Pushpay Holdings Limited

PPH Details

Shareholding of Interim CFO: Pushpay Holdings Limited (ASX: PPH) offers donor management systems, church management systems, and streaming solutions to non-profit organizations, the faith sector, and education providers. On 18 November 2021, Richard George Keys, the Interim CFO, became the registered holder of ~100,000 shares via an on-market share purchase for NZ$151,600.

On 10 November 2021, LEC consisting of Lead Edge Capital Management, LLC (LECM), LP, Lead Edge Capital VI, LP, Lead Edge Capital III, Lead Edge Capital V, LP, and Lead Edge Public Fund, LP became the substantial shareholder in PPH with 5.06% voting shares.

Key Takeaways from 1HFY21: 

• The company reported growth across key metrics including total processing volume growth (~9% YoY), net profit growth (~43% YoY), increase in EBITDAF (~12% YoY), and improved gross margins (~69%) during 1HFY21.
• The number of products and customers increased by ~43% and ~29% on pcp respectively, during the period.
• PPH acquired a SaaS firm, Resi Media with an established presence in the US faith sector and clients in the sports, education, corporate, and live event streaming markets. PHP identified material synergies by bundling its product offering and integrating with its sales and marketing engine. Post-acquisition, PHP made significant enhancements to its current product suite and offers differentiated solutions.
• PHP added two new US-based directors on board, Sumita Pandit as the Independent Director and John Connolly as the non-executive Director in September 2021.

Cash & Cash Equivalents Highlights; (Analysis by Kalkine Group)

Key Risks: PHP faces the COVID-19 impact of increasing wage pressure due to competitive hiring and talent retention in the US and New Zealand markets, especially in the IT sector. It faces the risk of technological changes and business integration from new acquisitions.

Outlook:

• PHP aims to maintain its established presence and a solid market share in the Protestant segment.
• In the mid-term, PHP plans to expand in the Catholic segment and aims to grow the number of products and customers. For the said Catholic expansion, PHP plans to hire talent first and then grow its product design and development headcount during the rest of FY22.
• PHP now expects to deliver an underlying EBITDAFI of ~US$60 - $65 million for the year ending on 31 March 2022 compared to ~US$64-69 million provided previously.

Valuation Methodology: EV/EBITDA 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 gave a negative return of ~29.88% in the past three months and a negative return of ~22.76% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $1.245 - $1.935. The stock has been valued using the Enterprise Value to EBITDA 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 than its peers’ average EV/Mean multiple, increase in borrowings from March 2021 to September 2021, downgraded guidance for underlying EBITDAFI, and continuing impacts of COVID-19 on wages and staff retention. For this purpose of valuation, few peers like Link Administration Holdings Limited (ASX: LNK), Appen Limited (ASX: APX), Over the Wire Holdings Limited (ASX: OTW), and others have been considered. Considering the current trading levels, growth in key metrics in 1HFY22, expanded customer base and synergies from integration, plans to expand the Catholic segment, grow customers in the Protestant segment, valuation, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the current market price of $1.255, as of 8 December 2021, 11:15 AM (GMT+10), Sydney, Eastern Australia.

PPH Daily Technical Chart, Data Source: REFINITIV 

Openpay Group Limited

OPY Details

Partnership with Amex in the US: Openpay Group Limited (ASX: OPY) is a global BNPL ('Buy now pay later') payment solutions provider. It caters to home improvement, memberships, automotive, healthcare, and education verticals. On 2 December 2021, OPY entered an agreement with NYSE listed American Express (NYSE: AXP).

• Under the partnership, AXP’s merchants in the automotive and healthcare sector will be linked to Opy’s consumer finance solution.
• AXP card members can access Opy plans in the US and repay funds via their American Express card.
• OPY and AXP plan to explore avenues to mutually engage on the product development initiatives in the US market.

AGM Presentation Highlights:

• The company enters FY22 with the recent launch of OpyPay, a consumer finance solution in the US healthcare market in October 2021. OPY has entered Hospitals (a sub-vertical in Health) and partnered with St John of God Health Care. It bagged large aggregator deals with Monash University and Gameday in the newly launched Membership’s vertical in FY21.
• In the UK, OPY secured aggregator deals with software providers, payment processors, entered healthcare vertical & bigger ticket retail offerings. It registered growth across key metrics (Total Transaction Value (TTV), plans, merchants, and customers) in Q1FY22, and anticipating approval from FCA for the acquisition of Payment Assist.
• The company entered partnerships with Woolworths, Kyriba, and HP for its recently launched SaaS account management platform, OpyPro, in Australia.
• OPY held ~US$34.02 million cash and cash equivalents and draw ~US$58.65 million financing facilities as of 30 September 2021 (Q1FY22-end).

