Infomedia Limited

IFM Details

Synergies from SimplePart Acquisition: Infomedia Limited (ASX: IFM) is involved in developing, designing, and supplying Software-as-a-Service & provision of data analytics solutions to the parts and service sector of the automotive industry.

• Recently, in June this year, IFM completed the purchase of SimplePart, an US-based e-commerce platform. The buyout was implemented on 4 May 2021.
• The addition of SimplePart expands IFM’s core global offering and strengthen its position to aid customers with an expanded range of market-leading service and data insights solutions.
• Further, an increase in organic monthly recurring revenue, and integration of SimplePart, offer robust momentum to the company’s financial position in FY22.

A Sneak Peek at 1HFY21 Results:

• Rise in Services Revenues: Service revenue in 1HFY21 increased 9% pcp, post the rollout of numerous new contracts win in each region.
• NPAT Up Y-o-Y: During the period, IFM’s net profit after tax (NPAT) stood at $9.33 million, up 3% from the prior corresponding period. On the back of continuous investment in business development, IFM remains on growth impetus.
• Cash Rich Company: The company exited the period with cash amounting to $97.3 million and total debt amounting to ~$4.96 million, reflecting the robust cash generative nature of the business.

Revenue Highlights; Analysis by Kalkine Group

Risk Analysis: The company is exposed to the prevailing global uncertainties related to COVID-19, stiff competition from peers, fluctuations in foreign currency, stringent regulations, and integration risk.

Outlook: Richard Leon, the company’s CFO, will be stepping down from his posts following the release of the FY21 results on 24 August 2021. For FY21, the company expects total revenue to be in the range of $95-$96 million and Cash EBITDA to be in the ambit of $19-$20 million for FY21.

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 company’s stock has been corrected by ~19.07% in the past six months. Currently, the stock is trading below the average of its 52-week low and high levels of $1.255 and $2.020, respectively. 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 might trade at some discount as compared to its peer average, considering its supply chain disruption risk, increased costs and integration risk, foreign currency risk and strict regulatory approval, etc. For that purpose, we have considered peers such as Life360 Inc (ASX: 360), Nearmap Ltd (ASX: NEA), Hansen Technologies Ltd. (ASX: HSN), to name a few. Considering the decent liquidity position, rise in profits in 1HFY21, encouraging outlook, current trading levels, acquisition synergies, valuation, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $1.470 as on 9 August 2021, 10:42 AM (GMT+10), Sydney, Eastern Australia.

IFM Daily Technical Chart, Data Source: REFINITIV 

Openpay Group Ltd

OPY Details

Synergies from Payment Assist Acquisition: Openpay Group Ltd (ASX: OPY) is a technology-based company that provides a payment platform for merchants and consumers. In June this year, the company agreed to acquire 100% of Payment Assist. The deal is expected to close in Q2FY22. The buyout of Payment Assist will accelerate OPY’s UK growth and strengthen its foothold as a global leader in the BNPL Automotive vertical.

A Quick Look at 4QFY21 Business Update:

• Strategic alliances: To drive future growth across all key verticals, OPY inked numerous partnership deals with global and local e-commerce providers, such as Adobe, Quest Payment Systems, One Step Checkout, etc.
• Funds Raised: The company completed a ~$71.2 million funding package during the quarter, which comprised $37.5 million from an institutional placement, $25 million from a corporate debt facility, and $8.7 million from share purchase plan (SPP).
• TTV up Y-o-Y: OPY maintained a robust volume growth dynamic and witnessed an increase of 46% YoY in the TTV (total transaction volume) to $92 million in 4QFY21. For Q2FY22, the company expects further growth in TTV post the completion of Payment Assist acquisition.
• Growth in Active Plans: In 4QFY21, OPY’s Active Plans increased a whopping 141% on pcp, driven by the continued recovery of bricks and mortar growth rates in the company’s Healthcare and Automotive verticals.
• Increase in Active Customers: In 4QFY21, OPY’s Active Customers increased 69% year over year, owing to strong customer engagement from the UK.
• Rise in Active Merchants: The company recorded an increase of 77% in Active Merchants in 4QFY21, due to the latest integrations with eCommerce platforms and point of sale provider partnerships.
• Cash Balance: the company ended the quarter, with cash balance of $52.1 million.

Cash Highlights (Analysis by Kalkine Group)

Key Risks: OPY faces the risk of investing in technological upgrades to remain secure and viable. The company is also exposed to credit risk, compliance risk, efficiency risk, and cybersecurity risk.

Outlook: The capital raise is expected to aid the company to continue investing in its strong growth trajectory in Australia, and the UK. The funding will also strengthen the company’s entry into the USA market, where it is expected to go live in early October 2021.

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 OPY gave a negative return of ~52.34% in the past six months. The stock is currently trading close to its 52-week’s low level of $1.110. We have valued the stock using the EV/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 average, considering technological risks, competition in the industry and lower customer spending due to COVID-19 led uncertainties. For this purpose, we have taken peers like Harmoney Corp Limited (ASX: HMY), Eclipx Group Limited (ASX: ECX), Prospa Group Limited (ASX: PGL), to name a few. Considering the current trading levels, increase in TTV, rise in active customers and merchants, valuation, expected growth in the UK and the US business, acquisition synergies, and key risks associated with the business, we give a ‘Speculative Buy’ rating on the stock at the market price of $1.240, as on 9 August 2021 10:42 AM (GMT+10), Sydney, Eastern Australia.

OPY Daily Technical Chart, Data Source: REFINITIV 

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.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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