Audinate Group Limited

Decent EBITDA Rise in FY19: Audinate Group Limited (ASX: AD8) is engaged in the business of development and sale of digital audio visual networking solutions. Dante^® is the group’s technology platform that distributes high-quality digital audio and video signals over computer networks. As on October 4, 2019, the market capitalisation of AD8 stood at ~A$511.95 million. During the year ended 30 June 2019, the company delivered 33.6% revenue growth from US$15.2 million in FY18 to US$20.3 million in the current year. The strengthening of the USD meant that revenue in Australian dollars increased 44.1% to $28.3 million. The strong growth in revenue underpinned a 249% increase in EBITDA to $2.8 million as the operating leverage in the business model was evident from the amount of growth in gross profit that flowed through to earnings. Similarly, operating cashflows grew strongly to $3.6 million in FY19 as compared to $1.0 million in the prior year.


Financial Highlights (Source: Company Reports)

A Look at Recent Updates: Alison Ledger acquired 900 fully paid ordinary shares for a consideration of $7.05 per share on 20 September 2019 in Audinate Group Limited.The company’s 2019 AGM will be held on 24 October 2019. On 16 September 2019, AudinateGroup Limited appointed Mr Aidan Williams as Chief Executive Officer of the company, which was effective September 16, 2019 following the retirement of Mr Lee Ellison (effective September 13, 2019).
Outlook:Economic conditions and US tariffs may impact the near-term results, but this will not the company’s focus to grow long term shareholder value. AD8 is well placed to drive innovation throughout the AV industry and to capitalise on market growth and increased penetration.

Stock Recommendation: The company’s current ratio stood at 6.76x, higher than the industry median of 1.93x, implicating decent liquidity levels as compared to the peer group, and is able to make deployments toward strategic growth activities. Further, EBITDA margin of 9.8% was higher than that of FY18 figure of 2.8%. The company is focusing on growing the shareholder value and the performance of the stock went up by 30.10% in the past 6 months. Currently, the stock is trading towards its 52 weeks high level of $8.660 with PE multiple of 700.93x. Hence, we recommend a “Hold” rating on the stock at the current market price of A$7.570 per share (down 1.046% on October 4, 2019).
 

Appen Limited

Decent Performance in 1HFY19:Appen Limited (ASX: APX) activities consisted of the  provision of quality data solutions and services for machine learning and artificial intelligence applications for global technology companies, auto manufacturers and government agencies. As on October 4, 2019, the market capitalisation of APX stood at ~A$2.49 billion.

The company announced an ordinary fully paid dividend of 4 cents per share, which was paid on 26 September 2019.During the year ended 30 June 2019, underlying NPAT went up by 67% to $29.6 million. Total revenue for the period ended 30 June 2019 was increased by 60% to $245.1 million.  It was added that the company’s ongoing investment towards technology uniquely positions it to meet the market’s demand for the high volumes of quality data at speed throughout the multiple data types for the growing number of use cases.


Financial Highlights (Source: Company Reports)

Outlook:The company is strengthening its position in a high growth market through investments in technology, sales & marketing, government markets and China. The full year underlying EBITDA of the company for the year ending 31 December 2019 including Figure Eight Technologies, Inc., is trending to the upper end of the range of $85 million - $90 million (at A$1 = US$0.74, Aug-Dec 2019).

Stock Recommendation: The company is strengthening its position in a high growth market, which might attract the attention of the market participants. Notably, debt/equity ratio stands at 0.07x at the end of June 2019, which is lower than the industry median of 0.53x, implying a stable position of its balance sheet. Therefore, considering the above stated facts, we recommend a “Buy” rating on the stock at the current price of A$21.200 per share (up 3.113% on October 4, 2019).
 

WiseTech Global Limited

Decent Total Shareholder Return: WiseTech Global Limited (ASX: WTC) is an Australian based company, which provides software to the logistics services industry globally. As on October 4, 2019, the market capitalisation of WTC stood at ~A$10.58 billion. In FY19, the company has continued to drive each of 5 powerful growth levers, most notably relentless deployment towards innovation and expansion of the platform, and acceleration of organic growth via acquisition.

During the year ended 30 June 2019, global operations continued to deliver high quality growth in FY19 with revenues rising 57% to $348.3 million and EBITDA increasing 39% to $108.1 million, a reflection of the company’s strategy to accelerate its global growth as well as industry penetration, driven by the geographic expansion, relentless innovation and deepening product capability.In the year ended 30 June 2019, WTC provided shareholders with a total shareholder return of 77.1% and its share price rose by 76.9% and outperformed the ASX 200 by 70.1% for the year.The following image provides an idea of the company’s key financial numbers:


FY19 Financial Performance (Source: Company Reports)

Outlook:The robust momentum and significant organic growth during FY19, power of CargoWise One platform, the annual customer attrition rate of lower than 1% and continued relentless deployment towards innovation and expansion throughout the global business and full year impact of FY19 acquisitions provides the company the confidence to expect FY20 revenue in the range of $440 million–$460 million, revenue growth of in the ambit of 26%–32%. However, EBITDA is expected to be between $145 million–$153 million as well as EBITDA growth in the range of 34%–42%. These expectations are subject to currency movements.

Stock Recommendation: The share price of WTC has witnessed a rise of 18.33% in the span of previous three months while, in the time frame of 6 months, it increased 44.21%. Currently, the stock is trading slightly towards its 52-week high level of $38.80 with PE multiple of 189.27x and an annual dividend yield of 0.1%. Hence, considering the above facts and current trading levels, we give an “Expensive” recommendation on the stock at the current market price of A$33.500 per share (up 0.752% on 4 October 2019).

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