 per cent on August 17, 2018 following the announcement on expanding its business operation into New Zealand market post completion of its pilot program. This includes the establishment of dedicated sales, marketing, and product resources to accelerate the significant growth opportunity that exists in New Zealand.  The management stated that the company has already completed multiple captures of New Zealand since early 2017, with imagery covering up to 72 per cent of the population and it’s being used by numerous Australian subscribers with business in New Zealand. Resultantly, the launch of a dedicated product will allow Nearmap to provide subscriptions specifically for the needs of New Zealand Businesses as it has a higher demand for subscription in the region. We expect that this launch will increase the penetration into the New Zealand market and further enhance the group position at the forefront of the global location intelligent market.


Diverse Global Customer Base (Source: Company Reports)

Meanwhile, the share price has risen 72.78 per cent in the past three months (as at August 16, 2018) and hit a 52-week high of $1.64 on August 17, 2018. Hence, we maintain our “Hold” recommendation on the stock at the current market price of $1.620, considering aforesaid fact and current trading level.
 

NEA Daily Chart (Source: Thomson Reuters)
 

RXP Services Limited

RXP Details

Decent Growth in Topline but Bottom line Disappointed: RXP Services Limited (ASX: RXP) has recently released it full-year earnings report for the period ended 30 June 2018 wherein revenue grew by 3 per cent and amounted to $144.9 Mn against the prior year. It was mainly driven by the growth of digital work during the same period. However, EBITDA contracted to 29 per cent to $13 Mn in FY18 on Y-o-Y basis. It was mainly impacted by decline in traditional consulting work, particularly in the first eight months across two major clients where the group was able to successfully position the business to take advantage of the promising growth in its digital work. NPAT was down by 33 per cent and recorded at $7.8 Mn as compared to the prior year. Basic EPS stood at 4.9 cent in FY18. Moreover, cash and cash equivalent at the end of the year was $ 14.011 Mn against $ 17.603 Mn of the previous year. While the last quarter of FY18 produced pleasing results and it was mainly driven by strong headcount, high utilization and new project win and, we expect this momentum will continue in FY19.


FY18 Financial Highlights (Source: Company Reports)

Based on subdued performance, the Board of Directors have declared a fully franked final dividend of 2.0 cents per share and it will be paid on 4 October 2018 with a record date of 14 September 2018. Meanwhile, the share price has fallen 18.18 per cent in the past six months but up by 8 per cent in the past one month as at August 16, 2018. Hence, we maintain our “Hold” recommendation on the stock at the current price of $ 0.540 as it is trading at a reasonable PE level of 7.98x among its peer group.
 

RXP Daily Chart (Source: Thomson Reuters)
 

Xero Limited

XRO Details

Annual General Meeting Result: Xero Limited (ASX: XRO) has recently disclosed the result of Annual General meeting wherein the shareholders of the company have approved several resolutions such as fix the remuneration of the auditor for the upcoming period, electing Ms. Dale Murray, re-electing Mr. Rod Drury, Mr. Craig Winkler, Mr. Graham Smith as directors of the company, approving Issuance of shares to Lee Hatton and Bill Veghte, and adopting the new Constitution. Besides this, the group has delivered its first positive annual EBITDA of $26.0 Mn compared to ($28.6) Mn loss in FY17 and has grown well in FY18 with the addition of 351,000 subscribers. Moreover, the group has recorded revenue growth at CAGR of 49 per cent over the three years. Resultantly, the group experienced improved operating and investment cashflow margins from (71%) to (9%). On the balance sheet front, the current ratio stood at 1.93x in FY18.


FY18 Financial Highlights (Source: Company Reports)

Meanwhile, the share price has risen 19.40 per cent in the past three months (as at August 16, 2018) and traded close to 52-week high level ($47.910). Hence, we maintain our “Hold” recommendation on the stock at the current price of $47.350, considering decent outlook ahead.
 

XRO Daily Chart (Source: Thomson Reuters)
 

NEXTDC Limited

NXT Details

Trading at higher PE level: NEXTDC Limited (ASX: NXT) is a mid-cap company with the market capitalization of circa $2.45 Bn as of August 17, 2018. It offers professional advisory services throughout the IT lifecycle that includes pre-sales engineering design services, project management, and Full data center migration and provides its solutions to the government and enterprise organizations. Recently, the group completed an upsized debt issuance (Notes IV) of $300 Mn repayable in June 2022 which complements the existing $300 Mn Notes III series due one year earlier. This exhibits the company’s growth strategy and provides NEXTDC with further flexibility in funding growth opportunity.  On the financial front, net margin increased by 520 bps to 10.9% in 1HFY18 against the previous six months. Resultantly, RoE grew by 90 bps to 1.6% in 1HFY18, against the value of 0.7% in 2HFY17. Meanwhile, the stock price has risen 18.97 per cent in the past six months as at August 16, 2018 and it is trading at its 52-week high price that is $8.190 and a higher PE level of 175.68x. Hence, we maintain our “Expensive” recommendation on the stock at the current market price of $7.210.
 

NXT Daily Chart (Source: Thomson Reuters)
 

NetComm Wireless Limited

NTC Details

Decent Outlook: NetComm Wireless Limited (ASX: NTC) is a small-cap company with the market capitalization of circa $172.67 Mn as of August 17, 2018. Recently, the company announced the retirement of Mr. Peter Beveridge from the role of alternative Company Secretary, effective from 2 July 2018. In turn, the Board of Directors appointed Mr. Clint Bell as an alternative Company Secretary on the same date. Moreover, Mr. Chris Last, Chief Financial Officer will continue to act as the primary Company Secretary for the group. On the other hand, the market opportunity for Fixed Wireless, DPUs, and M2M is very strong in Australia, North America, and Europe region and the group is well positioned to capitalize on these opportunities at the back of demonstrable real-world experience with Tier 1 customers and its bespoke solution methodology. As of now, the group is in the discussion with Tier 1 Carriers in Europe, UK and North America for the delivery of solutions based on NetComm’s existing product lines. During the first half of the year, the group posted strong performance and recorded top line and bottom line growth of 88.6 per cent and 317.2%, respectively, on PCP basis. As a result, RoE turned around to be positive and recorded 4.7 per cent during the same period. By looking at its strategic movement towards both organic and inorganic growth of the company, we maintain our “Buy” recommendation on the stock at the current market price of $1.175.
 

NTC Daily Chart (Source: Thomson Reuters)

 
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