Stocks’ Details

Nearmap Ltd

Growth in Annualised Contract Value: Nearmap Ltd (ASX: NEA) is involved in the provisioning of geospatial map technology for business, enterprises, and government customers. The market capitalisation of the company stood at $1.09 billion as on 14^th August 2020. Recently, the company stated that its Annualised Contract Value (ACV) is surpassing the level of $102 million. The company anticipates closing ACV for FY20 to be in the range of $103 million- $107 million. During 1H FY20, the company reported revenue growth of 31% due to expansion in ACV.

Key Financials (Source: Company Reports)

Guidance: The company expects to report closing cash balance for FY20 in the range of $32 million -$35 million. NEA is also running on the track to achieve cashflow breakeven by the end of FY20. The company has scheduled to release its FY20 results on 19^th August 2020.

Key Risks: The company’s business is exposed to data security risk as it creates, collects, and maintains a vast amount of data. In addition, the business is also sensitive to financial risks such as market risk and credit risk.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

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

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

Stock Recommendation: Going forward, the company is seeking to bring new and innovative products to accelerate its customer base, which is likely to improve its market leadership position in its key markets. On technical analysis front, the stock of the company has a support level of ~$2.154 and a resistance level at ~$2.753 level. We have valued the stock using the EV/Sales multiple based illustrative relative valuation method and have arrived at a target price offering an upside of lower double-digit (in percentage terms). For the said purposes, we have considered LiveHire Ltd (ASX: LVH), TechnologyOne Ltd (ASX: TNE) and Altium Ltd (ASX: ALU) as peers. Thus, considering the growth in ACV, revenue growth and outlook, we give a “Hold” recommendation on the stock at the current market price of $2.500 per share, up by 4.167% on 14^th August 2020.

BrainChip Holdings Ltd

Signing of Equity Draw Agreement with LDA Capital:  BrainChip Holdings Ltd (ASX: BRN) is engaged in the development of software and hardware-accelerated solutions for advanced artificial intelligence (AI) and machine learning applications. The market capitalisation of the company stood at $260.24 million as on 14^h August 2020. Recently, the company announced that it has reached a put option agreement with LDA Capital Limited and LDA Capital LLC, wherein, BRN will be receiving equity capital of A$29 million in the upcoming 12 months. This facility bolsters BRN’s balance sheet and is likely to support the commercialization of its groundbreaking Akida^TM technology. In another update, the company announced the conversion of the remaining 353,201 Convertible Notes, indicating that the company successfully repaid the US$2.85 million debt. The company has also inked a joint development agreement with Valeo Corporation, wherein BRN would utilise its Akida neuromorphic SoC.  During March 2020 quarter, the raised A$3.1 million through placement. During FY19, the company reported revenues amounting to $75,574, reflecting a fall of 92% largely due to revenues recognised in the prior year from the GPI agreement.

Key Metrics (Source: Company Reports)

Growth Opportunities: The company anticipates growth opportunities in emerging markets of Smart Sensors, Smart Homes and Smart Healthcare.

Key Risks: The company is exposed to various risks related to commercial viability and delays of new products and technology, delays in the establishment of an effective sales organisation as well as disruptions in the global economy.

Stock Recommendation: During the June quarter, the company completed the placement of A$3.15 million ordinary shares. At the end of June 2020 quarter, the cash balance of the company stood at US$5.3 million as compared to US$3.7 million in March 2020 quarter. Current ratio of the company stood at 5.63x in FY19 as compared to the industry median of 1.92x. This indicates that the company is in a decent position to address its short-term obligations. On technical analysis front, the stock of the company has a support level at ~$0.164 and a resistance level at ~$0.216 levels. The stock of BRN has provided a return of 59.09% in the past one month. Thus, considering the joint development agreement with Valeo Corporation, and decent liquidity position, we give a “Hold” recommendation on the stock at the current market price of $0.200 per share, up by 14.286% on 14^th August 2020.

LiveHire Limited

Growth in Annualised Recurring Revenue: LiveHire Limited (ASX: LVH) is involved in the provisioning of cloud-based human resources software and platform services. The market capitalisation of the company stood at $107.72 million as on 14^th August 2020.  Recently, the company notified the market that it has wrapped up the cancellation of 3,701,498 ordinary shares on 10^th August 2020 in line with its employee incentive plan. During the quarter ended June 2020, the company reported SaaS Annualised Recurring Revenue amounting to $3.5 million with a YoY growth of 38%. In addition, total SaaS clients went up to 110 with a growth of 38% on a YoY basis. During the quarter, the company has been presented a major Victorian state government contract, which follows Queensland State government contract win in Q3. In addition, the company also contracted with two Direct Sourcing clients in its scale-up of the US opportunity.

Key Metrics Q4 FY20 (Source: Company Reports)

Outlook: The company would continue to focus on driving significant growth and market share through its expanded channel partner strategy, which is focusing on key partners in Australia and the US.

Key Risks: The company’s business is sensitive to a number of risks, which include the risks from general economic conditions in Australia and globally; exchange rates; competition in the markets in which the company operates.

Stock Recommendation: During the June quarter, the company reported cash receipts of $1.20 million, reflecting the growth of 41%. The company ended the June 2020 quarter with a cash balance of $20.9 million and nil outstanding debt. The stock of LVH is trading at a price to book value multiple of 3.7x as compared to the industry average (Software & IT Services) of 5.9x on TTM basis. On technical analysis front, the stock of the company has a support level at ~$0.168 and a resistance level at ~$0.421. Thus, considering the growth in Annualised Recurring Revenue, growth in cash receipts and nil debt, we give a “Hold” recommendation on the stock at the current market price of $0.350 per share, down by 2.778% on 14^th August 2020.   

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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