NRW Holdings Limited

NWH Details

Business Update: NRW Holdings Limited (ASX: NWH) provides contract services to the resources and infrastructure sectors. As per a recent update, Comet Asia Holdings II Pte. Ltd., Comet Asia Holdings I Pte. Ltd., KKR Asia III Fund Investments Pte. Ltd. and KKR Asian Fund III L.P. have become an initial substantial holder in the company with a voting power of 5.04%.

FY21 Performance Update:

• The company reported revenues of $2.22 billion in FY21, reflecting an increase of ~11% on the prior year.
• EBITDA increased by 6.7% to $266.7 million in FY21, compared to FY20.
• It delivered an operating EBIT of $120.6 million, which was in line with consensus.
• Net cash flow from operating activities stood at $147.43 million as of 30 June 2021, a decrease from $215.70 million as of 30 June 2020. The decrease is owing to working capital pending resolution of outstanding claims and variations.
• The acquisition of Primero Group in March 2021 is further expected to strengthen the company’s MET Business.

Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks: The company is faced with the challenge of the availability of limited resource pool, driven by increased activities in the construction and mining space.

Outlook: The company has reported near term tender pipeline at $19.3 billion. Its order book stands at $3.5 billion, with secured work for FY22 increased to $2.3 billion. It retained revenue guidance at $2.4 billion to $2.5 billion for FY22. It also anticipates EBITDA to be in the range of $130 million to $135 million in FY22.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

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: Over the last three months, the stock has been corrected by ~13.62% and is trading lower than the average 52-week price level band of $1.360 -$3.190. The stock has been valued using an EV/Sales multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company can trade at a slight discount to its peers, considering the volatility associated with the COVID-19 pandemic, and volatile price movements of commodities. For the valuation purpose, peers such as SRG Global Ltd (ASX: SRG), Emeco Holdings Ltd (ASX: EHL), MACA Ltd (ASX: MLD), etc., have been considered. Considering the current trading levels, indicative upside in valuation, decent results in FY21, optimistic outlook and acquisition synergies, we give a “Buy” rating on the stock at the closing price of $1.570, down by ~4.269% as on 06 December 2021.

NWH Daily Technical Chart, Data Source: REFINITIV

LiveTiles Limited

LVT Details

AGM Update: LiveTiles Limited (ASX: LVT) is predominantly a SaaS provider and is engaged in the development and sale of Employee Experience software through its cloud-based platform offerings. The company has held its AGM on 30 November 2021, where the management has reflected in its transformation phase from a digital workplace technology provider to a pioneer in the Employee Experience Platform (EXP) space.

• The company reported an increase of ~19% in operating revenue to ~$45 million in FY21, compared to the previous year.
• ARR per customer grew by ~18% y-o-y to $58.3k, along with an increase in cash receipts by over 26% to $51.8 million in FY21.
• There has been an improvement in the underlying EBITDA by over ~91% to negative $1.1 million during the year.

Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks: The company’s line of business makes it prone to the risk of technological changes, and to competition risk also.

Outlook: The company is well-positioned for growth along with favourable sector tailwinds, with a need for positive employee experience in the workplace. It entered FY22 with a decent and diversified pipeline of opportunities. It plans to continue with its investment into R&D activities moving ahead, following the success of LiveTiles Reach Mobile in FY21.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

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: Over the last three months, the stock has been corrected by ~37.99% and is trading at par to its 52-week low-level band of $0.092. The stock has been valued using an EV/Sales multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company can trade at some discount to its peers, considering the negative profitability of the Group, and low current ratio. For the valuation purpose, peers such as Over The Wire Holdings Ltd (ASX: OTW), ReadCloud Ltd (ASX: RCL), Skyfii Ltd (ASX: SKF), etc., have been considered. Considering the current trading levels, indicative upside in valuation, positive performance in FY21, growth in ARR, improvement in underlying EBITDA, and the inherent key risks present in the business, we give a “Speculative Buy” rating on the stock at the current price of $0.092, as on 06 December 2021, 01:55 PM (GMT+10), Sydney, Eastern Australia.

LVT 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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