Laybuy Group Holdings Limited

LBY Details

Annual Meeting Date Announced: Laybuy Group Holdings Limited (ASX: LBY) is an operator of an integrated payment platform serving consumers and merchants. As of 5 July 2021, the market capitalisation of LBY stood at ~$143.77 million. On 30 June 2021, LBY announced that it would hold its Annual Meeting per the ASX listing rules on 26 August 2021. The company also declared 7 July 2021 as the closing date for accepting nominations for the Director position at its Annual Meeting. On 24 June 2021, LBY announced the termination of 714,286 options (under code LBYAA on 18 June 2021) due to the expiry of options/conversion to shares.

$5 Million Raised via SPP: On 21 June 2021, LBY announced the completion of a $5 million capital raise via a Share Purchase Plan (SPP). The company obtained ~14.4 million applications from eligible shareholders, more than the targeted capital of $5 million. Consequently, LBY would roll back the applications subject to a minimum subscription of $1,000 and on a pro-rata basis for above $1,000 application given the shareholding amount of applicant as per the record date of the plan. As a result, LBY would issue 9.99 million new fully paid ordinary shares per the SPP after the scale back of excess applications and rounding. On 21 June 2021, LBY confirmed $40 million proceeds, out of which $5 million were from the SPP and the remaining $35 million from the two-tranche institutional placement completed on 17 June 2021.

Key Takeaway from FY21 Results: The company posted the highest revenue income of NZ$32.6 million in FY21, up by 137% YoY. It recorded a gross merchandise value of NZ$589 million in FY21, up by 159% YoY. The number of active customers increased by 87% YoY and active merchants by 75% YoY in FY21. It held a cash balance of NZ$15.48 million as of 31 March 2021.

Revenue & Net Loss Trend from FY19-FY21; (Analysis by Kalkine Group)

Key Risks: The company faces the risk of new customer acquisition, decreased consumer spending, and severe movement in foreign exchange prices. As the firm operates a payment platform, it is exposed to the risk of technical glitches in transaction processing.   

Outlook: LBY is progressing well to exceed GMV of NZ$1 billion in FY22. It expects revenue to grow between 90%-100% in FY22 and NTM to improve in FY21 on a 12-month rolling average basis.

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 LBY gave a negative return of 42.11% in the past three months and a negative return of 59.35% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level of A$0.490-A$2.300. We have valued the stock using the Enterprise Value to Sales based illustrative relative valuation method and have arrived at a target price of low double-digit upside (in % terms). We believe that the company can trade at some discount than its peer median, considering the increase in net loss after tax, negative net profit margin and negative ROE in FY21. For this purpose, we have taken peers like Openpay Group Limited (ASX: OPY), Over the Wire Holdings Limited (ASX: OTW), EML Payments Limited (ASX: EML). Considering the low trading levels, a record increase in revenue, merchants and customers in FY21, $40 million raised to accelerate growth in the UK, target to exceed GMV of NZ$1 billion in FY22, valuation, and risks associated with the technological disruptions, we give a ‘Speculative Buy’ rating on the stock at the current market price of AUD 0.533 (as on 5 July 2021, 1:53PM (GMT+10), Sydney, Eastern Australia).

LBY Daily Technical Chart, Data Source: REFINITIV  

LiveHire Limited

LVH Details

Appointed New Director: LiveHire Limited (ASX: LVH) provides cloud-based human resources software and platform services. As of 5 July 2021, the market capitalisation of LVH stood at ~$138.20 million. On 1 July 2021, LVH announced that Kathryn Rostrom Foster had joined the company as an Independent Non-Executive Director. LVH also declared that the company would issue 80,520 service rights, which would be convertible into shares to Rajarshi Ray, a Non-Executive Director, after receiving all the necessary shareholder approvals. The conversion to shares will be based on the “service rights” issued per LVH’s Employee Incentive Plan (EIP) from 1 July 2021-30 June 2022.

Managed Direct Sourcing Agreements: On 30 June 2021, LVH announced that its partner Raise Recruiting had inked a Managed Direct Sourcing agreement. Per the deal, Raise Recruiting will offer recruitment and curation services to an end client in Canada. Similarly, LVH’s other partner, High5, an eTeam Inc firm, also entered a direct sourcing agreement for a global automotive client on 30 June 2021. LVH anticipates revenues to scale in sync with other Direct Sourcing agreements.

Financial Highlights for March Quarter (Q3FY21) 2021: The company posted $398,000 of revenue from the Direct Sourcing business in Q3FY21, up by 64% QoQ. The company added one more client to its Direct Sourcing during the quarter versus three expected due to the delay in the sales cycle. The company’s SaaS business is advancing to plan with 123 total clients and closing Annualised Recurring Revenue (ARR) of $4.037 million, up by 23% YoY in Q3FY21. LVH recorded the highest cash receipts of $1.5 million in Q3FY21. It held cash and cash equivalents of $16.037 million as of 31 March 2021.

Revenue & Net Income from FY16-FY20; (Analysis by Kalkine Group)

Key Risks: LVH must adhere to compliance to complete client confidentiality and trust. Hence, it faces the risk of developing a strong privacy-compliant framework. Further, pricing pressure, stiff competition from peers and cyber-attacks remains potential headwinds.

Outlook: The company has an estimated market size of $US80 billion in North America and ~4,400 companies in Australia & New Zealand. LVH has a go-to-market position with its partners who have a strong financial interest to market the solution to their end clients. LVH has 31 matured partner enablement opportunities, out of which seven are in the proposal stage. For SaaS business, LVH has 97 live opportunities, out of which 22 are at the proposal stage.

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 gave a positive return of 61.40% in the past six months and a positive return of 142.10% in the past year. The stock is currently trading close to its 52-weeks’ high level of $0.475. We have valued the stock using the Enterprise Value to Sales based illustrative relative valuation method and have arrived at a target price with a correction of high-single digit (in % terms). We believe that the company can trade at a slight premium than its peer median, considering the increase in revenue from Direct Sourcing and SaaS businesses in Q3FY21, and increasing clients and Talent Community Connections (TCC) for Q3FY21. For this purpose, we have taken peers like TechnologyOne Limited (ASX: TNE), Altium Limited (ASX: ALU), Dubber Corp Limited (ASX: DUB) and others. Considering the current trading levels, decent returns in the past months, and valuation, we suggest investors book profit and give a ‘Sell’ rating on the stock at the current market price of AUD 0.460 (as of 5 July 2021, 10: 42 AM (GMT+10), Sydney, Eastern Australia).

LVH 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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