LiveTiles Limited

LVT Details

Launch of Strategic Premiership Plan: LiveTiles Limited (ASX: LVT) is involved in the development and sale of business software in Australia and overseas.  The company operates across North America, Europe, Asia and Australia, and provides services to more than 1,000 customers. Recently, the company has rolled out Strategic “Premiership Plan” in response to a recently executed independent company review, which targets to increase operating efficiencies and the go-to-market model. The objective behind the same is to achieve scale and capitalise on the large market opportunity throughout the Employee Experience Platform space.

FY21 Financial Summary:

• Increasing Operating Revenue: During FY21, LVT recorded a rise of 19% and 48% in operating revenue and contracted licence base to $45 million and 2.3 million, respectively, despite the headwinds from the ongoing uncertainty with COVID-19 globally. The operating revenue growth was supported by the rising subscribers in all markets.
• Decent Improvement in EBITDA Loss: As a result of decreased operating expenses, the company witnessed an improvement of 91% in underlying EBITDA loss to $1.1 million against loss of $12.55 million in FY20.
• Growing Cash Receipts: LVT reported a rise of 26% in cash receipts to $51.8 million. In addition, there was an improvement of 71% in net cash operating outflows (excluding govt. grants and nonrecurring items) to $6.2 million.

Cash Receipts (Source: Analysis by Kalkine Group)

Key Risks:

• Forex Headwinds: As the company operates in many geographies, this leads them to a more complex foreign exchange environment. Hence, any unfavourable movement could impact its financial health.
• Regulatory Risk: Increasing presence in overseas may increase regulatory requirements and can create regulatory risk for the business.

Outlook:

• By 2024, the company is aiming to increase licensed user numbers, with minimum growth of 5 times, and to make 50% of the world's top 300 employers as its customers.
• LVT expects strong medium to long-term growth potential, supported by increased remote working as well as the demand for Employee Experience solutions in order to support organisations in a post-pandemic working environment.

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 company closed the year with cash and cash equivalents of $16.8 million, which places the company with an ample amount of capital to manage ongoing operations with growing cash receipts and disciplined costs management practices throughout the business. The stock has recently touched its 52-week low level of $0.130.  The stock of LVT gave a negative return of ~20.58 % in the past one month. The stock has been valued using EV/Sales multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company can trade at a slight discount to its peers’ median EV/Sales multiple, considering the COVID-19 disruptions and risk from foreign exchange. For the purpose of valuation, peers such as Class Ltd (ASX: CL1), Over The Wire Holdings Ltd (ASX: OTW), ReadCloud Ltd (ASX: RCL), and others have been considered. Considering the expected upside in valuation, decent cash position, decent long-term outlook and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.130 as on 24 September 2021, 10:30 AM (GMT+10), Sydney, Eastern Australia.

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.

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine and its related entities do not hold interests in any of the securities or other financial products covered on the Kalkine website.

Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.