Bigtincan Holdings Limited

BTH Details

Investment from Scotland for R&D: Bigtincan Holdings Limited (ASX: BTH) offers sales automation software and learning management solutions to companies using artificial intelligence (AI). Recently, BTH and Scottish Enterprise (the national economic development agency of Scotland) have partnered for the development of Bigtincan products and new R&D activities.

• BTH will receive a £1.4 million funding grant from the Scottish Enterprise to expand its existing development centre in Glasgow and mobilise long-term investment in its UK operations.
• BTH plans to develop the centre as a strategic hub for data science, R&D, new products, and expanding its European footprint.

Issue of Shares: On 8 December 2021, BTH issued 1.0 million shares at $0.56 per share for consideration due to the expiry or exercise of options under an employee incentive plan.

Substantial Shareholder Update: On 6 December 2021, MA Financial Group Limited (MAF) holds ~5.05% voting shares and has become a substantial shareholder in BTH.

Q1FY22 (30 September 2021) Results:

• The company generated ~$12.4 million cash receipts excluding Brainshark, Inc.’s acquisition, up by ~174% YoY in Q1FY22.
• BTH reported ~$19.3 million cash operating payments, depicting an increase of 67% YoY in the quarter.
• The company reported new customer wins from Trinetx, Alyaxis, and Bio-Rad Laboratories.
• By combining Brainshark technology with its sales enablement platform, BTH added solutions for course content creation, 1:1 video coaching, course authoring, and readiness scorecards to assist customers. The companies have rapidly progressed in integrating systems, workforce, products, and customers and expanded execution abilities via successful integration.
• BTH held $55.7 million cash and cash equivalents as of 30 September 2021 after completing the acquisition of Brainshark, Inc.).

Growth of ARR Highlights; (Analysis by Kalkine Group)

Key Risks: The company risks over dependence on third-party IT suppliers, peer competition in the mobility content industry. It faces the risk of acquiring & retaining new customers and accrual of synergies from recent acquisitions.

Outlook:

• BTH has started with the initial cross sell between Brainshark and its customers to leverage the advantages of scale and customer engagement. It expects more opportunities to cross sell and up sell in FY22.
• The company expects to generate or surpass the revenue guidance of ~$109 million and annualised recurring revenue (ARR) of ~$119 million in FY22.
  

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 BTH gave a negative return of ~29.32% in the past three months and a negative return of ~5.54% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $0.761 - $1.530. 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’ average EV/Sales multiple, considering net operating cash outflows, trend of negative net margins, risk of accrual of synergies and COVID-19 uncertainty, etc. For this purpose of valuation, few peers like Iress Limited (ASX: IRE), Nitro Software Limited (ASX: NTO), Class Limited (ASX: CL1), have been considered. Considering the current trading levels, growth in cash receipts, new customers’ addition, investments in the Data Product Group to scale up infrastructure in Q1FY22, indicative upside in valuation, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.940, as of 15 December 2021, 11:46 AM (GMT+10), Sydney, Eastern Australia.

BTH 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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