Stocks’ Details

Laybuy Group Holdings Limited

1H20 Financial Highlights: Laybuy Group Holdings Limited (ASX: LBY) is a fintech company that offers buy now pay later services. As on 30 November 2020, the market capitalization of the company stood at ~$241.63 million. During 1HFY21, the company demonstrated decent growth across all key metrics. During the half-year, GMV of the company witnessed an increase of 167% on the pcp to NZ$245 million, up from NZ$92 million in 1H20. In the same time span, active merchants witnessed an increase of over 48% to 6,323 and active customers stood at 568,000. At the end of the same period, the company reported healthy cash position of $NZ31.8 million, driven by proceeds from the IPO.

1H21 Financial and Operational Highlights (Source: Company Reports)

Outlook: The company is increasing its market share co-branded marketing campaigns and is seeking to expand in in the health, beauty, digital, travel and ticketing verticals. It is focusing on improving operational efficiencies and merchant and consumer experience and is aiming increasing user engagement and repeat purchases through improvements to the Laybuy App. The business continues to perform strongly with the addition of over 60,000 active customers and 1,000 active merchants since 30 September 2020.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The company retains a market leadership position in New Zealand and a growing presence in the United Kingdom and Australia. As per ASX, the stock of LBY is inclined towards its 52-weeks’ low level of $1.355. On a technical front, the stock of LBY has a support level of ~$1.272 and a resistance level of ~$2.1. We have valued the stock using the EV/Sales multiple based illustrative relative valuation and have arrived at a target upside of lower double-digit (in percentage terms). For the said purposes, we have considered peers such as FlexiGroup Ltd (ASX: FXL), Zip Co Ltd (ASX: Z1P), Openpay Group Ltd (ASX: OPY), etc. Considering the current trading levels, modest long-term outlook, key investment risks, and 1HFY21 financials and operational highlights, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $1.375, down by 0.723% on 30 November 2020.

LiveHire Limited

Quarterly Highlights: LiveHire Limited (ASX: LVH) provides cloud-based human resources software and platform services. As on 30 November 2020, the market capitalisation of the company stood at ~$81.40 million. During the quarter ended 30 September 2020, the company reported a QoQ increase of 6% in SaaS ARR to $3.7 million and marked a significant milestone of over 100 hires per day for the first time on its platform. At the end of the same period, client numbers went up by 4% to 114. During the quarter, the company received $885k from customers and used $2.08 million from operating activities. Cash on hand at the end of the period was $19.0 million.

Cash Flow from Operating Activities (Source: Company Reports)

Outlook: The company has a decent pipeline of opportunities via larger private sector and government clients joining platform. The company is also expanding into the US and Canadian contingent hiring markets and is likely to launch two large US contingent hiring clients in May and June in FY21.

Stock Recommendation: The company is making decent product investments over the preceding quarters and is implementing cost reduction initiatives. LVH seems well-positioned to capture an increased share of the Permanent Hire and Direct Sourcing Markets. As per ASX, the stock of LVH is trading above the average of its 52-weeks’ levels but retains potential for further growth. The stock of LVH gave a return of 5.66% in the past six months but a negative return of 6.66% in the last one month. On a TTM basis, the stock of LVH is trading at a P/BV multiple of 3.4x, lower than the industry median (Technology) of 5.3x. On a technical front, the stock of LVH has a support level of ~$0.12 and a resistance level of ~$0.36. Considering the current trading levels, decent returns in the past six months, increasing ARR and decent long-term outlook, we recommend a ‘Hold’ rating at the current market price of $0.280, up by 3.703% on 30 November 2020.

Novatti Group Limited

UnionPay Merchant Acquiring Partnership: Novatti Group Limited (ASX: NOV) is a payment processing platform that provides mobile and alternative financial payments solutions and services. As on 30 November 2020, the market capitalization of the company stood at ~$62.46 million. The company has recently announced a new comprehensive partnership with a leading card payment company, UnionPay, for Merchant Acquiring. The partnership is likely to drive growth in the company’s core payment processing business.

Quarterly Highlights: During the quarter ended 30 September 2020, the company reported record quarterly revenue of $3.56 million and an YoY increase of 81% in quarterly payments processing revenue. The company initiated cost control measures, resulting in positive earnings as normalized EBITDA hits over $101k. The company is now focused on investing for growth. At the end of the September quarter, the company reported a cash balance of over $11 million.

Growth in Quarterly Revenue (Source: Company Reports)

Outlook: The company is focused on delivering ongoing growth in revenue, consolidation of its EBITDA, and improved quarterly cash flow. The company is accelerating its growth strategy to capitalise on the strong push to digital services post the COVID-19 crisis.

Stock Recommendation: NOV expects a continued decent performance in its existing businesses across FY21 and is also likely to witness strong growth from international expansion. The stock of NOV gave a return of 22.22% in the past three months but a negative return of 3.50% in the last one month. On a TTM basis, the stock of NOV is trading at an EV/Sales multiple of 4.4x, lower than the industry median (Professional & Commercial Services) of 11.6x, and thus seems undervalued. On a technical front, the stock of NOV has a support level of ~$0.17 and a resistance level of ~$0.351. Considering the record quarterly revenue, expansion in international markets, acquisition of UnionPay, and key investment risks, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.270, down by 1.819% on 30 November 2020.

Daily Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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