Praemium Limited

 

PPS Details
 
FUA for December Quarter Increased by ~145%: Praemium Limited (ASX: PPS) is engaged in offering accounting services to the world’s top financial advisors, investment managers, institutions, accountants, etc.
 
December’19 Quarter Key Highlights: On 13^th January 2020, the company provided an update for the December 2019 quarter. Funds under administration (FUA) during the quarter increased to $20.305 billion from $8.287 billion reported in the prior corresponding quarter.Quarterly gross inflows were reported at $844 million, and quarterly net inflows (pre-transition) were reported at $489 million.
 

Quarterly Performance for PPS (Source: Company Reports)
 
Other Business Highlights: International platform FUA during the quarter came in at $3.1 billion, up 54% year over year. International platform’s gross inflows stood at $325 million, whereas net inflows came in at $228 million. Australia platform FUA increased by 21% and came in at $7.1 billion. The company’s non-custodial VMA Administration Service (VMAAS) has now crossed $10 billion, as compared to ~$0.3 billion 12 months ago. UK pensions business reported 1,403 schemes, soaring 79% year over year.
 
Valuation Methodology:Price to Book Multiple Approach
 

P/B Based Valuation (Source: Thomson Reuters)
 
 Note: All the forecasted figures have been taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: As per ASX, the stock is trading close to the average of its 52-week low and high of $0.320 and $0.790, respectively. The stock gave a return of 32.50% in the past six months and a return of 20.45% in the last three months.EBITDA margin and ROE of the company stood at 18.2% and 11.6%, showing an improvement on the previous year margins of 15.9% and 7.6%, respectively. Net marginof the company stood at 5.8%, showing an improvement on the previous year margin of 3.4% Considering the company’s improved margins, decent financial performance and current trading levels, we have valued the stock using P/BV based relative valuation method and for the purposewe have taken the peer group - Netwealth Group Ltd (ASX: NWL), Hub24 Ltd (ASX: HUB) and OneVue Holdings Ltd (ASX: OVH), to name few. Therefore, we have arrived at a target price of lower double-digit growth (in % terms). Hence, we recommend a “Hold” rating on the stock at the current market price of $0.555, up 4.717%on 13^th January 2020 on account of the release of quarterly update.


PPS Daily Technical Chart (Source: Thomson Reuters)
 

Zip Co Limited

Z1P Details

Second Quarter Revenue Increased by ~101% Year Over Year: Zip Co Limited (ASX: Z1P) is one of the leading players in the payment industry and digital retail finance. It is involved in offering point-of-sale credit and digital payment services to consumers and merchants. On 27^th December 2019, the company closed the Share Purchase Plan (“SPP”) announced on 29 November and 2 December 2019. The announcement followed the successful completion of the upsized placement of $60 million. 

Q2FY20 Financial Highlights: The company reported quarterly revenue of $38.5 million, up 101% on a year over year basis.  Receivables increased 113% year over year and came in at $1,040.5 million.During the quarter, transaction volume came in at $562.6 million, an increase of 85% year over year. The company’s total customers increased 24% year over year and came in at 1,753,862. Total merchants in the second quarter went up by 17% to 20,875. Total transactions increased a whopping 133% year over year and came in at 2,879,527. During the quarter, the company raised capital worth $61.9 million from institutional, sophisticated and professional investors, and share purchase plan.


Key Financial Metrics (Source: Company Reports)

FY20 Outlook: The company is targeting 2.5 million customers by the end of FY20.The company is also targeting annualised transaction volumesof $2.2 billion at the end of FY2020.

Valuation Methodology:Price to Book Value Multiple Approach
 

P/BV Based Valuation (Source: Thomson Reuters)
 
 Note: All the forecasted figures have been taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: As per ASX, the stock is trading above the average of its 52-week low and high of $1.050 and $5.860, respectively. The stock gave a return of 12.42% in the past six months and a return of 234.60% in the past one year.The company has a market capitalization of ~$1.38 billion with outstanding shares of ~390.39 million. The company’s gross margin has increased from 20% in FY18 to 38.1% in FY19. The company is focused on increasing its investment in product and technology and strengthen its balance sheet. Considering the company’s improving margins, decent financial performance and current trading levels, we have valued the stock using P/BV based relative valuation method, and for the purpose,we have taken the peer group - Xero Ltd (ASX: XRO), Afterpay Ltd (HUB: APX) and Credit Corp Group Ltd (ASX: CCP), to name few. Therefore, we have arrived at a target price of lower double-digit growth (in % terms). The company’s half-yearly results to December 2019 are expected to be released towards the end of February. Hence, we have a watch stance onthe stock at the current market price of $3.640, up 3.116%on 13^th January 2020 on account of the release of quarterly report.

 
Z1P Daily Technical Chart (Source: Thomson Reuters)

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