Stocks’ Details
 

Tyro Payments Limited

Strong Financial Position:Tyro Payments Limited (ASX: TYR) is a technology-focused company providing Australian businesses with payment solutions and value-adding business banking products. In a recent trading update for the week ended 5^th June 2020, the company’s transaction value amounted to $0.260 billion, up 11% on the prior corresponding value of $0.234 billion. Year-to-date transaction value came in at $18.735 billion, up 16% on pcp.


Transaction Value (Source: Company Reports)
 
1HFY20 Highlights: During the half year ended 31^st December 2019, the company achieved an all-time $11.1 billion high in transactions processed, with record revenues of $117.3 million, up 28.4% on pcp and a positive EBITDA result of $1.5 million, representing an improvement of 149.5% on pcp. Net loss after tax amounted to $19.2 million.
 
Withdrawal of Guidance: Due to a compression in transaction value growth from COVID-19 related challenges faced by Tyro Payments’ merchants and uncertainty related to future events, the company’s Board withdrew the Forecast Financial Information contained in Tyro’s Prospectus.
 
Valuation Methodology:EV/Sales Multiple Based Relative Valuation (Illustrative)

EV/Sales Multiple Based Relative Valuation(Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation:The stock of the company gave positive returns of 34% in the last one month and is trading near its 52-week high price of $4.53. Despite several challenges, the company continued to operate business as usual basis, meeting the expectations of its customers. At the end of February, the company had a strong financial position, with cash, cash equivalents and financial investments of $154 million. We have valued the stock using the EV/Sales multiple based relative valuation approach and arrived at a target price with an upside of low double digit (in percentage terms). Considering the above factors, we give a “Hold” recommendation on the stock at the current market price of $4.1, up 1.99% as on 9^th June 2020.
 

FlexiGroup Limited

 
Increased Flexibility Through Cost Management Initiatives:FlexiGroup Limited (ASX: FXL) provides a diverse range of finance solutions to consumers and businesses through a network of retail and business partners. The company recently released an announcement regarding the issue of 3,317,872 options under the FlexiGroup Long Term Incentive Plan. As per another announcement, the voting power of Renaissance Smaller Companies Pty Ltd reduced to 6.91%, from 8.05% earlier.
 
Trading Update: In response to COVID-19 related disturbances, the company has diverted its work and direct resources towards the management of issues arising from the economic disruption. As per the unaudited results for 3QFY20, the company recorded an increase of 11% in active customers to 1.89 million as compared to pcp. Transaction volumes of continuing products increased by 18% on pcp. In April, BNPL volumes were impacted by reduced discretionary retail spend. New Zealand business was heavily impacted due to restrictions. However, the business witnessed continued demand for commercial lending as a result of the support provided to small businesses. Below is a snapshot of 1HFY20 results of the company:
 

1HFY20 Performance (Source: Company Reports)
 
Outlook: Despite the slowdown in discretionary retail spend, the company witnessed a shift of consumer spending towards key verticals like solar, health and wellbeing, and home improvement. The company has been successful in managing costs, which provides flexibility to manage operations in the current uncertain environment and will enable increased investments in the business as activity returns.
 
Valuation Methodology:P/E Multiple Based Relative Valuation (Illustrative)

P/E Multiple Based Relative Valuation(Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation:The stock of the company gave positive returns of 56.52% in the last one month and is trading near the average of its 52-week trading range of $0.380 - $2.710. The company has a diverse business model and serves a broad cross-section of the economy across various demographics. Its cost management initiatives, business transformation strategy and prudent capital management, will enable unhindered support to customers and merchants during these difficult times. We have valued the stock using the P/E multiple based relative valuation approach and arrived at a target price with an upside of low double digit (in percentage terms). Considering the backdrop of the above factors, we give a “Speculative Buy” recommendation on the stock at the current market price of $1.425, down 1.042% as on 9^th June 2020.
 

OneVue Holdings Limited

 
Proposed Acquisition by Iress Limited:OneVue Holdings Limited (ASX: OVH) is a high growth technology business with service leveraged to the superannuation sector under two core divisions, including Fund Services and Platform Services. In a recent update, the company announced regarding the conversion of 6,227 Rights pursuant to the Short & Medium Term Incentive Plan approved by shareholders as 29^th November 2018.
 
Proposed Acquisition by Iress Limited: Iress Limited (ASX: IRE) recently released an announcement regarding a proposal to acquire 100% of the outstanding shares OneVue through a Scheme of Arrangement, offering to pay a consideration of 40 cents per share implying an equity value of around $107 million. OneVue Holdings’ Board has recommended the shareholders to vote in favour of the scheme, in the absence of any superior proposal and subject to an independent expert’s advice. The acquisition announcement by IRE stated that the transaction is expected to be implemented in its Q3FY20 ending September 2020. OneVue’s position in the administration of funds, super and investments, and Iress’ software strength, will drive innovation and demonstrates an opportunity for the development of software and services that will offer significant earnings upside potential to deliver long-term shareholder value.
 
Other Details: Iress Limited is planning to invest c.$7 million for integration and acceleration of the business during the first two years after the transaction takes place. In year 3, the transaction is expected to result in $3 - $4 million pa in synergies, on account of savings in corporate cost overlap including software license fees, board/listing costs and property.
 

Financial Performance – OVH (Source: Company Reports)
 
Stock Details:The stock of the company gave positive returns of 70.45% in the last one month and is currently inclined towards its 52-week high level of $0.492. The company has the largest single third-party fund registry in Australia, based on Funds under Administration. 95% of the company’s revenues are recurring in nature, with the key sources being subscription, transaction and service fees. To reiterate, the Board of the company has advised the shareholders to vote in favour of the proposed acquisition of outstanding shares by Iress at a price of 40 cents per share. The stock of the company closed at $0.38 on 9^th June 2020, representing an increase of 1.333% on the closing price of $0.375 recorded in the previous trading session. 
 
 
Comparative Price Chart(Source: Refinitiv, Thomson Reuters)

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