Cash Receipts from Customers Highlights; (Analysis by Kalkine Group)

Key Risks: The company faces stiff competition from peers, change in government regulations in the US, the UK, Australia, and forex rate changes on its financial performance.

Outlook:

• OPY aims to continue adding new verticals in Australia and expand partnerships in FY22.
• It plans to expand the solution in other high-value verticals in the US.
• In September 2021, OPY signed a partnership agreement with Kogan to go live with the OpyPro platform in Q2FY22.
• In FY22, OPY plans to focus on integration with the already signed vertical aggregators and payments processors in the US. With these measures, OPY expects to take a quantum leap in volume growth, expand OpyPro outside Australia, and spend money prudentially.

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 OPY gave a negative return of ~25.55% in the past three months and a negative return of ~35.16% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $0.925 - $3.570. The stock has been valued using the Enterprise Value to Sales based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at some discount than its peers’ median EV/Sales multiple, considering its negative cash flows, continuing negative net margin, uptick in the debt-to-equity ratio, acquisition, and forex fluctuations’ risk. For this purpose of valuation, few peers like Money3 Corp Limited (ASX: MNY), Eclipx Group Limited (ASX: ECX), Prospa Group Limited (ASX: PGL) have been considered. Considering the current trading levels, growth in Q1FY22 key metrics, launch of plans in the US, addition of verticals, expected expansion in the UK, the US & Australia in FY22, valuation, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.990, as of 8 December 2021, 10:30 AM (GMT+10), Sydney, Eastern Australia.

OPY Daily Technical Chart, Data Source: REFINITIV

RMA Global Limited

RMY Details

Director’s Purchase of Shares: RMA Global Limited (ASX: RMY) offers extensive data on residential properties via its digital platform. RateMyAgent Services Pty Ltd., a subsidiary of RMY provides online marketing services in the US, Australia, and New Zealand. On 8 December 2021, Director, David Williams, acquired ~83,000 ordinary shares in Moggs Creek Pty Limited for ~$14,940 via an on-market trade.

Issue of Options: On 22 November 2021, RMY issued ~6.0 million options at an exercise price of ~$0.01 to key management personnel (KMP) as per an employee incentive scheme such as David Williams, Philip Powell, and others.

 Address to Shareholders:

• RMY reported that it now has over 160,000 agents on its platform and a collection of over 230,000 reviews. RMY has partnered with four top brokerages in the US to grow agent reviews on the platform and is in discussion with a few more.
• RMY reported the annualised subscription revenue run rate (ARRR) is ~US $1.3 million. In Q1FY22, RMY achieved an increase of ~85% QoQ in agent reviews. ~25% of the total reviews in the US were gathered in Q1FY22 alone.
• In Australia, RMY posted ~29% YoY growth in subscription revenue in
• The peer competition in the US is facilitating reviews and engagement as the best agents in the US make use of the company’s platform which drives subscriptions.

Cash & Cash Equivalents Highlights; (Analysis by Kalkine Group)

Key Risks: The company faces the COVID-19 impact in executing new partnerships with MLSs and brokerages. It slowed down the launch of new products/ services. The pandemic restrictions impacted property marketing in New Zealand & Australia, adversely affected sales of the Promoter product.

Outlook:

• For 1HFY22, RMY focuses to drive agent reviews and usage on the platform in the US besides accelerating its subscription revenue. It plans to increase the number of agents, multiple listing services (MLS), and brokerage network in the US.
• RMY plans to market Promoter Product (digital advertising product) in December 2021 before the US Awards in late January 2022.
• The business growth witnessed across metrics and geographies in FY21 and a robust balance sheet, strengthens RMY’s expectation to drive positive cash flows monthly in FY22.
• RMY plans to monetise more agents in Australia and New Zealand and increase its subscription revenues further.

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 RMY gave a positive return of ~27.27% in the past week and a positive return of ~7.69% in the past month. The stock is currently trading lower than the 52-weeks’ average price level band of $0.160 - $0.385. The stock of RMY has a support level of ~$0.187 and a resistance level of ~$0.250. 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’ median EV/Sales multiple, considering the trend of net losses, negative ROE, and continuing COVID-19 impact on the sales of the Promoter product. For this purpose of valuation, few peers like Hipages Group Holdings Ltd (ASX: HPG), Icar Asia Limited (ASX: ICQ), Rent.com.au Limited (ASX: RNT) have been considered. Considering the current trading levels, decent returns in the past month, and valuation, we suggest investors to book profit and give a ‘Sell’ rating on the stock at the current market price of $0.210, as of 8 December 2021, 11:31 AM (GMT+10), Sydney, Eastern Australia.

RMY 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.

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