ELMO Software Limited

Recent Acquisitions of HROnboard and Box Suite: ELMO Software Limited (ASX: ELO) is into providing software-as-a-service (SaaS), cloud-based human resource and payroll solutions for organizations in Australia, New Zealand, and Singapore.
The company expects the following shares to be released from escrow on 29 June 2019:

• 40,061,751 ELMO Shares subject to ASX imposed escrow at the time that ELMO was admitted to the official list of ASX
• 1,587,083 ELMO shares subject to voluntary imposed escrow at the time that ELMO was admitted to the official list of ASX.

Additionally, 396,557 shares are expected to be released from voluntary escrow on 1 July 2019.Following the release of these ELMO shares from ASX and voluntary escrow, there will be 141,643 ELMO shares still subject to voluntary escrow which are expected to be released from escrow in February 2020.

The recent acquisitions of HR Onboard and Box Suite by the company broadened its suite of modules, along with increasing market share.HROnboard is a leading specialist provider of cloud-based employee onboarding software while BoxSuite is a SaaS, cloud-based specialist.


Financial & Operational Highlights 1HFY19 (Source: Company Reports)
 
ELMO reported statutory revenue of $17.7 million as compared to $10.9 million in 1HFY18. The statutory net loss of the company after tax was $7.2 million in 1HFY19 as compared to a loss of $0.6 million in 1H18. Pro forma financial information reflects ELMO’s statutory financial statements adjusted for the impacts of acquisitions and the expenses associated with the acquisitions. The growth in pro forma revenue during the period was driven by factors, including strong recurring revenues of 96.2% and high customer retention rates of 93.6%, expansion of ELMO’s customer base to 1,129 organisations as compared to 859 at 31 December 2017, and the contribution from acquisitions completed during FY18.
 
As of 31 December 2018, ELMO has no debt and had a net cash balance of $38.9 million. ELMO’s cash receipts for the half-year ended 31 December 2018 amounted to $20.3 million. The consolidated entity’s strong cash position is due to ELMO’s SaaS-based revenue model whereby customers typically enter into three-year contracts and pay annual license fees in advance.
 
Outlook Ahead: Currently, the company is investing towards sustainable growth. The company added that it has maintained continued focus towards growing SaaS revenue. It has a positive outlook for organic growth across the business. The company has large addressable market. It has a broader platform offering.The core investment areas include Research & Development, Sales & Marketing, Client Services, and General & Administration.
 
The stock had significant volatility with 31.39% return over the past six months and a 1.45% over the past month. Currently, the stock is trading slightly towards the 52-week high level of $8.510. Hence, considering aforesaid facts and looking volatility of the stock over the past few months, we have a wait and watch stance on the stock at the current market price of $7.200 per share (up 3.004% on 19June 2019).
 

Rhipe Limited

 
Guidance Update for FY19 and Preliminary Guidance for FY20: Rhipe Limited (ASX: RHP) is an Australian based leading cloud channel company. The company provided a further upgrade on operating profit guidance for the 2019 Financial Year (FY19) to more than $12.5 million. Due to these strong results and the potential for further future growth, the company Board has decided to continue its investment in the business during FY2020 with an expansion in operating expenses to fund sales growth, marketing and intellectual property initiatives of the company. Additionally,for FY20, the operating profit guidance is estimated to be around $16Mn, excluding any changes in market conditions or major expansion initiatives such as geographical or vendor expansion opportunities.
 

1HFY19 Highlights (Source: Company Reports)
 
Group revenue for 1H FY19 was $21.5 million as compared to $16.5 million in the pcp, up 30% in line with sales growth.Group reported EBITDA for the six months ended 31 December 2018 increased by 66% to $4.6 million. Rhipe delivered a positive net profit after tax of $3.0 million as compared to a net profit after tax of $1.1 million in the prior corresponding period. The company delivered the same net profit after tax in 1H FY19 as it delivered in the whole of FY18.
 
Stock Performance: Turning on to the stock performance, we notice that the stock remained significantly volatile with 96.75% returns over the past six months along with a 2.11% return over the past month. Although the company performed well as exhibited in its financials in 1HFY19, however, we presume that the current stock price has already factored the positive developments to reach closer to its 52-week high level of $3.060.

On 19 June 2019, the stock price of the company climbed up 23.14%, owing to the release of optimistic guidance for FY19 and FY20. At CMP of $2.980, P/E (Price/Earnings ratio) for the company stands at 65.580x. Hence, considering the current spike in the stock price and the current trading level (which is closer to the 52-week high), we give an “Expensive” recommendation on the stock at the current market price of $2.980 per share (up 23.14% on 19 June 2019).  

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.