Isentia Group Ltd (ISD)

Leveraging data and clients’ base for deeper penetration:During Q3FY17, the company launched the improved Media portal and 97% of users have migrated to the new platform. This reflects a positive response to new product release while the client churn has returned to historic norms. Importantly, the company is leveraging technology to increase SaaS penetration by media portal recharge rollout in coming months, increasing penetration of VAS products through cross-sell and expanding its regional sales and service teams for multiple market client wins. For H1FY17, Isentia’s revenue grew by 5% year on year (yoy) to $79.6 million, while EBITDA declined by 13% yoy to $20.5 million impacted by EBITDA loss of $2 million in content marketing, more challenging conditions for ANZ SaaS business in November and December, and the increase in copyright fees. In turn, underlying PAT witnessed a de-growth of 17% yoy to $12.4 million. For FY17, ISD expects to report revenue of $162m and underlying EBITDA of $44m. In last one month, the stock moved up 22% (as at May 31, 2017). We give a “Speculative buy” recommendation on the stock at the current price of – $ 1.74 

Recent customer wins in 2H17 (Source: Company reports)  

NetComm Wireless Ltd (NTC)

Debt free and well-funded to support growth objectives: For H1FY17, group operating revenue grew by 1.2% to $47.0 million led by M2M & Fixed Wireless revenue as it grew by 16.4% yoy growth to $36.3 million (77% of group revenue). While adjusted EBITDA grew by 40.5% yoy to $12.5 million, there was NPAT loss of $1.7 million. Importantly, the company is continuously investing in growth assets to support long term revenue growth. For H1FY17, the company witnessed a strong cash generation with cash inflow of $6.1 million, with no debt on its balance sheet, while having $30 million cash at the end of December 2016. Recently, the company won three major contracts from reputed customers (wherein the contracts included Ericsson/nbn Fixed Wireless, nbn FTTC and US Fixed Wireless). Further, the company has increased its fixed wireless coverage by 144k premises since 31 December 2015 to 485k premises at 23 March 2017. The stock has moved up 4.47% on June 01, 2017 and has been up about 35% in last one month. Given the prospects and trading levels despite the recent rise, we maintain a “Buy” at the current price of $ 1.87

NextDC Ltd (NXT)

Pursuing customer opportunities:NextDC Ltd has completed the subscription of $300 million senior unsecured, 6.25% fixed rate debt offering (Notes III). Subscription for Notes III included a combination of new investor funds and the discretionary rollover of selected Notes I and Notes II securities. NXT will use the net cash proceeds of Notes III to redeem the balance of the remaining Notes I and Notes II securities at the optional redemption date of June 16, 2017, while the excess net cash proceeds are intended to be used for general business and financing purposes. Moreover, the company is currently pursuing several new large customer opportunities, which will require additional capital expenditure and are expected to be adequately funded by NXT’s new liquidity sources. For FY17, the company is expected to report $115-$122 million in revenue while EBITDA is expected to be $46-$50 million with capital expenditure at $260-$340 million. The stock has moved up 18% in the last three months as on May 31, 2017. We give a “Hold” recommendation on the stock at the current price of $ 4.45

Freelancer Ltd (FLN)

Robust growth in project fees:During Q1FY17, Freelancer Ltd reported a 20% yoy growth in cash receipts at $12.5 million on a rolling 12-month basis, with strong positive operating cashflow of $2.1 million. The company witnessed a robust growth in key metrics in the core marketplace segment during the quarter, while the core infrastructure, systems and processes are refurbished. Further, considerable progress has been made in Escrow.com payments business and the remaining is expected to be completed within the next two quarters. Q1 2017 saw a strong bounce in accepted projects as issues in the core desktop project funnel were corrected in mid-January 2017, while projects posted on mobile reported an exceptional growth of 79% yoy during the quarter. Moreover, the company’s advantage lies in the revenue composition as USD is the main operating currency of the group and contributed to 75% of revenue in FY16. The company held cash and equivalents of A$34.7 million with no debt on balance sheet as on March 2017. The stock rose about 15% in last one month (as at May 31, 2017). We give a “Buy” rating on the stock at the current price of $ 0.92 

Growth in Deposits in Core Freelancer Marketplace (Source: Company Reports) 

Catapult Group International Ltd (CAT)

