LiveTiles Limited

LVT Details

1HFY22 Results in Spotlight: LiveTiles Limited (ASX: LVT) is a developer and marketer of employee experience software through its cloud-based platform. On 4 March 2022, S&P Dow Jones Indices declared removal of LVT from the S&P/ASX All Ordinaries Indices, effective prior to the open on March 21, 2022, in a quarterly Index review.

• The company reported a positive EBITDA of ~$4.3 million in 1HFY22 compared to previous EBITDA loss of ~$(14.9) million in 1HFY21, up by ~129% Y-o-Y. The turnaround in performance is driven by robust revenue growth and stricter cost control. The underlying EBITDA improved by ~141% on pcp in 1HFY22.
• The gross profit margin improved from ~70.3% in 1HFY21 to ~76.2% in 1HFY22, up by ~5.9% Y-o-Y due to revenue increase and a maintained cost base.
• LVT increased investments by ~54% YoY in R&D for product development in 1HFY22. It witnessed a reduction in Sales & marketing expenses (Down ~5% on pcp) and general & admin expenses (Down ~17% on pcp) due to disciplined operating cost management.
• Annualised Recurring Revenue (ARR) per customer increased from ~$15.6K in 1HFY18 to ~$61.8K in 1HFY22, due to a continued shift towards larger based agreements.

Growth in ARR from 1HFY17-1HFY22; (Analysis by Kalkine Group)

Key Risks: The company faces the risk of accruing synergies from the acquisition, growing customers on the platform, forex headwinds, and technological changes.  

Outlook:

• LVT undertook a re-branding exercise and launched a new LiveTiles Reach website (reach.livetilesglobal.com) in FY21. It expects a refreshed focus in sales and marketing to enable continued growth.
• LVT aims to maintain a disciplined cost management approach, reduce cash burn, achieve breakeven, explore strategies to innovate product offerings, and prudently acquire new
• The employee experience market continues to develop rapidly as validated by the growth of enterprise customers and the portfolio of products in 1HFY22 which strengthens the medium to longer-term outlook.

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 positive return of ~25.00% in the past three months and a negative return of ~24.13% in the past six months. The stock has a 52 weeks’ support level of ~0.071 and a high level of ~$0.240. The stock of LVT has a support level of ~0.097 and a resistance of ~$0.132. The stock has been valued using the Enterprise Value to Sales based illustrative relative valuation method and arrived at a target price with a correction of a high single-digit (in % terms). The company might trade at a slight discount than its peers’ mean EV/Sales multiple, considering a slight uptick in the debt-to-equity ratio, and decline in current ratio. For this purpose of valuation, a few peers like ReadCloud Ltd (ASX: RCL), 99 Technology Ltd (ASX: 99L), Integrated Research Ltd (ASX: IRI) have been considered. Considering the decent returns in the past few months, uptick in the debt-to-equity ratio, and indicative downside in valuation, and associated key business risks, we give a ‘Sell’ rating on the stock at the closing market price of $0.110, up by ~13.40% as of 8 March 2022.

LVT Daily Technical Chart, Data Source: REFINITIV 

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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