Stocks’ Details
 

Bravura Solutions Limited

Technology Leader in its Key Markets:  Bravura Solutions Limited (ASX: BVS) provides software and services to clients which operate in wealth and fund management industries. The market capitalisation of the company stood at $950.49 Mn as on 9^th April 2020. BVS recently appointed Ms. Libby Roy on the role of a Non-Executive Director, which became effective on 1^st April 2020. During 1H FY20, the company was placed as a technology leader in its key markets, which was underpinned by its continued investment. The company has a strong wealth management sales pipeline with significant opportunities throughout all key markets.

During H1FY20, BVS reported a rise of 6% in revenue, which amounted to $135.1 million. It also declared an unfranked interim dividend of 5.5 cents per share, reflecting 68% of 1H FY20 NPAT.


Key Financial Highlights (Source: Company Reports)

Benefits from Acquisitions: The company is well placed to take benefit of strong demand for its product portfolio throughout all its markets. BVS acquired Midwinter and FinoComp during the period, and these are performing as expected with strong sales pipelines. The company anticipates that these acquisitions will make an additional contribution of around $3 million in FY20 NPAT.

Valuation Methodology: P/CF Multiple Based Relative Valuation

P/CF Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures have been taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The company managed to close the half-year with net cash of $100.3 million, which reflects its strong financial position. Current ratio of the company stood at 2.24x in 1H FY20 as compared to the industry median of 1.72x. This reflects that the company is in a decent position to address its short-term obligations against the broader industry. We have valued the stock using P/CF-based illustrative relative valuation approach, and for the purpose, we have taken peers such as EML Payments Ltd (ASX: EML), Pushpay Holdings Ltd (ASX: PPH),  and Fineos Corporation Holdings Plc (ASX: FCL) etc., and arrived at a target price, which is offering an upside of lower double-digit (in percentage terms). Thus, considering the strong financial position, decent liquidity and expected benefits from acquisitions, we give a “Buy” recommendation on the stock at the current market price of $4.170 per share, up by 7.198% on 9^th April 2020. 

EML Payments Limited

Completed Acquisition of PFS: EML Payments Limited (ASX: EML) is an issuer of pre-paid financial cards, with market capitalisation of around $851.6 Mn as on 9^th April 2020. Recently, EML wrapped up the acquisition of Prepaid Financial Services (Ireland) Limited on the renegotiated upfront enterprise valuation of GBP 131.5 million. Moreover, the company has paid upfront cash payment of GBP 85 million from its cash reserves.  For the first eight months ended 29^th February 2020, the company reported Gross Debit Volume (GDV) of $8.71 billion with revenue amounting to $79.6 million.


Renegotiated Terms (Source: Company Reports)

Suspension of Guidance: As of now, the company is not in a capacity to evaluate the impact of COVID-19 and hence it has suspended its earnings guidance for FY20, which include EBITDA guidance range of $39.5 Mn to $42.5 Mn.

Valuation Methodology: P/BV Multiple Based Relative Valuation

P/BV Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures have been taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: For the first eight months of FY20, EML reported operating cash flow of $22.8 million, a cash balance of $278.6 million with zero debt. Net margin of EML stood at 7.3% in 1HFY20, reflecting YoY growth of 1.9%. This implies that EML has improved its capabilities to convert its top-line into the bottom-line. Debt to equity of the company stood at 0.02x in 1HFY20 against the industry median of 0.49x. We have valued the stock using P/BV based illustrative relative valuation method and arrived at a target price, which is offering an upside of lower double-digit (in percentage terms). Hence, in light of improved net margins, cash position, and zero debt balance sheet, we give a “Buy” recommendation on the stock at the current market price of $2.520 per share with a rise of 5% on 9^th April 2020.

oOh!media Limited

Shares Acquisition by HT&E Limited: oOh!media Limited (ASX: OML) is an out of home advertising company with a market capitalisation of $359.29 Mn as on 9^th April 2020. Recently, the company has been notified that HT&E Limited (HT&E) has purchased around 11 million OML shares, which reflects around 1.8% of the issued capital of the company after the completion of oOh!media’s Equity Raising. However, the company stated that it has not had any correspondence with HT&E with respect to its shareholding and regards the purchase as totally opportunistic. Moreover, as per the Board of OML, the company is still undervalued based on current trading prices.
In another update, the company announced that it has decided to defer its 2020 Annual General Meeting till 4^th June 2020 due to the impact of COVID-19 and recent changes to Directors. The below picture gives an overview of revenue for FY19 by products:


Revenue by Product (Source: Company Reports)

Expected Future Growth: The company is well placed for achieving future growth. During FY19, the business had generated strong cash conversion, and it anticipates this growth to be continued in future.

Valuation Methodology: P/BV Multiple Based Relative Valuation

P/BV Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures have been taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: Gross margin and EBITDA margin of the company stood at 71.6% and 50.4%, reflecting YoY growth of 24.8% and 27.1%, respectively. We have valued the stock using P/BV based illustrative relative valuation method and for the purpose, we have taken peers such as HT&E Ltd (ASX: HT1), Uniti Group Ltd (ASX: UWL) and SKY Network Television Ltd (ASX: SKT) and arrived at a target price, which is offering an upside of higher single-digit (in percentage terms). Thus, considering the decent improvement in key margins and strong cash conversion, we maintain a “Hold” rating on the stock at the current market price of $0.760 per share, up by 19.685% on 9^th April 2020. 
 
 
Comparative Price Chart (Source: Thomson Reuters)

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