Stocks’ Details

GTN Limited

Successful Refinancing of Debt: GTN Limited (ASX: GTN) provides a differentiated advertising platform that enables advertisers to reach radio and television audiences. As on 28 May 2020, the market capitalization of the company stood at $100.1 million. GTN has refinanced its existing bank facility that was set to expire 21 February 2021 with a commitment of $60 million and a term date of 30 September 2023. Sue Theckston has made a change in his holdings and has reduced his voting power to 6.42% from 7.95%.

Quarterly Update: Despite significant revenue losses in March 2020 due to the global pandemic, the company maintained a profitable position for the 3Q FY20 with an increase in revenue to $44.56 million. During the quarter, EBITDA of the company stood at $3.12 million and NPAT of the company was $997 million. However, the consolidated revenue of the company for April 2020 went down by 55% to $6.8 million. Due to the sharp decrease in revenue, the adjusted EBITDA loss and net loss for the month stood at $3.3 million and $3.4 million, respectively.


Quarterly Financial Highlights (Source: Company Reports)

Outlook: The company is expecting a substantial impact on its fourth-quarter revenue due to the COVID-19 pandemic. However, the company believes that it will be able to reduce expenses to maintain profitability or positive adjusted EBITDA during the remainder of the fiscal year.

Stock Recommendation: As per ASX, the stock of GTN gave a negative return of 36.3% in the past six months but a positive return of 20.78% in the last one month. Currently, the stock is trading at attractive levels, close to its 52-week low of $0.345. On TTM basis, the stock is trading at a P/E multiple of 8.16x, higher than the industry median (median & publishing) of 7.2x. Considering the current trading levels, volatile returns, decline in financial performance and uncertain outlook, we suggest our investors to keep a close eye on the business activities. Hence, we have a watch stance on the stock at the current market price of $0.525, up by 12.903% on 28 May 2020.

Smartpay Holdings Limited

Completion of Capital Raise: Smartpay Holdings Limited (ASX: SMP) designs, develops, and implements payment solutions and advanced payment and data management solutions. As on 28 May 2020, the market capitalization of the company stood at $82.53 million. The company has raised $13 million via a placement to institutional, sophisticated, and professional investors which comprised of 30,952,381 new fully-paid ordinary shares. William Robert Pulver holds 2.12 million ordinary shares and has recently become a substantial holder in the company on 28 May 2020.

Business and COVID Update: The company witnessed a decline of 40% in aggregate transactional revenues as a direct result of the measures implemented in response to COVID-19. However, NZ business has shown itself to be extremely resilient through the COVID-19 period. The company has reduced its cost base to offset the impact of revenues. For the year ended 31 March 2020, the company reported a 34% increase in revenue to NZ$28.3 million. Australian acquiring terminals have grown to 4,613 transacting terminals to the end of March. During April 2020, Australian acquiring revenue witnessed a substantial growth and acquiring margins were strong.


Growth in Australian Acquiring (Source: Company Reports)

Outlook: The company has shown resilience in the business through the COVID period and believes that it is well-placed to accelerate growth when the economies resume. The company is likely to benefit from positive tailwinds as the effects of COVID further entrench cashless and contactless payments. Current indications are that market trends are likely to remain uncertain.

Stock Recommendation: As per ASX, the stock of SMP gave a negative return of 8.65% in the past three months but a positive return of 15.85% in the last one month. The stock is trading slightly above the average of its 52-week trading range. During 1H20, gross margin of the company stood at 26.7%, lower than the industry median of 74.8%. In the same time span, debt/equity ratio of the company was 2.27x, higher than the industry median of 0.49x. Considering the current trading levels, volatility in returns in the past three months and uncertain outlook, we suggest our investor to wait for the price correction and give a watch stance on the stock at the current market price of $0.490, up by 3.158% on 28 May 2020.

Energy One Limited

Decent Growth in Revenue and EBITDA: Energy One Limited (ASX: EOL) is a supplier of consulting services, software applications and support services to the Energy Sector. As on 28 May 2020, the market capitalization of the company stood at $86.84 million. The company reported a strong first half with focused investment in product development. During the half year, revenue of the company went up by 61% to $9.66 million and EBITDA witnessed an increase of 46% to $2.34 million. 


Growth in EBITDA (Source: Company Reports)

Approval of French Government for eZ-Nergy Acquisition: The company has recently announced that it has received approval for the acquisition of eZ-Nergy. The company has also announced a private placement to raise approximately $4.4 million at $2.20 per ordinary share from Topline Capital Partners LP. 

What to Expect: The company is building a track record of integrating good companies and their products to achieve diversification strategy. This strategy is creating a robust business. EOL has two new large Australian projects in the pipeline. The company is not anticipating any immediate decline in demand for its products and services. It has recently signed a new customer and another customer has committed to a substantial upgrade. These two projects will provide ongoing project revenue to and beyond June 2020.

Stock Recommendation: As per ASX, the stock of EOL gave a return of 33.57% on the YTD basis and a return of 38.52% in the last one month. It is also trading close to its 52-week high of $3.76. During 1H20, gross margin of the company stood at 92.8%, higher than the industry median of 84.2%. In the same time span, ROE of the company was 4.3% as compared to the industry median of 7.5%. On a TTM basis, the stock is trading at an EV/Sales multiple of 4.8x, higher than the industry median (Software &IT services) of 4.1x. Considering the trading levels, attractive returns and higher EV/Sales multiple, we suggest investors to wait for the price correction and give an 'Expensive" rating to the stock at the current market price of $3.7, down by 1.07% on 28 May 2020. 

 
Daily Comparative Chart (Source: Refinitiv, Thomson Reuters)

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