Stocks’ Details

NEXTDC Limited

Update on Debt Funding: NEXTDC Limited (ASX: NXT) is involved in the establishment, development and operation of data centre facilities. The market capitalization of the company stood at ~A$2.34 Bn as on 25^th July 2019. Recently, the company, via a release dated 4^th June 2019 announced that it raised an amount of $200 Mn in senior unsecured debt through an additional fixed and floating rate tranche of its existing $300 Mn Notes IV, which are due on 9^th June 2022. The company further added that the Floating Rate Notes IV-2 of $170 Mn was priced at par on a margin of 3.75% over 90-day Bank Bill Swap Rate (Or BBSW) and the Fixed Rate Notes IV-2 of $30 Mn was priced at 102.466% of par on a coupon of 6.00%, reflecting a yield to first call of 4.92%. The following picture provides an overview of the company’s underlying EBITDA:


Underlying EBITDA Growth (Source: Company Reports)

What to Expect:The company is expecting revenue in the range of $180Mn - $184Mn and provided guidance for underlying EBITDA in the ambit of $83Mn to $87Mn for FY19. It is anticipating capex in the range of $430Mn to $470Mn for the same period. It is setting the operational benchmark for the data centre industry in the Asia Pacific.

Stock Recommendation:The company reported a gross margin and EBITDA margin of 76.7% and 53.8% in 1H FY19 as compared to the industry median of 73.6% and 29.1%, respectively. It posted a current ratio of 8.96x in 1H FY19 against the industry median of 2.81x. This implies that the company is in a sound position to meet its short-term obligations as compared to the broader industry. On the stock’s performance front, it provided returns of 5.61% and 6.94% in the time span of one month and three months, respectively. Hence, considering the above-stated facts and decent outlook, we give a “Buy” recommendation on the stock at the current market price of A$6.930 per share (up 2.212% on 25^th July 2019).
 

WiseTech Global Limited

Trading at Higher Levels: WiseTech Global Limited (ASX: WTC) provides software solutions to the global logistics industry. The market capitalisation of the company stood at A$10.15 Bn as on 25^th July 2019. The company added that 25 of the top 25 global freight forwarders uses its solutions throughout ~130 countries worldwide. It reported revenue of $156.7 Mn in 1H FY19, reflecting a growth of 68% on 1H FY18. It posted 100% recurring revenue in CargoWise One.

 
Financial and Operational Summary (Source: Company Reports)

Future Prospect:The company is expecting revenue to be in the range of $326 Mn - $339 Mn in FY19 as well as EBITDA in the range of $100 Mn- $105 Mn. It is also focused on accelerating organic growth with the help of acquisitions.

Stock Recommendation:Thecompany is accelerating into more products, more geographies, and more adjacencies, which are driving long-term growth with each innovation and acquisition. The company reported a gross margin and net margin of 80.8% and 14.7% in 1H FY19 in comparison to the industry median of 86.4% and 14.7%, respectively. It posted an asset to equity ratio of 1.97x in 1H FY19 against the industry median of 1.66x. Coming to the stock’s past performance, it generated returns of 12.32% and 42.77% in the time span of one month and three months, respectively. As per ASX, the stock is trading at close to its 52-week high level of $33.040x with higher PE multiple of 196.98x. Hence, considering the above-stated facts and current trading levels, we give an “Expensive” recommendation on the stock at the current market price of A$32.720 per share (up 2.538% on 25^th July 2019).
 

ELMO Software Limited

A Look at Quarterly Results:ELMO Software Limited (ASX: ELO) is a talent management software company, which has a market capitalisation of ~A$431.25 Mn as of 25^th July 2019. The company released its results for the last quarter of the financial year 2019. The company reported a rise in cash receipts in the quarter to $15.5 Mn, reflecting a growth of 63% on the prior quarter. The cash receipts for the FY19 stood at $45.1 Mn, reflecting a rise of 60% in comparison to FY18. The AnnualisedRecurring Revenue stood at $46.0 Mn as at 30 June 2019 against $31.1 Mn in 1H FY18, which was resulted by new customer acquisition and successful module cross-sell to its existing customer base.


Cash Receipts for the Quarter (Source: Company Reports)

Future Prospects:The company is having a larger market opportunity with wider product set including HR, payroll and rostering/time & attendance. It is accelerating the penetration of cloud-based talent management solutions. The company is also deploying towards sustainable growth, which might attract the attention of market players. Considering ELMO’s broadened platform as well as a wider view of the addressable market, it enters FY 2020 with a robust sales pipeline and significantly enhanced opportunity for the long-term sustainable growth. There are expectations that ELMO’s FY 2019 full year results would be released to ASX pre-market open on August 15, 2019.

Stock Recommendation:  The company reported a gross margin of 85.5% in 1H FY19 in comparison to the industry median of 86.4%. It posted a current ratio of 1.95x in 1H FY19 against the industry median of 1.58x. With respect to the stock’s past performance, it generated returns of 24.00% and 29.41% in the time span of three months and six months, respectively. However, in the time period of one month, it produced negative returns of 8.70%. Currently, the stock is trading at slightly towards its 52 weeks high level of $8.510, which increases the probability for a correction in the near term. Hence, considering the aforesaid facts and current trading level, we have a wait and watch stance on the stock at the current market price of $7.430 per share (up 8.944% on July 24, 2019, owing to the release of fourth-quarter cash report, preliminary FY19 results, and company update).  
 

OneVue Holdings Limited

Robust Growth in FUA:OneVue Holdings Limited (ASX: OVH) is a wholesale service provider to the wealth management industry. The market capitalisation of the company stood at ~A$100.57 Mn as on 25^th July 2019. The company announced that the final divestment has been wrapped up by the sale of Diversa Trustees to Sargon Capital for an amount of $43 Mn on 28^th June 2019. Adding to that, a residual payment amounting to $31 Mn is due on or before 31^st November 2019 for divestment. In the platform services, it stated that funds under administration approached to $5.5 Bn, reflecting a growth of 17% on the previous quarter.


Fund Under Administration (Source: Company Reports)

Future Aspects:The company is well-positioned for continuing growth. It is focusing on strong growth runways in Fund Services and Platform Services, and it has a pipeline of new business opportunities. The company made an announcement that after the receipt of the non-contingent final payment, it would pay a fully franked dividend of 2.19 cents per share.

Stock Recommendation:  The company reported a gross margin and EBITDA margin of 82.2% and 8.7% in 1H FY19 against the industry median of 74.1% and 52.2%, respectively. It posted a current ratio of 1.77x in 1H FY19, reflecting a growth of 20.3% on PCP basis. It can be said that its liquidity position to address its short-term obligations has been improved. Also, respectable liquidity levels might help it in making deployments towards strategic business objectives. As per ASX, the stock is trading closer towards 52-week lower levels, indicating a decent opportunity for accumulation. Hence, considering the above-stated facts and current taring levels, we give a “Speculative Buy” recommendation on the stock at the current market price of A$0.445 per share (up 17.105% on 25^th July 2019). It can be assumed that this significant upside during the day's trade was mainly due to the release of its June 2019 quarterly results.

 
Comparative Price Chart (Source: Thomson Reuters)    

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