Seek Limited
SEK Details
This report is the full version of the report published on 10 May 2022 at 3:50 PM GMT.
Robust Financial Results of 1HFY22 (ended 31 December 2021): Seek Limited (ASX: SEK) operates an online employment marketplace which connects employers and candidates for job related and other services.
- The company posted ~147% Y-o-Y growth in NPAT (ex-significant items) driven by higher EBITDA (up ~83% Y-o-Y) and revenue growth (up ~59% on pcp) in 1HFY22.
- Revenue growth in 1HFY22 was driven by increased job ad volumes led by Seek Australia and New Zealand (ANZ) and Seek Asia segments and an overall increased candidate activity across these segments.
Comparative EBITDA Growth in the Key Segments; (Analysis by Kalkine Group)
Key Risks: The company faces the risk of expanding in new markets, cyber security threats, technological shifts, and macro headwinds.
Outlook: SEK expects FY22 EBITDA (ex-SEEK Growth Fund and significant items) in the range of ~$490 - ~$515 million and revenue between ~$1.05 - ~$1.10 billion, anticipating improved market conditions and lesser volatility due to COVID-19.
Valuation Methodology: P/E 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 SEK gave a negative return of ~7.77% in the past three months and a negative return of ~25.71% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of 23.950 - $36.090. The stock has been valued using the P/E-multiple-based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount than its peers’ average P/E-multiple, considering the risk of cyber-attacks, and expected lower margins in FY22. For this purpose of valuation, a few peers like REA Group Ltd (ASX: REA), CV Check Ltd (ASX: CV1), Domain Holdings Australia Ltd (ASX: DHG), and others have been considered. Considering the current trading levels, growth in top-line, increased job ad volumes, greater utilisation of depth products, positive long-term outlook, and an indicative upside in valuation, we give a ‘Buy’ rating on the stock at the current market price of $24.200, as of 10 May 2022, 10:49 AM (GMT+10), Sydney, Eastern Australia. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
SEK Daily Technical Chart, Data Source: REFINITIV
Altium Limited
ALU Details
1HFY22 (ended 31 December 2021) Results in Overview: Altium Limited (ASX: ALU) is a developer and marketer of computer software for the 3D design of embedded systems and electronic products.
- Recurring revenue increased from ~65% in 1HFY21 to ~74%, led by robust performance of Octopart business (up ~105% Y-o-Y) and PCB (Printed circuit board) revenue growth (up ~16% Y-o-Y) in 1HFY22.
- EBITDA grew by ~29% Y-o-Y from ~US$27.00 million in 1HFY21 to ~US$34.80 million in 1HFY22. Reported EBITDA margin stood higher at ~34.1% in 1HFY22 versus ~33.8% in 1HFY21.
Revenue Growth Trend from 1HFY17-1HFY22; (Analysis by Kalkine Group)
Key Risks: The company faces the risk of adverse forex movements, shifts in technology, increased R&D, peer competition, and the risk of COVID-19 lockdowns in China.
Outlook:
ALU expects to meet the top-end of the revenue guidance range of ~US$213 - ~US$217 million (vs US$180.2 million in FY21) for FY22. In the longer-term, ALU has set targets for market leadership with ~US$500 million revenue, ~100K subscriber base, and ~95% recurring revenue till FY25-FY26.
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 ALU gave a negative return of ~13.49% in the past three months and a negative return of ~24.45% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $23.660 - $45.300. The stock has been valued using the Enterprise Value to Sales based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at some discount than its peers’ average EV/Sales multiple, considering the COVID-19 lockdowns in China, negative forex rate movements, and acquisition risks. For this purpose of valuation, a few peers like TechnologyOne Ltd (ASX: TNE), WiseTech Global Ltd (ASX: WTC), NEXTDC Ltd (ASX: NXT), and others have been considered. Considering the current trading levels, growth in key metrics, decent 1HFY22 results, encouraging revenue guidance for FY22, and an indicative upside in valuation, we give a ‘Buy’ rating on the stock at the current market price of $28.61, as of 10 May 2022, 10:49 AM (GMT+10), Sydney, Eastern Australia.
Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
ALU Daily Technical Chart, Data Source: REFINITIV
Nearmap Limited
NEA Details
Investor Presentation & 1HFY22 (ended 31 December 2021) Highlights: Nearmap Limited (ASX: NEA) is a location intelligence firm offering cloud-based geospatial information services via its subsidiaries, Nearmap US, Inc. and Nearmap Australia Pty Ltd.
- Gross margins stand robust and consistently above ~90% for the Australia & New Zealand (ANZ) segment since 1HFY18.
- The North American enterprise portfolio remains on track, with ~71% of the ACV (annual contract value) deeply integrated into the workflows of insurance, government, and roofing clients. The ARPS (average revenue per subscription) of the North American segment has increased from ~US$11,425 in 1HFY18 to ~US$22,350 in 1HFY22.
Material Update: In the latest update on 20 April 2022, NEA reported over ~US$2 million incremental ACV from its portfolio of government entities in the US and Canada in Q3FY22 (March 2022 quarter).
Comparative Annual Contract Value (ACV) Movement; (Analysis by Kalkine Group)
Key Risks: The company faces the risk of vertical business growth, new product testing and development, technological shifts, and regulatory barriers.
Outlook:
- NEA has completed the testing of HyperCamera3 (HC3) and plans to launch it commercially in Australia and New Zealand first. It intends to fund technological and product initiatives from regional cash contributions. NEA focuses on disciplined cash management and plans to invest a maximum of ~$30 million in FY22 growth measures.
- NEA now expects the Group ACV portfolio in the range of ~$155 - $160 million for FY22 versus previously stated guidance of ~$150 - $160 million (and higher than ~$128. 2 million in FY21).
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 NEA gave a negative return of ~8.42% in the past three months and a negative return of ~47.12% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $1.065 - $2.330. The stock has been valued using the Enterprise Value to Sales based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount than its peers’ median EV/Sales multiple, considering negative bottom-line, negative ROE, and the risk of successful launch of new technologies. For this purpose of valuation, a few peers like Hansen Technologies Ltd (ASX: HSN), Vista Group International Ltd (ASX: VGL), Dubber Corp Ltd (ASX: DUB) have been considered. Considering the current trading levels, growth in ACV portfolio, plans to roll out HC3 in ANZ, continuous investment in artificial intelligence and product development, decent guidance for FY22, an indicative upside in valuation, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the current market price of $1.105, as of 10 May 2022, 10:30 AM (GMT+10), Sydney, Eastern Australia. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
NEA 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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