Elmo Software Limited

ELO Details

Elmo Software Limited (ASX: ELO) is Australia and New Zealand’s only integrated cloud HR, payroll, and rostering/time & attendance solution provider to over 1,400 organizations across APAC. Solutions offered include ONE vendor, ONE dashboard, and ONE user-experience.

H1FY21 Performance – For the First Half Ended 31 December 2020

For the first half ended 31 December 2020, revenue grew 29.3% to $30.6 million, driven by strong subscription revenues of 97.4% of total revenue, followed by the expansion of ELMO’s mid-market customer base to 2,892 organizations. The revenue was also supported by the acquisition of Breathe in October 2020, investment growth into ELMO’s sales and marketing team, and investment and traction in new and existing modules. Further, the company reported EBITDA of ($0.8) million, improved by $1.8 million pcp. Meanwhile, it had a net cash balance of $71.3 million as of 31 December 2020. The company secured a credit-approved term sheet for a three-year $34.5 million debt facility with an interest rate of 2.6% that will be used to support the growth initiatives.

Financial Snapshot (Source: Company Reports)

Outlook

The company has initiated an important foundation to build its business in new geography, the United Kingdom (UK). The acquisitions of Breathe and Webexpenses is expected to provide strong support in expanding its market opportunity in line with its growth strategy. Further, the company is well capitalised with decent cash levels and a new debt facility. Importantly, the company is well placed in the adoption of cloud-based business tools, including HR-technology. It expected Annualised Recurring Revenue (ARR) in the ambit of $83.0-85.0 million, Revenue in the range of $68.0-70.0 million, and EBITDA loss between ($2.5)-($3.5) million.

Key Risks

The company is exposed to risks arising from financial assets and liabilities that include credit risk, liquidity risk, and market risk.

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

Stock Recommendation

ELO has delivered 6-months and 1-year returns of ~-24.8% and ~-36.7%, respectively. It is currently trading below the average of the 52-week low price of $4.48 and the 52-week high price of $7.86, indicating an opportunity for accumulation. We have valued the stock using the EV/Sales multiple based illustrative relative valuation method and arrived at a target price of low double-digit (in percentage terms). We believe that the stock might trade at a slight premium as compared to its peer average EV/Sale (NTM trading multiple), considering a decent liquidity position which could help the company in taking strategic decisions for future growth. Also, the management sees positive sentiment in the market, as procurement rates are starting to return to pre-COVID levels. We have taken peers like Nearmap Ltd. (ASX: NEA), Janison Education Group Ltd. (ASX: JAN), Iress Ltd. (ASX: IRE). Considering the strong management focus towards growth, and expansion into new geographies, the current trading levels, and valuation, we give a “Buy” recommendation on the stock at the current market price of $4.79 per share, down 0.209% on 18^th June 2021.

ELO Daily Technical Chart, Data Source: REFINITIV

Imagion Biosystems Limited

IBX Details

Imagion Biosystems Limited (ASX: IBX) is developing a new non-radioactive and safe diagnostic imaging technology. Bringing together biotechnology and nanotechnology, the Company aims to detect cancer and other diseases earlier and with higher specificity.

Result Performance – For the third quarter ended 31 March 2021 – (Q3FY21)

During the third quarter ended 31 March 2021, site initiation and training for a second clinical site for the Phase I Study of the MagSense HER2 Breast Cancer imaging agent was accomplished and screening of patients for enrolment in the study is underway at both sites. Further, the third site currently is finalized and expected to commence patient screening in May. In addition to this, the company also received approval for an Innovations Connections grant (a Federal Government funding program delivered by the CSIRO) aimed to facilitate connecting industry with researchers to help fast-track R&D projects.

Meanwhile, the cash balance fell by $0.2 million to $13.0 million. In the quarter over $1.3 million was received upon the exercise of options partially offsetting operating cash outflows. The operating cash outflow stood at $1.4 million, slightly better than the prior quarter’s operating cash outflow of $1.5 million.

Key Data (Source: Company Reports) 

Risk:

The company is exposed to various risks about financial instruments. The core risks are market risk (including foreign currency risk, price risk, and interest rate risk), credit risk, and liquidity risk. Delays in clinical study may distort revenue projections.

Outlook:

The company is focused on increased pace of recruitment and taking several concurrent initiatives. These initiatives include further growing the number of sites, increasing visibility to the study for patients through engagement with relevant medical professionals. In addition, the company is considering breast cancer clinics and support groups and analysing options to grow the eligibility criteria for patients to enter the study. Importantly, the company is focused on achieving its goal of demonstrating the safety and potential efficacy of MagSense HER2 imaging agent within the earlier stated timeline of this year.

Stock Recommendation:

The stock has delivered nine months returns of ~+25.0% and one-year returns of ~+275.0%. It has made a 52-week low and high of $0.028 and $0.225, respectively. Considering the management keen focus on product development and advance clinical trial, decent cash position, the current trading levels, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.100, down 9.091% on 18^th June 2021.

IBX Daily Technical Chart, Data Source: REFINITIV 

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.

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

Note 2: Investment decisions 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 analysis has been achieved and subject to the factors discussed above alongside support levels provided.

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