Airtasker Limited

ART Details

Change in Directors Interest: Airtasker Limited (ASX: ART) is in the provisioning of a technology-enabled online marketplace for local services. On 2^nd September 2021, James Roland Travers Spenceley has made a change to holdings in the company via disposing 251,292 ordinary shares at a consideration of $0.95 per share.

FY21 Financial Summary:

• Surpassed Revenue Guidance: During the year, the company surpassed its revenue projection of $24.5 million and recorded a growth of 38% to $26.6 million on a YoY basis. The company achieved this milestone in spite of lockdowns in key markets and with expenses below forecast.
• Achieved Positive EBITDA: The company recorded positive underlying EBITDA of $1.3 million against EBITDA loss of $(1.8 million) in FY20.
• Growth in GMV: ART also achieved its Gross Marketplace Volume (GMV) guidance of $143.7 million and posted GMV of $153.1 million, reflecting growth of 35% on a YoY basis.

Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks:

• COVID-19 Disruptions: The company’s operational and financial performance could be impacted by the uncertainties in relation to the pandemic.
• Competitive Pressure: ART operates in a highly competitive market, which may impact its financial heath led by changing consumer sentiments.

Outlook:

• For FY22 and FY23, the company is planning to make an investment of $20 million in order to ignite city-level markets in the US and UK with a primary focus on identifying scalable growth tactics.
• ART is expecting GMV and revenue to surpass $200 million and $35 million in FY22, respectively.

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 company recorded a positive operating cash flow of $5.5 million in FY21, which outstripped the forecast of $0.1 million. ART closed FY21 with a cash balance and term deposit of $45.9 million, which puts the company in a decent position to invest in accelerating international expansion. The stock is trading below its 52-weeks’ low-high average levels of $0.880 - $1.965. The stock of ART has been corrected by ~12.84% and ~26.92% in the past three and six months, respectively. The stock has been valued using an EV/Sales multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company can trade at a slight premium to its peers’ average EV/Sales multiple, considering the growth in revenue, increasing operational cash flow, and growing GMV. For the purpose of valuation, peers such as Seek Ltd (ASX: SEK), REA Group Ltd (ASX: REA), Hipages Group Holdings Ltd (ASX: HPG), and others have been considered. Considering the expected upside in valuation, decent liquidity position, growth in revenue and EBITDA, decent outlook, current trading levels, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.950, down by ~1.042% as on 12 October 2021.

ART Daily Technical Chart, Data Source: REFINITIV 

RMA Global Limited

RMY Details

Appointment of Directors: RMA Global Limited (ASX: RMY) operates an online marketing platform for real estate agents. Recently, the company has appointed US-based Charlie Oshman as a non-executive Director to the Board of Directors.

FY21 Financial Summary:

• Decent Growth in Revenue: For the year ended 30^th June 2021, the company witnessed a growth of 52% in total recurring revenue to $11.1 million, with annualised revenue run rate approaching $14 million.
• Increase in Agents: During the year, the company was focused on substantially growing market access, and the agent network in the USA and the agents in the US reached 136,500.
• Improvement in Losses: RMY witnessed an improvement of 9% in net losses to ~$8.9 million against ~$9.7 million in FY20. As a result, net loss per share moved down to -1.89 cents against -2.40 cents in FY20.

Revenue Trend (Source: Analysis by Kalkine group)

Key Risks:

• Industry Risk: The company’s business model is directly dependent on the performance of the real-estate industry: any adverse movement in the industry could impact its business.
• COVID-19 Headwinds: RMY’s operational performance may be affected due to uncertainties from the pandemic, which may lead to a fall in agents’ number.

Outlook:

• RMY is seeking to further monetise the user base in AU & NZ and targeting to become cashflow positive on a monthly basis in FY22.

• The company would continue to build out its platform and products in order to offer greater value to agents with a focus on growth.

