Pushpay Holdings Limited

PPH Details

Change in Director’s Interest: Pushpay Holdings Limited (ASX: PPH) offers a platform to merchants and customers for mobile commerce and electronic payments. It serves non-profit organisations, the faith sector, SMEs, and corporates. On 22 December 2021, Director, Lovina Anne McMurchy sold ~61,728 ordinary shares in an on-market transaction for NZ$80,246.40.

On 21 December 2021, Director, Richard George Keys, the interim CFO, was granted ~145,149 unlisted restricted share units (RSUs) at NZ$1.3779 per share under a 2016 share incentive plan as part of the remuneration package.

Key Takeaways from 1HFY22:

• The total LTV (lifetime value) of the customer base increased from ~US$4.5 billion to ~US$5.4 billion, up by ~20% YoY in 1HFY22.
• The total operating revenue increased by ~9% YoY to ~US$93.49 million due to growth in subscription, processing, and other revenue in 1HFY22.
• The company reported net tangible asset (NTA) value of a negative US 7.53 cents per share as of 30 September 2021 versus US 0.33 cents per share reported as at 31 March 2021. It reported a negative NTA value due to the debt funding used to acquire Resi Media LLC.
• The operating cash flows increased by ~14% YoY to ~US$30.8 million during the reporting period.

Reduction in Net Finance Costs; (Analysis by Kalkine Group)

Key Risks: The company faces higher staff costs and retention of talent in the US & New Zealand markets due to the COVID-19 situation. Regulatory changes, technological advancements, and a competitive environment pose additional risks to the business. 

Outlook:

• PPH expects the underlying EBITDAFI for the period ending 31 March 2022 in the range of ~US $60.0 - $65.0 million.
• The company is increasing engagement with the key stakeholders in the Catholic segment and pacing up go-to-market resources for the Catholic segment expansion. It anticipates accrual of benefits incrementally in the following years.
• In the long-term, PPH aims to capture over 25% market share in the Catholic segment.

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 PPH gave a negative return of ~30.76% in the past three months and a negative return of ~24.99% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $1.155 - $1.935. 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 a slight discount than its peers’ average EV/Sales multiple, considering the COVID-19 impact of higher staff costs, talent retention in the US & New Zealand, expected capitalisation of costs related to the Catholic segment expansion, etc. For this purpose of valuation, few peers like Hansen Technologies Limited (ASX: HSN), Humm Group Limited (ASX: HUM), WISR Limited (ASX: WZR), and others have been considered. Considering the low trading levels, increase in revenue and customers as well as products in 1HFY22, a planned expansion of the Catholic segment, decline in debt-to-equity ratio, indicative upside in valuation, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the closing market price of $1.215, down by ~.188%, as of 31 December 2021,

PPH Daily Technical Chart, Data Source: REFINITIV  

Integrated Research Limited

IRI Details

Key Takeaways from the AGM Presentation: Integrated Research Limited (ASX: IRI) develops systems and applications management computer software for unified communication (UC) networks & payment networks and business computing.

• IRI spent ~94% on innovation and ~6% on maintenance and currency updates in FY21. ~$12 million was spent on the cloud platform development and four new cloud solutions were rolled out in FY21.
• The innovation is led by COVID-19 led structural changes in the market regarding hybrid working and cashless payments. IRI has extended into card payment analytics and recently introduced solutions for high-value and real-time payments environments. The Transact product has a market opportunity due to the expected growth in cashless payment and real-time transactions.
• IRI reported addition of new customers (as planned) on a year-to-date (YTD22) basis across on-premises, hybrid, and SaaS environments. TCV from new customers is reported to be ahead of plan with decent progress on expanding third-party strategic alliances.

Key Financials, Highlights (Analysis by Kalkine Group)

Key Risks: The company risks the launch of new products in new markets and regulatory changes. It needs to continuously invest in the upgrade of products to combat obsoletion and competition.

Outlook:

• IRI plans to continue investing in innovation and launch new solutions for scaling up the business. It believes new products would offer an opportunity to up-sell and cross-sell to available and new customers and leverage from the long-run trends, driving the market change.
• IRI continues to focus on executing a strategy to move the revenue model towards Total Contract Value (TCV) and eventually Annual Recurring Revenue (ARR) as the key operating metrics.
• IRI believes that the process of transitioning would help in expanding the market relevance, total addressable market, and release of new products to market quickly.

Valuation Methodology: Price to Earnings 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 IRI gave a negative return of ~26.03% in the past three months and a negative return of ~36.54% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $1.135 - $2.780. The stock has been valued using the Price to Earnings 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/Sales multiple, considering the higher spend on platform development & a slight uptick in the debt-to-equity ratio in FY21, and uncertainty of realisation of SaaS revenues. For this purpose of valuation, few peers like Infomedia Limited (ASX: IFM), Over the Wire Holdings Limited (ASX: OTW), Nuix Limited (ASX: NXL), and others have been considered. Considering the low trading levels, continued investment in innovation, transition to new operating metrics, business model well-supported by long-term rising market trends, expected growth in the addressable market, indicative upside in valuation, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the current market price of $1.240, as of 31 December 2021, 10:30 AM (GMT+10), Sydney, Eastern Australia.

IRI 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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