Expanding global footprint in the elite performance technology market: The group conducted a $14 million placement under which new shares were issued at $2 per share. Further, the company offered a $3 million share purchase plan (SPP), which provides shareholders with the opportunity to acquire up to $15,000 worth of fully paid ordinary shares in the company without incurring brokerage or other transaction costs. Proceeds of the placement and the SPP will be used to fund two key acquisitions which are in line with the company’s strategic focus of expanding its range of products as it extends its global footprint in the elite performance technology market. The company has maintained its FY17 revenue guidance of between $61 million and $65.5 million (21% - 30% pro-forma growth in FY17) and aims to deliver positive underlying EBITDA. The stock has fallen 18% in last one month but rose about 1.6% on June 01, 2017. Given the prospects, we maintain a “Speculative buy” recommendation at the current price of $ 1.63

Nearmap Ltd (NEA)

New Zealand pilot capture program:For H1FY17, Nearmap posted a revenue growth of 38% year on year (yoy) to $19.4m while EBIT grew by 46% yoy to $10.2m led by solid growth in both Australia and the US. NEA has completed a one-off capture of New Zealand’s main economic areas during the period, and has already secured the first commercial sales of the imagery to its Australian customers. The pilot capture program was completed in March and covers approximately 72% of the New Zealand population. Further, this pilot program allows the company to explore the expansion of Nearmap’s world leading technology in the global location content market. The stock has declined 21.4% in the last six months as on May 31, 2017 over investors’ concerns on NEA’s expansion into the USA while there has been some upside momentum in last one month. We give a “Buy” recommendation on the stock at the current price of $ 0.51

Xero Ltd (XRO)

Givia to sell entire shareholding over next 10 years: Recently, Xero Ltd.’s non-executive director Craig Winkler has reduced his shareholding to 10.5% (from 12.7%) to fund his private charitable trust. Winkler is a Director of Givia, the trustee for a private charitable trust and remains Xero’s second largest individual shareholder (via Givia) after Xero’s CEO, Rod Drury. Further, Winkler has informed Xero that he will seek to distribute 100% of Givia’s assets over approximately a 10-year time frame. Over that period, Givia will sell its portfolio holdings, including Xero shares, to fund its charitable giving, and stated its intention to manage its shareholding sale processes in order to minimize impact on the market. During FY17, the company’s operating revenue grew by 43% to $295.4 million (51% rise when excluding currency movements) while the subscription revenue surged 44%. Further, there was an improvement in net loss after tax to $69.1 million from $82.5 million in FY16 together with improvement in EBITDA loss and gross margin percentage. Notably, XRO has reported positive operating cash-flow for the first time in the second half of the year, and has $113.7 million of cash and short-term deposits. We give a “Hold” recommendation at the current price of $ 24.09

Appen Ltd (APX)

Improved earnings outlook:For FY16, Appen Ltd.’s total revenue grew by 34% yoy to $111.0 million, while EBITDA grew by 24% yoy to $17.2 million. In turn, NPAT also surged by 26% yoy to $10.5 million, led by the increase in earnings from the accelerating demand for machine learning-based product development. Further, artificial Intelligence and machine learning rely on very large volumes and a wide variety of high quality data for training and improvement. Notably, significant growth of these technologies worldwide is powering a strong surge in the need for data, and the company’s track record, skills and capabilities strongly positioned it to benefit from the rising demand in the future. APX has improved FY2017 earning forecast as the company’s EBITDA for FY2017 is estimated to be more than 40% to 50% over FY16, driven by the recent receipt of purchase orders from existing customers, a sharp increase in monthly revenues from existing and new customers, and better overall margins, largely from new projects. However, the stock is trading at higher levels and looks “Expensive” at the current market price of $ 3.69

Aconex Ltd (ACX)

Guidance re-affirmed:During H1FY17, Aconex Ltd reported a revenue growth of 38% yoy to $77.0 million, primarily driven by the acquisition of Conject Holding GmbH in March 2016 and strong international growth. Earnings before interest, taxes, depreciation, and amortization (EBITDA) from core operations, excluding acquisition and integration costs grew by 9% yoy to $7.4 million. The company’s cash and cash equivalents stood at $43.2 million at December 31, 2016 against $52.5 million at June 30, 2016. Aconex has reaffirmed its earlier (Jan-2017) outlook for FY17, as it expects revenue of $160-165 million and EBITDA of $15-18 million. The stock has declined about 34% over the past twelve months owing to concerns on meeting guidance, uncertainty in the UK and Europe and overall economic picture. However, it has moved up 21% in the last three months as on May 31, 2017. The stock still seems to be trading on volatility, and we give an “Expensive” recommendation on the stock at the current price of $ 4.29 

Revenue Bridge (Source: Company Reports)

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