Nuix Limited 

NXL Details

Managerial Changes: Nuix Limited (ASX: NXL) provides investigative analytics and intelligence software. The company offers its Nuix platform, which helps customers process, normalise, index, enrich and analyse data from various sources. NXL has announced on 15 June 2021 that its CEO Rod Vawdrey has given the notice to retire from the company. Rod has agreed to remain with the company through the announcement of the financial year ending results. Meanwhile, NXL looks for a replacement option for Rod Vawdrey. In addition, CFO of the company, Stephen Doyle is being terminated by a mutual agreement. Chad Barton has been appointed as an interim CFO to replace Stephen Doyle with effect from 21 June 2021. 

Termination of Consultancy Agreement: The company has announced a recent termination of consultancy agreement with Nuix co-founder Dr Tony Castagna. Since its inception, Dr Castagna has been associated with the company and provided his important services for the company’s growth.  

Strong Foothold in the US: The company has seen a strong foothold in the US markets, mainly in US$4bn eDiscovery and Digital forensics software markets. The company expects to build its presence in the US$23bn government, risk, and compliance (GRC) market in the future. The contribution from both these markets in the US is likely to benefit NXL in the investigative analytics and intelligence software segment. 

1HFY21 Financial Highlights: NXL has registered a decline in revenue to $85.32mn in 1HFY21 against $88.78mn in 1HFY20 due to foreign exchange price movement. The company has incurred a loss of $16.56mn in 1HFY21 due to higher operating costs. Moreover, the company has reported an increase in its cash balance to $128.24mn as on 31 December 2020 against $38.53mn as on 30 June 2020 on the back of IPO proceeds in December 2020.

Revenue (Source: Analysis by Kalkine Group)

Key Risks: The company is exposed to foreign currency. Thus, any adverse price movement in foreign currency may impact the financials of the company. In addition, the company requires regulatory approvals to operate its business efficiently. Therefore, any delay in regulatory approvals may impact the business of the company. 

Outlook: NXL has provided revenue guidance in a range of $173-182mn for FY21 against its previous guidance in a range of $180-185mn. Similarly, guidance for Annualised Contract Value (ACV) has been revised in a range of $165-$172mn against previous guidance in a range of $168-$177mn. The company expects its EBITDA in a range of $64.6-$66.6mn for FY21. 

Valuation Methodology: EV/Sales based Relative Valuation Method (Illustrative) 

Source: Analysis by Kalkine Group 

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks. 

Stock Recommendation: The stock of NXL gave a return of ~-21.14% in the last one month and a return of ~-51.57% in the last three months. The current market capitalisation of NXL stands at ~$825.01mn as of 17 June 2021. The stock is currently trading below the average 52-weeks’ price level range of ~$2.570~$11.855. We have valued the stock using the EV/Sales multiple-based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). We believe that the company can trade at a slight premium as compared to its peer average, considering an increase in cash balance as on 31 December 2020 and strong foothold in the US markets. For this purpose, we have taken peers Damstra Holdings Ltd (ASX: DTC), Whispir Ltd (ASX: WSP), ELMO Software Ltd (ASX: ELO), to name a few. Considering the company’s increasing presence in the US markets through investigative analytics and intelligence software segment, current trading levels, decent liquidity postion, valuation, and key risks associated with the business we recommend a “Speculative Buy” rating on the stock at the current market price of $2.73, (as on June 17, 2021, 11:34 AM (GMT+10), Sydney, Eastern Australia).

NXL Daily Technical Chart, Data Source: REFINITIV

Laybuy Group Holdings Limited 

LBY Details

Robust Performance Since IPO: Laybuy Group Holdings Limited (ASX: LBY) operates an integrated payment platform that caters to various consumers and merchants. It offers online shoppers a payment plan. LBY has seen a robust increase in Gross Merchandise Value (GMV) in Australia, New Zealand (NZ), and the UK. The company has seen an increase of 159% YoY in GMV to NZ$589mn in FY21. Similarly, the active merchants rose by 3,922 in all the regions to reach 9,126 in FY21. In addition, active customers rose by 353k in Australia, NZ, and UK to reach 756k in FY21. The company provides its services to many renowned companies such as Arsenal FC, Manchester City, and Manchester United.   

Raised Capital for Expansion: LBY has completed its Share Purchase Plan (SPP) on the last date, 16 June 2021. The issue price for SPP was at A$0.50 per share and aimed to raise A$5mn. The company has already raised A$35mn through institutional placements earlier. LBY intends to utilise the proceeds for its business expansion in the UK along with investments in marketing and sales professionals in the UK, developing technology, and general working capital requirements.    

FY21 Financial Highlights: LBY has registered an increase in total income to NZ$32.56mn in FY21 against NZ$13.74mn on the back of increasing revenues from the e-commerce segment. The company has incurred a loss of NZ$41.28mn in FY21 as the company has incurred higher operating expenses. The company has witnessed an increase in cash balance to NZ$15.48mn in FY21 against NZ$9.85mn in FY20.

Revenue trend (Source: Analysis by Kalkine Group)

Key Risks: The company is exposed to foreign currency risks. Thus, any adverse price movement in foreign currency may impact the financials of the company. In addition, the company holds interest-bearing liabilities. Therefore, any severe change in interest rates may impact the financials of the company. 

Outlook: LBY expects Gross Merchandise Value (GMV) to reach the NZ$1bn mark in FY22. Moreover, the company expects its revenue to increase in FY22 between 90%-100% on FY21. 

Valuation Methodology: EV/Sales based Relative Valuation Method (Illustrative)

Source: Analysis by Kalkine Group 

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks. 

Stock Recommendation: The stock of LBY gave a return of ~-25.73% in the last one month and a return of ~-56.83% in the last three months. The current market capitalisation of LBY stands at ~$129.56mn as of 17 June 2021. The stock is currently trading below the average 52-weeks’ price level range of ~$0.505~$2.300. We have valued the stock using the EV/Sales multiple-based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). We believe that the company can trade at some discount as compared to its peer median, considering the historical trading multiple of the company with respect to the industry, reported loss in FY21 and higher R&D expenditure during the same period. For this purpose, we have taken peers Over the Wire Holdings Ltd (ASX: OTW), Bravura Solutions Ltd (ASX: BVS), to name a few. Considering the company has registered an increase in top line in 1HFY21, increase in cash balance as on 31 March 2021, raising capital for expansion in the UK, current trading levels, valuation and key risks associated with the business, we recommend a “Speculative Buy” rating on the stock at the current market price of $0.505, down by ~4.717%, as on June 17, 2021.

LBY Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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