LiveTiles Limited

LVT Details

AGM & Approval of the Proposed EIP: LiveTiles Limited (ASX: LVT) specialises in the development and sale of Employee Experience software at the workplace via its SaaS-based platform. LVT has more than ~1,000 enterprise customers in different sectors in Europe, North America, and the Asia Pacific. On 22 November 2021, LVT declared to issue ~12 million unlisted rights to employees as per its FY22-24 employee incentive plan (EIP). The rights will be issued post the shareholders’ approval at the AGM (annual general meeting) on 30 November 2021.

Operational and Financial Highlights of Q1FY22:

• The company reported ~$14.6 million cash receipts, up by ~21% YoY for Q1FY22.
• LVT registered a 3-year CAGR of ~99% in revenue as of 30 June 2021.
• LVT deployed United Health Group, Catholic Schools, and a hospitality company in Australia as some of the key customers in the quarter.
• LVT introduced LiveTiles Reach, a new website as a new marketing initiative and completed a brand refreshment during the quarter.
• The company undertook a ~$10 million debt facility (out of which ~$4 million is yet to raise via a convertible note issue) for the funding growth initiatives in Q1FY22.
• On a Trailing Twelve Months (TTM) basis, the net operating cash outflows improved from ~$14.3 million in Q1FY21 to ~$5.9 million, up by ~58% YoY in Q1FY22.

Net Operating Cash Flows (Trailing-Twelve Months) (TTM); (Analysis by Kalkine Group)

Key Risks: The company faces technological and technical glitches, adequate funds for expansion & innovation, COVID-19 impact. It faces the impact of forex rate changes on the business.

Outlook:

• LVT is on track to implement the Premiership Plan based on the recommendations of a completed strategic review. It aims to improve the overall operational metrics including ROI and cash generation. LVT plans to reorganise structure, reduce headcount, and realise ~$3.5 million annualised savings.
• LVT plans to stay focused on new product innovation and investment to grow its footprint in the EX-space.
• The management expects strong medium to long-term growth potential due to increased remote working and the demand for its solutions to support organisations post COVID-19 environment.
• LVT plans to renew its sales & marketing strategies and move ~65-70% of marketing investment towards scaling Reach.
• It plans to launch an online sales platform for SME sales for downloads.

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 LVT gave a negative return of ~41.17% in the past three months and a negative return of ~39.39% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of ~$0.098 - $0.305. The stock has been valued using the Enterprise Value to Sales based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at some discount than its peers’ median EV/Sales multiple, considering its negative net operating cash flows, continuing trend of negative net margin, and expected increase in the debt facility. For this purpose of valuation, few peers like Reckon Limited (ASX: RKN), Integrated Research Limited (ASX: IRI), Adacel Technologies Limited (ASX: ADA), and others have been considered. Considering the current trading levels, decent growth in ARR, growth in TTM cash receipts, new customer additions in Q1FY22, on track execution of the Premiership plan, cost optimization plan for FY22, valuation, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the closing market price of $0.100, as of 24 November 2021.

LVT Daily Technical Chart, Data Source: REFINITIV 

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision 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 Valuation has been achieved and subject to the factors discussed above.

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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