Nuix Limited

NXL Details

Consistent Growth in Contract Value: Nuix Limited (ASX: NXL) is an Australia-based company that provides investigative analytics and intelligence software. The Company offers its Nuix platform, which helps customers to process, normalise, index, enrich and analyse data from various sources. The Nuix platform comprises of the Nuix Engine and several software applications. NXL has registered a consistent growth in its annualised contract value (ACV) from the past 3 years. During 1HFY21, NXL has registered an Annualised Contract Value (ACV) of $162mn as compared with $157mn in 1HFY20 backed by strong new subscription, renewals, customer retention and their willingness to enter multi-year deals. For H1FY21, the company reported revenue of $83.32 million and EBITDA loss of $4.36 million.

Annualised Contract Value (Source: Company Reports)

Diversified Business Across Varied Industries and Regions: NXL has diversified its business across varied industries. 35% of their total revenue comes from Advisories, 19% from Corporate, 20% from Government, 11% from Law Firms and 15% from New Strategic Markets. The business of NXL is diversified across varied regions. 56% of the total revenue come from North America, 28% from EMEA and 16% from APAC. Such diversity   

Key Risks: NXL business is dependent on US markets so any fluctuations in the foreign currency will impact the financials of the company. Any change in government or its policies will impact the contract for the company. 

Outlook: NXL will continue to support growing trend of customer migration to SaaS. The company is likely to keep external risks under control by monitoring closely the risks arise by forex fluctuations and budget changes. For FY21, the company expects its revenue to be around $193.5 million and ACV to be around $200 million. 

Valuation Methodology: EV/Sales Multiple 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, NXL has decreased by 50.59% and by 37.57% in the last three months. The current market capitalization of NXL stands at $1.68bn as on 5 March 2021. The stock is currently trading below the average 52-week price level range of $4.99-$11.855. On the technical analysis front, the stock is trading close to its all-time low and has a resistance of ~$6.11. 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 some premium as compared to its peer average, considering an increase in EBITDA margins in 1HFY21 and diversification across regions. For the purpose, we have taken peers LiveHire Ltd (ASX: LVH), Nearmap Ltd (ASX: NEA), Altium Ltd (ASX: ALU) and more. Considering consistent increase in contract value, positive outlook for the long-term, well diversified business across regions and industries, valuation, and current trading level, we recommend a “Speculative Buy” rating on the stock at the current market price of $5.00, down by 5.661% as on 5 March 2021.

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

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