JCurve Solutions Limited

JCS Details

JCurve Solutions Ltd. (ASX: JCS) was incorporated in 1997 and based in Sydney, Australia. The company offers software development and software solutions such as accounting and payroll, Client relationship management (CRM), inventory management solutions focused on the small business markets in Australia and New Zealand.

Recent Acquisitions- JCurve Solutions Ltd. recently made acquisitions :

• Rapid E-Suite Pte Ltd: JCurve Solutions acquired the Rapid E-Suite Pte Ltd.'s Thailand Operations, which generated revenue of $0.6 million for the period ending 30^th April 2021 and an EBITDA of $0.1 million from its Thailand operations. The total purchase price was SGD 300,000, which was paid out of JCurve’s cash reserves.
• Creative Quest Events and Marketing Services- a growing digital marketing agency based in Phillippines providing varied online and offline marketing services and generated revenue of $1.4 million for the year ended 31^st December 2020 with an EBITDA of $0.4 million. JCurve Solutions paid $245,000 for the deal.

Financial Highlights for 30^th June 2021-  The key focus for the 4Q FY21 are -

• Revenues- The company clocked 40% growth in its revenue to $4 million in 4QFY21 vs. $2.8 million in 4QFY20.
• Cash Balance- The increase of 21.4% increase in cash balance to $5.1 million as of June 2021 vs $4.2 million posted in pcp.
• Debt- The company had nil debt outstanding as of 31^st December 2020.

Financial Performance (Source: Company Report)

Key Risks:

The company is involved in software services targeting primarily small businesses across Australia and New Zealand. The risk of a data breach in the advent of new technology is compelling to write off old or current technology, and the cost expensed on it. Also, the risk of a data breach is one of the critical risk factors for small players as they are prone to attacks by various anonymous hackers. In addition, after multiple acquisitions, the group is exposed to the foreign exchange risks from the revenues coming across south Asian countries.

Outlook:

JCurve Solutions Ltd. is very optimistic about the strategic acquisitions across the Philippines and Thailand, which will boost its reviews and EBITDA in the coming quarters. Also, brand loyalty gives a favourable outlook towards its business, where the company retained 91.6% of its existing Australian 3Q FY21 renewing contract portfolio.

Stock Recommendation:

The stock of JCS gave a return of +7.27% in the last three months and a return of +84.37% in the last six months. The stock is trading above the average of the 52-week low price of $0.023 and the 52-week high price of $0.070. On a TTM basis, the stock of JCS is trading at an EV/Sales multiple of 1.6x compared to the Industry Median of 6.7x (Software and IT Services), indicating undervaluation. Considering the improved revenues, various acquisitions across South Asian countries, healthy cash balance, the current trading levels, we recommend a “Speculative Buy” on the stock at the closing price of $0.059, up by  1.724% as of 13^th July 2021.

JCS Daily Technical Chart, Data Source: REFINITIV

Note: The purple color line represents RSI (14-period). The green color line indicates 12-period SMA. While the yellow lines indicates the support and resistance levels of the stock. 

Envirosuite Limited

EVS Details

Envirosuite Limited (ASX: EVS)  was incorporated in 2006 and based in North Sydney, Australia. the company s engaged in the development and commercialization of environmental management technology platforms and offers varied services as environmental compliance, risk management, environmental intelligence, etc. to its clients as port operators, oil refineries and government 

Recent Updates- :

• Fund Raising- The company offered to raise close to $10.2 million through placement and Institutional Entitlement Offer, which received strong demand. The proceeds from the issue will be used for global expansion and the smooth running of the current projects in the pipeline. In the recent update, it had raisd $3.8 million through retail entatilment offer which got completed in June 17, 2021.
• Appointmnet of Advisor - Former CEO of Orica, Alberto Calderon is appointed as the advisor to the CEO. His appointment will give the company new insights and advice in accelerating sales across mining, Water and Airports, amongst other sectors.

Financial Highlights for 30^th June 2021-  The key focus for the 4Q FY21 are -

• Revenues- The company recorded revenue gains with $2.3 million of sales, were $1.3 million of the new sales came from the existing customers.
• Lower attrition rate- The annualised and trailing twelve months stayed constant, close to 2%.
• Increase in Accounting Rate of Return- The ARR for the company increased by 9% to $46.5 million as compared to the previous quarter. The ARR is also positively impacted by the foreign exchange movement of $0.8 million.

Financial Performance (Source: Company Reports)

H1 FY21 Profitability: The company reported a net loss after tax of $7.8 million in 1H FY21 ending on 31^st December 2021 compared to the loss of $6.5 million in the previous comparable period.

Key Risks:

The company is exposed to the currency risk where any significant movement on the Australian Dollar could impact the company’s financial performance severely. The risk of a data breach in the advent of new technology is compelling to write off old or current technology, and the cost expensed on it. The changing environment regulations could impact the existing contracts or the ones in pipelines.

Outlook:

Recurring revenues is expected to increase 4-8% in H2 FY21 over H1 FY21. Adjusted EBITDA to be improved over H1 FY21. Envirosuite has mentioned in its recent updates regarding the strong demand and pipeline building for 4Q FY21. The recent fundraising will help the company bag new contracts and complete them smoothly without facing the fund requirements in the near term. In addition, the rising Environmental, Social and Governance norms and following them globally as a mandate will act as a catalyst for the company to open its client bases across various geographies.

Valuation Methodology: EV/Sales Value Multiple Based Relative Valuation (Illustrative)

Stock Recommendation:

The stock of EVS gave a return of -29.85% in the last three months and a return of -43.88% in the last six months. The stock is trading below the average of the 52-week low price of $0.087 and the 52-week high price of $0.252, implying an accumulation opportunity. We have valued the stock using the EV/Sales multiple-based illustrative relative valuation method and arrived at a target price of low double-digit (in percentage terms). We believe that the stock can trade at a slight premium compared to its peer average, considering the increasing revenues in Q3 FY21, recent fund raising, and various expansionary plans. For this purpose, we have taken peers such as Reckon Ltd. (ASX: RKN), Skyfii Ltd. (ASX: SKF), Iress Ltd. (ASX: IRE). Considering the strong order book and favourable ESG norms, varied client base, the current trading levels, valuation, we recommend a “Speculative Buy” on the stock at the closing price of $0.097, down by 3.0% as on July 13, 2021.

EVS Daily Technical Chart, Data Source: REFINITIV

Note: The purple color line represents RSI (14-period). The green color line indicates 21-period SMA and the yellow lines are resistance and support levels.

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions 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 analysis has been achieved and subject to the factors discussed above alongside support levels provided.

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.

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