Stocks’ Details

5G Networks Limited

Achieved exponential growth in 1HFY19 against prior period: 5G Networks Limited (ASX: 5GN) aggressively pursue Cloud, Digital and Data Networking opportunities that enhance its business, both organically and through strategic acquisitions coupled with other data connectivity and managed services in the business to business (B2B) market.

The company updated on the acquisition of Melbourne Data Centre (MDC) which is in the prime Melbourne CBD location with total new annualised revenue of $3 million from the acquisition and $600k pa of the annualised synergies to be realised within the first three months. The 5GN’s strategy is focused on three levers for growing shareholder value; integration, cross-sell, up-sell for customer revenue growth and acquisitions. The acquisition strategy of the company is guided by a disciplined approach to discern true financial value and quickly identify operational synergies.

Currently, the stock of the company is in trading halt owing to its pending announcement related to capital raising.


1HFY19 Financial Summary (Source: Company Reports)

Reported revenue for the group in 1H FY 2019 was $23.576 million as compared to $1.134 million in H1 FY 2018. The transition to service-based revenue and the growth in multiproduct holdings has contributed to the company’s success.
Strategy going forward: Operationally, the company is continuing to execute, develop and deliver results which support revenue and EBITDA growth. Future capital investment of the company will be funded through operating cash flow and is closely linked to customer demand, this is demonstrated with total capital spend of $398k for 1HY19.

On the 5G spectrum front, firstly it will enable new services such as cloud-based virtual reality, cloud PC and ultra-high definition video. Moreover, in terms of throughput, QoS and latency the difference in 4G and 5G will be significant putting an upsurge in cloud computing.

Moreover, 5G would influence adoption of cloud technology in a significant way and some of the areas which are witnessing the impacts are streaming data and analytics, Industrial IoT, SD-WAN / NFV (Network Functions Virtualization), Edge Computing, AI and NLP and VR & AR.

The stock has generated significant YTD returns of 122.62% and is trading slightly towards the 52-week high level of $1.015. However, in accordance with the corporate strategy, the company continued its exploration on several accretive acquisitions. The market sentiment for progressing merger and acquisition opportunities remains positive. With an established banking facility to support current and future funding requirements, and strong sales and EBITDA growth in 1HFY19 against the previous corresponding period, the fundamentals look decent. Hence, considering aforesaid facts and current trading level, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.935 per share.
 

Beyond International Limited

EBITDA Guidance to be in the range of $3.6 Mn-$4.0 Mn for FY19: Beyond International Limited (ASX: BYI) has been producing television programming since 1984 and has produced over five thousand hours of global television programming.The company has given an update on its expectations to report an EBIT loss before abnormal items for the financial year ending 30 June 2019 in the range of $2.5 million to $3.0 million which is significantly lower than the EBIT of $0.4 million reported for the financial year ended 30 June 2018. Also, it is expecting EBITDA in the range of $3.6 million to $4.0 million for the twelve months ending 30 June 2019 compared to EBITDA of $4.4 million for the financial year ended 30 June 2018.
 
 

1HFY19 P&L Statement (Source: Company Reports)

Strategic outlook going forward: The company continues to focus on the strategic outlook of the development of programming in its strong genres of factual series, documentaries, family and children’s programs, and also actively increasing its presence in the market for world quality drama programming.

As per the market understanding of the 5G, the increase in performance, portability and efficiency might bring massive change to revolutionise the entire television broadcasting industry on the back of watching standard TV broadcasts over a 5G mobile network connection rather than using traditional cable or satellites. Moreover, 5G will also benefit the television broadcasting process, especially in terms of live broadcasts. Using 5G technology on location rather than traditional broadcast trucks will be much cheaper and convenient as well. Although it is not precise, how 5G implementation in Australia will impact the operations of the company, however in a broader term convergence will impact the distribution of TV and linear services to users but also production and contribution, with possibility in future benefits in terms of quality, flexibility and reduction of costs.

Meanwhile, the share price has fallen 4.35% in the past three months and is trading slightly towards the 52-week high level of $1.105. With the company’s expectation in EBIT loss and lower EBITDA for FY19, we advise investors to watch the stock at the current market price of $0.950 per share and wait for future performance and earnings.
 

I Synergy Group Limited

Subdued Performance in FY18: I Synergy Group Limited (ASX: IS3) is a leading affiliate marketing network and solutions provider. The company connects advertisers with affiliates through its marketing platform for the delivery of performance-based marketing solutions which enhances product or brand awareness. For the financial year ended 31 December 2018, the revenue experienced a decline of 10% compared to the previous financial year to AUD$9.551 million from AUD$10.603 million. The lower reported revenue is predominantly due to the decrease in affiliate sign-up as compared to the previous financial year. This subsequently adversely affected the income generated from software activation, training, license right and the program fee.

Among the key ratios, the ROE declined by 18.3% on the YoY basis and stood at -29.3% at the end of FY 2018


Financial Highlights (Source: Company Reports)

The way forward: The company has a robust plan for sustainable growth in place and it is confident that the digitalisation strategy will enable them to meet the challenges ahead. The group will be attentive towards cost-efficiency, low complexity and profitability in the overall business operations on a priority basis.

Meanwhile, the share has risen 70.37% in the past six months as at March 13, 2019 and traded close to 52-week high level of $0.240. By looking at the trading level and declining growth in RoE and revenue in FY18 over the prior year, we have a wait and watch view on the stock that trades at the market price of $ 0.230.
 

LatAm Autos Limited

Commitment Towards Achieving Sustainable Positive Cash Flow Position:LatAm Autos Limited (ASX: LAA) is engaged in online auto classifieds business and content platform with operations in 6 countries across the American continent.LAA provides platform to commercial sellers, private sellers and buyers of vehicles for the auto acquisition process, making auto industry more integrated. The business is supplemented by a range of cross selling products such as finance, insurance and GPS tracking, with focus on the Mexican and Ecuadorean markets. From the business point of view, FY2018 remained excellent and witnessed strong overall growth of 63% in LAA’s key market of Mexico. LAA is in the process of transforming itself from a classified site to a complete vehicle transaction marketplace (VTMP).

The company’s revenues from the operations came in at $7.5 million in FY18 as compared to $5.6 million in FY17, posting a growth of 33.9% (YoY). The company’s losses have slightly gone down to $13.13 million in FY18 as compared to $13.95 million in FY17.


FY18 P&L Statement (Source: Company Reports)

On 13^th November 2018, with the view of its Mexican business, LAA has accomplished an integration with Facebook Marketplace enabling its car dealer customers to place their listings on the Facebook Marketplace platform.The development will assist in lead generation complementing the existing classifieds operations.

Stock Recommendation: Looking at the price performance, stock has collapsed 50.0% in the past six months. The company’s stock has given a negative return of 8.70% on 1-year basis. At CMP of $ 0.105, the market cap for the stock comes in at ~$43.93 million. The company happens to be committed towards achieving the sustainable positive cash flow position with the key drivers being further growth in loan product sales through Motorfy platform, combined with continued growth in users on the Motorfy platform. However, the company’s stock has generated negative returns which might weigh over the sentiments of investors. Thus, we have a wait and watch stance on the stock at the current market price of A$0.105 per share.


Stock Price Comparative Chart (Source: Thomson Reuters)       

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