Integrated Research Limited
IRI Details
New Board Appointment: Integrated Research Limited (ASX: IRI) is a provider of varied software solutions such as collecting and storing data, performance tracking, event automation, helpdesk applications, resource management and job scheduling. As of 11 June 2021, the market capitalisation of IRI stood at ~$353.04 million. On 13 May 2021, IRI notified regarding the appointment of Mr James Scott as a Non-Executive Independent Director to the Board.
1HFY21 Results: IRI reported $34.1 million of revenue in 1HFY21, down by 36% YoY due to lower revenues generated from its collaboration and infrastructure businesses. It posted an NPAT of $129,000 in 1HFY21, down by 99% YoY. The company added 16 new customers, including FedEx, during 1HFY21. It reduced its operating cost base to $32.9 million in 1HFY21, down by 15% YoY. Besides, the company introduced new cloud solutions for Zoom and Microsoft Teams and expanded its Collaborate product line. IRI paid a fully franked final dividend of 3.75 cents per share in October 2020. The company did not declare a dividend for 1HFY21 and will assess future dividend payments after the availability of FY21 results. IRI held a cash reserve of $8.2 million as of 31 December 2020.
Key Financials from FY2016-FY2020; (Analysis by Kalkine Group)
Key Risks: The company faces business uncertainty due to COVID-19 and other global tensions, lengthening regular sales cycles, and deferred customer purchases. It also bears the risk of foreign exchange impact on the AUD dollar.
Outlook: IRI has laid plans to turn around its 1HFY21 performance. However, the company estimates FY21 revenue and profit will remain below last year figures. IRI aims to seek traction from new cloud solutions, which is recently introduced to bolster the platform growth in future. The company plans to introduce real-time payment monitoring in Q4FY21 to cater to banks. IRI anticipates 100 renewals and capacity deals in 2HFY21 and 20 plus strategic customers on its SaaS platform. IRI also plans to expand its product line – Collaborate, with the launch of new solutions for Webex in Q4FY21.
Valuation Methodology: EV/Sales Multiple Based Relative Valuation (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 IRI gave a negative return of 34.05% in the past six months and a negative return of 40.83% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $2.0-4.920. We have valued the stock using the Enterprise Value to Sales based illustrative relative valuation method and have arrived at a target price of low double-digit upside (in % terms). We believe that the company can trade at a slight discount than its peer average, considering its lower revenue, NPAT and decision to not declare the interim dividend for 1HFY21. For this purpose, we have taken peers like Infomedia Limited (ASX: IFM), TechnologyOne Limited (ASX: TNE), rhipe Limited (ASX: RHP) and others. Considering the low trading levels, the addition of new customers and reduced operating cost in 1HFY21, the launch of new solutions planned, expansion of the Collaborate product line, valuation, and key risks associated with the business, we give a ‘Speculative Buy’ rating on the stock at the current market price of $2.130, up by ~3.902% on 11 June 2021.
IRI Daily Technical Chart, Data Source: REFINITIV
Mosaic Brands Limited
MOZ Details
Business Update: Mosaic Brands Limited (ASX: MOZ) is involved in retailing women’s apparel and accessories via multiple channels in Australia. As of 11 June 2021, the market capitalisation of MOZ stood at ~$57.03 million. On 26 May 2021, MOZ announced the completion of a string of strategic measures, including the renewal of its working capital facilities. MOZ is experiencing a positive trend of material sales improvements after the Easter & Mother’s Day trading period and speedy vaccination rollouts. Regarding the EziBuy acquisition, MOZ has renegotiated the exercise option period to 30 September 2021 and payment terms to 31 December 2021. The EziBuy acquisition will propel the digital revenue of the Group to over $200 million per annum (~30% of the Group sales).
March Quarter (Q3FY21) Cash Flow Update: MOZ reported cash outflows of $45 million from its operating activities for Q3FY21 due to the working capital seasonality of fashion purchasing. MOZ posted cash inflows of $76 million from operating activities for YTD21, up by 29.9% YoY. At the end of 3QFY21 YTD, the company's finance facility stood at $51.5 million, down by 32.3% year over year. It held a cash balance of $48.6 million as of 31 March 2021, up by 85.5% YoY.
Key Financials from FY2016-FY2020; (Analysis by Kalkine Group)
Key Risks: The company is exposed to the subdued retail environment, changes in consumer spending, income levels and preferences. It also bears the risk of store closures and lowers customer visitation in stores, due to COVID-19 lockdowns and restrictions.
Outlook: Due to the vaccination rollout and sales recovery, MOZ expects an underlying EBITDA of ~$48 million (excluding EziBuy) in FY21, given no large-scale shutdowns. The Group forecasts comparable sales growth in FY22 and an underlying EBITDA of ~$50 million (excluding EziBuy) next year. MOZ expects EziBuy to generate a normalised underlying EBITDA of ~NZD 2.5 million in FY21 and ~NZD 5 million in FY22 before synergies. It forecasts synergies between ~NZD 3-5 million on a yearly run rate as the integration process begins with MOZ operations.
Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation (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 MOZ gave a negative return of 23.74% in the past three months and a positive return of 22% in the past nine months. The stock is currently trading lower than the 52-weeks’ average price level band of $0.455 - 1.190. We have valued the stock using the Enterprise Value to EBITDA based illustrative relative valuation method and have arrived at a target price of low double-digit upside (in % terms). We believe that the company can trade at some discount than its peer median, considering its cash outflows from operating activities in Q3FY21, low current ratio and changes in consumer spending. For this purpose, we have taken peers like Myer Holdings Limited (ASX: MYR), Super Retail Group Limited (ASX: SUL), Shaver Shop Group Limited (ASX: SSG) and others. Considering the current trading levels, decent outlook for underlying EBITDA for FY21 and FY22, expected contribution of EziBuy’s acquisition to the Group’s digital revenue, valuation, and associated risks of COVID-19 lockdowns & disruptions, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.610, up by 3.389% on 11 June 2021.
MOZ 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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