Sezzel Inc.

SZL Details

Latest FY20 Result Highlights: Sezzle Inc. (ASX: SZL) is a technology driven payments company. The company provides a payment platform that facilitates payments between consumers and retailers. Sezzle's payment product is a short-term, interest-free instalment plan that provides consumers both a budgeting and financing value proposition. SZL has posted a robust growth in Underlying Merchant Sales (UMS), and total income, which increased by 250.8% and 272.1%, respectively in FY20 for the period ending 31 December 2020. Increase in income is a result of significant growth in active consumers and active merchants, which came in at 2.2mn and 26.7k, respectively during the same period. Further, SZL is associated with merchants within various industries. With an addition of vitamins and supplements, health and wellness, electronics, SZL has been adding merchants to contribute to its revenue stream.

Business Growth During FY20 (Source: Company Reports)

What to Expect: SZL is expanding its reach through tapping global opportunities. In 2020, SZL has made its presence in Canada through signing up merchants and the company is testing market development in Europe and India for any potential opportunities. As per the company report, SZL is expecting its UMS to achieve an annualized run rate more than US$2.5bn by the end of 2021. 

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

Data Source: Refinitiv, Thomson Reuters, 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: In the last one month, SZL has increased by 16.74% and by 43.88% in the last three months. The current market capitalization of SZL stands at $1.96bn as on 2 March 2021. The stock is currently trading above the average 52-week price level range of $0.350-$11.990. On the technical analysis front, the stock has a support level of ~$8.573 and resistance of ~$10.166. We have valued the stock using an EV/Sales multiple based illustrative relative valuation method and arrived at a target price of high single-digit upside (in % terms). We believe that the company can trade at a slight premium as compared to its peer average, considering a robust increase in revenues in FY20, higher active customers and decent outlook. For the purpose we have taken peers ' EML Payments Ltd (ASX: EML), 'WiseTech Global Ltd (ASX: WTC), to name a few. Considering a robust FY20 performance, rise in underlying merchant sales, increase in active number of customers and merchants, valuations, and current trading levels, we recommend a “Hold” rating on the stock at the current market price of $9.41, down by 3.488% as on 2 March 2021.

SZL Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Uniti Group Limited

UWL Details

Multiple Integration Leading to Growth: Uniti Group Limited (ASX: UWL) is a real estate investment trust (REIT) focused on the acquisition and construction of mission-critical communications infrastructure such as fiber, wireless towers and ground leases. The company had acquired OptiComm in November 2020. With this acquisition, UWL has integrated its core functions with OptiComm and will be able to increase its market share in greenfields, given the growing greenfields market share by ~27% in the last 12 months vs ~19.7% share in December 2020. UWL is well integrated through operational and network integration with Harbour ISP and tied up with Velocity to work on API to enable Telstra as an RSP. UWL is expecting to achieve $6m run rate synergies from OptiComm acquisition by Jun-21.

Significant Revenue Growth Since Listing: UWL has registered a significant revenue growth since its listing in February 2019. The revenues were grown from $3.1mn in 1HFY19 to $54.6mn in 1HFY21, similarly EBITDA has registered a consistent growth on a year over year basis (up 307%) and came in at $29.3 million in 1HFY21. 

Cash Availability (Source: Company Reports)

Outlook: UWL is focused on next phase of growth opportunities. Strong cash flow generation will allow UWL to invest in organic expansion and development opportunities, going forward.

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

Data Source: Refinitiv, Thomson Reuters, 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: In the last one month, UWL has increased by 21.85% and by 42.94% in the last three months on ASX. The current market capitalization of UWL stands at $1.44bn as on 2 March 2021. The stock is currently trading close to its 52-weeks high level of $2.250. On the technical analysis front, the stock has a support level of ~$2.065 and resistance of ~$2.24. We have valued the stock using an EV/Sales multiple based illustrative relative valuation method and arrived at a target price with a correction of low-double digit (in % terms). We believe that the company can trade at aslight premium as compared to its peer median, considering a consistent increase in revenues and EBITDA since the time of its listing. For the purpose we have taken peers '5G Networks Ltd (ASX: 5GN), Alcidion Group Ltd (ASX: ALC), RMA Global Ltd (ASX: RMY), to name few. Considering the recent run up in stock prices, decline in net income, higher operating expenditure, valuations, and current trading levels, we suggest investors to book profits and give a “Sell” rating on the stock at the current market price of $2.23, as on 2 March 2021.

UWL Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Superloop Limited

SLC Details

Revenues to Grow with New Contract: Superloop Limited (ASX: SLC) is a provider of connectivity services in the Asia Pacific region. The Company is engaged in the development and operation of independent dark fiber telecommunications infrastructure throughout the Asia Pacific region. It is engaged in the provision of network solutions capability. It owns a duct and fiber optic cable network in Singapore. SLC has won a contract from Symbio Networks (MNF Group limited), under which, SLC will supply wholesale nbn aggregation services to Symbio through its Superloop Connect platform. As per SLC, this is the largest contract won till date which is estimated to be around $25mn. SLC is expecting a contribution of $8.4mn from Symbio Networks to its annualised revenue in 2HFY21.   

Significant Growth in EBITDA: SLC has registered a 4% YoY revenue growth in 1HFY21 to $53.3mn. Nevertheless, owing to higher direct costs, the gross margins declined by 11% YoY during the same period and came in at 46%. The company was able to register a higher EBITDA in 1HFY21 to $8.2mn (99% YoY growth). SLC posted a net loss before tax of $18.4mn during the same period, primarily due to high depreciation and amortization cost.

Revenue and Profits Table (Source: Company Reports)

Key Risks: SLC is heavily dependent on funding and capital expenditure for its continued growth, any failure to obtain sufficient funds may hinder the company’s ability to grow. Failure of Technology and Infrastructure is also a big risk for the company. Further, any human error, power loss, improper maintenance security breaches and similar events may lead to revenue and business loss for the company.

Outlook: As per the company reports, SLC has provided an EBITDA guidance for FY21. The company is expecting EBITDA to be at the bottom level of the guided range of $18mn-$20mn, primarily due to temporary implications of COVID-19 on Hospitality and Education sectors. 

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

Data Source: Refinitiv, Thomson Reuters, 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: In the last one month, SLC has decreased by 4.73% and by 15.02% in the last three months. The current market capitalization of SLC stands at ~$343.91mn as on 2 March 2021. The stock is currently trading above the average 52-weeks’ price level range of $0.435-$1.272. On the technical analysis front, the stock has a support level of ~$0.839 and resistance of ~$1.081. We have valued the stock using an 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 revenue accretive contract with Symbio Networks, rise in top line performance in 1HFY21 and stable balance sheet postion. For the purpose we have taken peers '5G Networks Ltd (ASX: 5GN), Uniti Group Ltd (ASX: UWL), Vocus Group Ltd (ASX: VOC), to name few. Considering the recent contract with Symbio Networks, growth in EBITDA, decent growth in revenues, valuations, 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 $0.905, up by 1.117% as on 2 March 2021.

SLC Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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