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: As on 30 June 2021, the company had a cash balance of ~$10.7 million against ~$4 million at the end of FY20. The stock is trading below its 52-weeks’ low-high average levels of $0.185 - $0.385. The stock of RMY has been corrected by ~4.65% and ~21.15% in the past one and three months, respectively. The stock has been valued using an EV/Sales multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company can trade at a slight discount to its peers’ average EV/Sales multiple, considering the losses in business, negative ROE, and negative net margin. For the purpose of valuation, peers such as Seek Ltd (ASX: SEK), Straker Translations Ltd (ASX: STG), Hipages Group Holdings Ltd (ASX: HPG), and others have been considered. Considering the expected upside in valuation, decent liquidity position, increase in revenue, growing agents, decent outlook, current trading levels, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.185, as on 12 October 2021, 10:30 AM (GMT+10), Sydney, Eastern Australia.

RMY Daily Technical Chart, Data Source: REFINITIV 

5G Networks Limited

5GN Details

Merger Between 5GN and WCG: 5G Networks Limited (ASX: 5GN) provides data network and cloud services, which include managed IT services. Recently, the company stated that Scheme Booklet with respect to the proposed merger between 5GN and Webcentral Group Limited (ASX: WCG) has been registered with the Australian Securities and Investments Commission (ASIC).

• The shareholders of 5GN are likely to receive 2 Webcentral shares for every 5GN share held at the scheme record date (16^th November 2021), and as a result, 5GN will become a wholly owned subsidiary of Webcentral.
• On 1^st October 2021, the Federal Court of Australia has approved 5GN to convene and hold a meeting of 5GN shareholders to consider and vote on the Scheme.
• The director and independent directors unanimously recommend that 5GN shareholders vote in favour of the scheme, as it is in the best interests of 5GN shareholders as well as in the absence of a superior proposal. The scheme is likely to be executed in October or early November 2021.

FY21 Financial Summary:

• Increase in Revenue: During the year, the company recorded total revenue amounting to $91.7 million, reflecting growth of 84% against $49.8 million in FY20, supported by Webcentral (Email & Hosting) domain revenue.
• Growing EBITDA and EBITDA Margin: As a result of the operational synergies from Webcentral, the company witnessed a growth of 144% in EBITDA to $15.5 million. Consequently, the EBITDA margin soared to 16.8% against 12.7% in FY20.
• Rising Operational Cashflow: 5GN witnessed a growth of 44% in operating cash flow to $10.8 million against the $7.5 million in FY20.

Revenue and EBITDA (Source: Analysis by Kalkine Group)

Key Risks:

• Regulatory Risk: The company is exposed to a more complex regulatory environment; any failure may lead the business to fines, penalties etc.
• COVID-19 Disruptions: Any uncertainties in relation to the COVID-19 pandemic could impact its topline and bottom line.

Outlook:

• Looking forward, the company anticipates higher operating margins from its build-out of 5GN-owned fibre network, which was completed in FY21.
• In FY22, the company expects CAPEX of around $5 million, which may increase its free cash flow.

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 company closed FY21 with cash balance of ~$19.2 million against ~$23.5 million as on 30^th June 2020. The stock is trading below its 52-weeks’ low-high average levels of $0.850 - 1.920. The stock of 5GN has been corrected by ~2.11% and ~23.55% in the past three and six months, respectively. The stock has been valued using an EV/Sales multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company can trade at a slight discount to its peers’ median EV/Sales multiple, leveraged balance sheet, declining cash balance, considering negative ROE, negative net margin and COVID-19 led uncertainties. For the purpose of valuation, peers such as Spirit Technology Solutions Ltd (ASX: ST1), Superloop Ltd (ASX: SLC), and Hubify Ltd (ASX: HFY) have been considered. Considering the expected upside in valuation, decent liquidity position, growth in revenue, increase in EBITDA, decent outlook, current trading levels, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.925, as on 12 October 2021.

5GN 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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