Sky Network Television Limited

SKT Details

Change in Substantial Holding: Sky Network Television Limited (ASX: SKT) is a digital multi-media company that provides sports and entertainment media services in New Zealand and overseas. In a recent update, the company notified that Accident Compensation Corporation (ACC) has increased its holding in the company from 8.357% to 9.385% via the purchase of shares on New Zealand Stock Exchange.

Announces Partnerships with NRL and New Zealand Rugby League: On 23 June 2021, SKT announced long-term partnerships with NRL and New Zealand Rugby League to attract and develop the next generation of Rugby League fans and players.

H1FY21 Result Highlights:

• Decline in Revenue: For the half-year ended 31 December 2020, the company reported total revenue of NZ$356.9 million, down by 7.3% on pcp, due to the impact of COVID-19 pandemic.
• Increase in EBITDA: Due to the implementation of cost-saving measures, the company was able to increase its EBITDA by 30% YoY to NZ$116.3 million.
• Decline Operating Expenses: The company witnessed an 18% YoY reduction in operating expenses to $242.8 million in H1FY21.

Trend in NPAT (Source: Analysis by Kalkine Group)

Key Risks: The company operates in a highly competitive environment and is exposed to the risks related to the COVID-19 pandemic and associated restrictions. The company is also exposed to the risk related to fluctuations in the foreign currency exchange rates.

Outlook: The company is planning to release its FY21 results on 25 August 2021. In FY21, the company expects its total revenue to be in the range of NZ$695 to NZ$715 million. As per the company’s three-year outlook, SKT is targeting to grow its revenues by NZ$75-NZ$100 million per annum by FY24. It plans to invest 50-60% of capex in growth initiatives by FY24.

Stock Recommendation: Looking ahead, the company is focused on establishing and growing its streaming business and while investing for growth. Over the last six months, the stock has corrected by 8.82%. On a TTM basis, the company is trading at a price to book multiple of 0.7x, down from 1.2x of industry median (Median and Publishing),thus seems undervalued.  Considering the company’s improving bottom line, reduced operating expenses, expected revenue growth over the next three years, valuation on a TTM basis, and associated key risks, we give a “Speculative Buy” rating on the stock at the current market price of $0.150, as on 6^th August 2021, 12:07 PM (GMT+10), Sydney, Eastern Australia).

SKT Daily Technical Chart, Data Source: REFINITIV 

Airtasker Limited

ART Details

Highlights of Q4FY21 & FY21: Airtasker Limited (ASX: ART) provides a web platform and mobile application that connects people to outsource tasks and find local services such as deliveries, cleaning, graphic design, photography.

• Higher Cash Flows: ART posted cash flows of $7.4 million from operating activities (exclusive of the IPO costs) in FY21 versus the forecasted $0.1 million as per the Prospectus. The higher cash flows are due to the robustness of the company’s model and the achievement of scale of operating leverage despite lockdowns in Melbourne and Sydney in Q4FY21.
• Increased GMV: The company reported $153.1 million of Gross Marketplace Volume (GMV) in FY21 exceeding the estimated $143.7 million stated in the Prospectus.
• More Customers: The customer base expanded to ~415,000 in FY21 compared to the ~405,000 estimated as per the Prospectus.
• UK Expansion: The UK marketplace expanded well and reported an increase of 232% YoY in GMV in the June 2021 quarter (Q4FY21).
• Business Integration: ART is progressing well with the business integration of Zaarly, a US services marketplace acquired in May 2021 and planning expansion in the US.
• Higher Cash Balance: The company closed Q4FY21 with a higher cash balance of $45.9 million because of the robust operating cash flows and $20.7 million funds raised from an institutional placement of shares on 25 May 2021.

Q1FY22 Update: The company reported business momentum in Q4FY21 ahead of its expectations after the IPO. In Q1FY22, the lockdowns in Sydney, Melbourne, and Adelaide have affected operations to date. As a result, the weekly GMV was down by ~12% in July versus pre-lockdown. ART expects a strong recovery in the marketplace volumes as the lockdown restrictions ease based on similar experiences in the past.

Revenue & Net Income from FY19-FY20; (Analysis by Kalkine Group)

Key Risks:

• COVID-19 Lockdowns: The company faces the lockdown situations in Sydney, Melbourne and Adelaide in July and the impact on operations in Q1FY22.
• Technology Risks: ART faces the risk of change in technology and data/ security/ technical issues on its platform, disrupting access and transaction of services.

Outlook:

• ART has upgraded the revenue guidance to $25.5-$26.0 million from the prospectus forecast of $24.5 million for FY21.
• ART has appointed a new CMO to invest significantly into user acquisition and marketing infrastructure in FY22. ART intends to invest in further developing its main product and new user experiences with rebooking (connecting Customers and previous Taskers) and Listings (pre-packaged services).
• The company aims to boost domestic and overseas expansion and optimise growth avenues on the back of its robust cash reserves.

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 ART gave a negative return of 15.65% in the past month and a negative return of 18.14% in the past three months. The stock is currently trading lower than the 52-weeks’ average price level of $0.880 - $1.965.  The stock of ART has a support of $0.905 and a resistance of $1.055. We have valued the stock using the Enterprise Value to Sales based illustrative relative valuation method and have arrived at a target price of high single-digit upside (in % terms). We believe that the company can trade at some premium to its peer average, considering its increased cash flows, higher GMV than forecasted in the Prospectus and upgraded revenue guidance for FY21. For this purpose, we have taken peers like REA Group Limited (ASX: REA), Carsales.Com Limited (ASX: CAR), RMA Global Limited (ASX: RMY) and others. Considering the current trading levels, increase in cash flows, growth in GMV, expansion of customer base overall and in the UK, acquisition benefits expected from Zaarly, business expansion in the US, valuation upside, and associated risk of COVID-19 lockdowns in Sydney, etc. and technological changes, we give a ‘Hold’ rating on the stock at the current market price of $0.970, up by ~0.518% as on August 06, 2021.

ART 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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