Kalkine has a fully transformed New Avatar.

small-cap

Is it Prudent to Book Profit on this Technology Stock – LVH

Jan 18, 2022 | Team Kalkine
Is it Prudent to Book Profit on this Technology Stock – LVH

 

 

LiveHire Limited

LVH Details

Q1FY22 Updates: LiveHire Limited (ASX: LVH) is a technology company in Australia that provides services like engage and hire, direct sourcing, internal mobility, outplacement, and systems and applications and products in data processing (SAP) SuccessFactors through online Talent Acquisition software. LVH was ranked fourth out of 10 Most Innovative Companies in the annual AFR Boss Most Innovative Companies List.

  • Quarterly Revenues Decline: Though, due to COVID-19, the company witnessed a fall in quarterly revenues from $686k in 4QFY21 to $578k at the end of 1QFY22 in its direct sourcing business, but on the other hand showed a rise of ~700% Y-o-Y in the same.
  • Estimated Annual Contact Value Increment (EACV): On the other hand, its EACV in its direct sourcing business increased from ~$4.2 million in 4QFY21 to ~$5.4 million in 1QFY22, with Y-o-Y growth of ~260%.
  • Rise in NRR: With respect to SaaS business, its Net Revenue Retention (NRR) percentage has increased by ~20% Y-o-Y, and from ~91% in 12-months period (FY21) to ~96% as at 1QFY22.
  • Cash Receipts Increment: With the Y-o-Y growth of ~80% in cash receipts, the company has recorded ~$1.58 million for its 1QFY22 with closing balance cash of ~$13.15 million in the same quarter versus ~$14.41 million in 4QFY21.

 Cash Balance (Source: Analysis by Kalkine Group)

Key Risks:

  • Competition Risks: The company works in a highly competitive environment, which will dilute the market share of peers, in turn impacting its operational health.
  • Technology Risk: LVH is also exposed to a risk arising from the change in technology, which can change the way of doing business.

Outlook: With the addition of three new partners (total 17 as of now) and a net gain for the quarter of four new clients taking total clients to 18 and makes the company on track to achieve 36 clients by the end of FY22. The company also focuses on enabling investment into North America supported by its financial indicators. It has 11 & 27 new proposals for its partner enablement (direct sourcing) and client opportunities (SaaS business), respectively.

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 LVH is trading slightly above its 52-weeks low and high levels of $0.250-$0.475. The stock gave a positive return of ~10.76% in the past one month. The immediate resistance and support levels for the stock are ~$0.400 and ~$0.330, respectively. The stock has been valued using an EV/Sales multiple-based illustrative relative valuation and arrived at a target price with a correction of mid-single-digit (in % terms). The company can trade at a slight discount its peers’ average EV/Sales multiple, considering a decline in quarterly revenue from direct sourcing business and negative ROE, etc. For the purpose of valuation, peers such as Xref Ltd (ASX: XF1), TechnologyOne Ltd (ASX: TNE), Dropsuite Ltd (ASX: DSE), and others have been considered. Considering the expected downside in valuation, negative EBITDA margin, expected headwinds related to COVID-19 Omicron, fall in quarterly revenue from direct sourcing business, current trading level, and key risks associated with the business, we suggest investors to book profit and give a ‘Sell’ rating on the stock at the current market price of $0.375, 12:00 PM (GMT+10), Sydney, Eastern Australia, as on 17 January 2022.

LVH Daily Technical Chart, Data Source: REFINITIV 

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

Note 2: Investment decisions should be made depending on the investors' appetite for 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 is subject to the factors discussed above alongside support levels provided.


Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine and its related entities do not hold interests in any of the securities or other financial products covered on the Kalkine website unless those persons comply with certain safeguards, procedures, and disclosures.


Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.