Pushpay Holdings Limited

Operating Revenue Witnessed Significant Rise: Pushpay Holdings Limited (ASX: PPH) provides a donor management system, which includes donor tools, finance tools, etc. The market capitalisation of the company stood at A$878.08Mn as on 11 July 2019. In the release dated 4 July 2019, the company disclosed that the bookbuild for Chris Heaslip’s NZ$45.3Mn partial sell down has closed successfully, with 12.24Mn sharesheld by Mr Heaslip’s associated interests being sold, at the clearing price of NZ$3.70 per share. It further added that settlement of the sale of the shares has occurred on 9th July 2019. The bookbuild was conducted by Deutsche Craigs Limited, as manager and underwriter. As per the release, the bookbuild was well supported, attracting bids from 13 institutional investors across New Zealand, Australia, Hong Kong and the US, as well as strong participation from retail investors. As per the release dated 3 July 2019, the partial sell down is fully underwritten and will provide further free float and liquidity to support Pushpay’s index weightings. In another release dated 8 May 2019, Chris Heaslip had resigned from his position as Chief Executive Officer (CEO), effective 31 May 2019, and remains a Director of the Company.

The company has processed 18.9 Mn transactions over the year to 31^st March 2019. The average transaction value stood at US$192 over the year to 31^st March 2019.The company delivered on the gross margin guidance for the year ended March 31, 2019, increasing gross margin from 55% to 60%. PPH’s operating revenue witnessed a rise of 42% to US$95.9 Mn over the year, while total operating expenses remained stable. During the year, the total operating expenses improved by 28% i.e. from 93% to 65% as a percentage of operating revenue.

 

Total Processing Volume (Source: Company Reports)

What to Expect: For FY20, the company reiterated its annual operating revenue guidance of between US$122.5Mn- US$125.5 Mn and it also reiterated gross margin of over 63%. PPH has increased its EBITDAF guidance, which was previously in the range of US$17.5 Mn and US$19.5 Mn, to between US$18.5 Mn and US$20.5 Mn, representing growth between 5.1% to 5.7%. It had increased its total processing volume guidance to between US$4.8Bn and US$5.0 Bn which was previously between US$4.6 Bn and US$4.8 Bn.

Stock Recommendation: The stock’s net margin stood at 19.6% in FY19, reflecting YoY growth of 54.0%, which implies that PPH has improved its capability to convert its topline into the bottom line. The return on equity stood at 60.3% in FY19 against the industry median of 15.0%. This represents that Pushpay is providing better returns to shareholders in comparison to the broader industry and this might attract the attention of the market players moving forward. The current ratio of PPH stood at 2.10x in FY19 as compared to the industry median of 1.64x, which represents that the company is in a decent position to meet its short-term obligations as compared to the broader industry. Due to the sound liquidity levels, the company can make further deployments towards the operational activities which can act as a catalyst for the company to achieve the growth in the long-term. When it comes to the stock’s past performance, it produced returns of -3.63% in the span of the previous three months. In the annual shareholders’ meeting (June 2019), the company had stated that they have been driving social good, with the platform that has been built for scale.

Hence, considering the above-stated facts and decent outlook, we give a “Buy” recommendation on the stock at the current market price of A$3.260 per share (up 2.194% on July 11, 2019).       

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