Rhipe Limited

Robust financial performance, however, currently trading at higher levels: Rhipe Limited (ASX: RHP) lately announced to the exchange that, as per March 2019 Quarterly Rebalance of the S&P/ASX Indices, the stock of RHP was added to All Ordinaries index, effective from March 18, 2019.

On the other hand, the company appointed Mr. Gary Cox as a Non-Executive Director and Chair of the Company, effective from 26th March 2019. Mr Cox was previously the Executive Officer for the Enterprise and Partner business for Microsoft Japan. Before assuming his roles in Japan, Mr Cox was responsible for the leadership of Microsoft’s Office 365 cloud business in Asia.


RHP’s 1H FY19 Financial Results (Source: Company Reports)

The company had reported a strong set of numbers for 1H FY19. The total sales for 1HFY19 came in at $114.7 million vis-à-vis $85 million in 1HFY18, resulting in a growth of 30% on a pcp basis. Also, the reported EBITDA for 1HFY19 came in at ~$4.6 million vis-a-vis ~$2.8 million in 1HFY18, hence the growth of 66% in EBITDA on PCP basis. This growth was underpinned by a number of key strategic initiatives including an expansion in operations across South East Asia, Korea, New Zealand and Australia, investment in the Indirect Microsoft Cloud Solutions Provider (“CSP”) program for Office365 and an investment in operations to support the expansion of Microsoft’s Public Cloud Infrastructure platform, Microsoft Azure.

The company reported total operating expense growth of 18% on a YoY basis, hence RHP was able to report operating profit growth of 79% better than revenue growth of 30%.

On the outlook front, the company is expected to deliver $11.5 million to $12 million of operating profit in the FY19 which is expected to end on 30 June 2019.

The company might, however, be overvalued at the current juncture as it trades at the PE multiple of 47.97x which is high compared to industry median of 25.1x. The stock has risen 47.50% in the past three months as of March 22, 2019 and up by 11.32% in the past one month. As a result, the stock is currently trading at near to its 52-week high. Although the company has been a consistent performer and value generator for the investors, we presume that the current price might have discounted all the recent positive developments. We, therefore, recommend a “Sell” rating on the stock at the current market price of $1.780 (up 0.565% on 25 March 2019) and suggest to investors that they can book the profit at the current juncture.
 

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