Latitude Group Holdings Limited

LFS Details

Offering of Capital Notes: Latitude Group Holdings Limited (ASX: LFS) provides credit services that offer lending products comprises credit cards, personal loans, motor loans, debt consolidation, home renovation in Australia and New Zealand. Recently, the company has opened its offering in Capital Notes and allocated $150 million with a margin of 4.75% p.a.

Dividend Distribution- The company has declared a dividend at a price of $0.0785 per share with a record date of 31 August 2021 and a payment date of 14 October 2021.

H1FY21 Financial Performance:

• During the period, the company reported strong volume growth of 5.4% to $3,640 million from $3,452 million over the pcp and excluding international and travel it was up by 10.9% in H1FY21. This reflects continuous spending on the 'home economy'.
• The company has recorded a robust cash NPAT of ~$121 million in H1FY21, increasing 81% from ~$67 million in H1FY20.
• The company has delivered an increase in personal loan and auto volume growth of 37% vs pcp, supported by the continuous BNPL graduation program.
• It reported decline in operating income to ~$426 million in H1FY21, compared to ~$501 million in H1FY20.

Total Volumes (Source: Analysis by Kalkine Group)

Key Risks:

• Impact of COVID-19 pandemic- The international and travel spends were affected due to continuous lockdown restrictions, and still, the uncertainty prevails.
• Liquidity Risk- The company requires sufficient liquidity to meet its financial obligations, operational activity, offer more lending to clients and mitigate the working capital risks.

Outlook:

• The company is enhancing its global footprint in Southeast Asia in the next 12 months. Further, it focuses on offering new product launches in Australia & New Zealand to support industry verticals.
• The Latitude Pay+ is widely scheduled to release in October 2021, which will enable growth in verticals such as health, home, and telecommunications.
• The company anticipates an economic recovery, and spending will increase once restrictions are eased in Australia and New Zealand.
• The management remains confident in its financials and expects the 2H21 dividend to remain in the 60-70% payout range at 7.85 cents fully franked per share.

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 LFS is trading below its average 52-weeks' levels of $2.150-$2.990. The stock of LFS gave a negative return of ~2.66% in the past three months and a negative return of ~6.00% in the past one month. The stock has been valued using EV/Sales multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount to its peers' average, considering the uncertainty of economic activities and currency fluctuations. For the purpose of valuation, peers such as Humm Group Ltd (ASX: HUM), Credit Corp Group Ltd (ASX: CCP), Money3 Corp Ltd (ASX: MNY) have been considered. Considering the current trading levels, indicative upside in valuation, strategic investment in marketing, enhancing its footprint, optimistic outlook and the key risks associated with the business, we recommend a 'Speculative Buy' rating on the stock at the current market price of $2.180, as on 21 September 2021, 10:45 AM (GMT+10), Sydney, Eastern Australia.

LFS Daily Technical Chart, Data Source: REFINITIV

Platinum Asset Management

PTM Details

Business Update: Platinum Asset Management (ASX: PTM) is an asset management company that manages hedge funds, equity mutual funds and portfolios for its clients. It also performs in-house and external research to make its investments. As per a recent update, the management has decided to buy back a total of 586,678,900 shares.

FY21 Financial Performance:

• The company has recorded an improvement in its revenue and other income by 5.9% to $41 million in FY21, compared to $298.66 million in FY20. This reflected an increase in gains from Platinum’s seed investments.
• The company reported Fund under management (FUM) at $23.5 billion as of 30 June 2021, a 10% increase over pcp, driven by absolute investment returns.
• The company has reported an increased profit by 4.9% to ~$163.3 million in FY21 against ~$155.6 million in FY20
• At the end of the period, the company’s cash balance stood at $143.27 million as of 30 June 2021.

Net Income (Source: Analysis by Kalkine Group)

Key Risks:

• Foreign Currency Risk- The company’s operation is to invest in the global equity market, and it is prone the volatility of the foreign exchange.
• Political Risk- The tension between China and the west remains at a high level that caused uncertainty across a range of industries, including eCommerce and property development, both important drivers of economic growth.

Outlook:

• The company expects an improvement in economic activity that will translate into good performance for stock markets that might bring opportunities for investors in the near term.
• Further, the company focuses on positioning the funds in the equity market to make a profit from such opportunities.
• The company launched the Platinum Investment Bond in collaboration with Australian Unity, allowing the investor to attain long-term saving goals by accessing its global and Asian equity investment capabilities.
• Platinum is strategically enhancing its business in Europe and the US.

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 delivered a decent financial performance and declared a final fully franked ordinary dividend of 12 cents per share. The stock of PTM is trading below its average 52-weeks' levels of $3.020-$5.140. The stock of PTM gave a positive return of ~9.74% in the past one year and a negative return of ~27.29% in the past three months. The stock has been valued using EV/Sales multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight premium to its peers' average, considering the expected economic recovery and decent cash position. For the purpose of valuation, peers such as Pendal Group Ltd (ASX: PDL), Magellan Financial Group Ltd (ASX: MFG), Perpetual Ltd (ASX: PPT) have been considered. Considering the current trading levels, indicative upside in valuation, decent balance sheet, improvement in top-line & bottom line, enhancing its footprint, shares buy-back and optimistic outlook, we recommend a ‘Buy' rating on the stock at the current market price of $3.460, down by ~1.42% as on 21 September 2021, 10:30 AM (GMT+10), Sydney, Eastern Australia.

PTM 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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