Pushpay Holdings Limited

Pushpay Holdings Limited (ASX: PPH) provides a SaaS-based donor management system that simplifies engagement, payments, and administration functions. The company caters to the faith sector in the U.S. It also caters to non-profit organizations and education providers, and small and medium enterprises.

Recent Business Updates & H1FY22 Highlights:

• PPH announced on April 26, 2022, that it had received an expression of interest from third parties for possible acquisition. The board of PPH has appointed Goldman Sachs as its financial advisor. PPH mentioned that there is no certainty that this proposal will result in any transaction.
• The company reaffirmed its guidance for the year ending March 31, 2022. It is expecting underlying EBITDAFI to be in the ambit of US$61.5-63.5 million. This guidance was earlier announced on March 15, 2022. Excluding the cost related to the investment into the Catholic initiative, the underlying EBITDAFI is between US$63.5 million and US$65.5 million.
• On March 9, 2022, Accident Compensation Corporation became a substantial shareholder with ~57.42 million shares representing voting rights of 5.033%.
• As announced on February 9, 2022, FEMA has filed proceedings against two individuals who conducted insider trading in the company.
• In H1FY22, total customers witnessed an increase of 29% YoY to 14,095.
• ARPC per month stood at US$1,348, an increase of 7% YoY, excluding the Resi Media acquisition.
• Its NPAT showed an uptick of 43% to US$19.1 million in H1FY22.

Valuation Methodology: P/E 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 PPH generated returns of ~+6.60% in the past three months and ~+10.78 in the past month. The stock is trading lower than the 52-weeks’ average price level band of $0.817-$1.925. The stock has been valued using the P/E-multiple-based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount from its peers, considering the narrowed guidance for FY22. For this purpose of valuation, a few peers like EML Payments Ltd. (ASX: EML), Link Administration Holdings Ltd. (ASX: LNK), Appen Ltd. (ASX: APN), and others have been considered. Considering the recent rally in share price, FEMA investigation, potential acquisition based on the expression of interest it received from undisclosed third parties, valuation indicating downside potential, and associated key business risks, we give a ‘Sell’ rating on the stock at the current market price of $1.155, as of 27 April 2022, 10:35 AM AEST (GMT+10), Sydney, Eastern Australia.

PPH 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.

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