Bravura Solutions Limited

BVS Details

Change in Substantial Holdings: Bravura Solutions Limited (ASX: BVS) provides software products and services to clients operating in the wealth management and funds administration industries. On 22 November 2021, Invesco Australia Limited has made a change to holdings in the company with voting power of 9.536% as compared to the previous voting power of 10.596%.

FY21 Financial and Operational Highlights:

• Due to lower revenues in the UK caused by significant COVID-19 uncertainty in the market, the company recorded a fall of 11% in revenue to ~$243.0 million. Reported NPAT for the year amounted to $34.6 million, reflecting a fall of 14%.
• BVS recorded an EBITDA of $49.3 million as compared to $57.8 million in FY20, reflecting a fall of 15%.
• The company declared an unfranked final dividend of 6.0cps, which brought the full-year dividend payout ratio to 66% of FY21 adjusted NPAT.

Revenue and NPAT Trend (Source: Analysis by Kalkine Group)

Key Risks:

• Rising Competition: The company operates in a very competitive environment, and the rising market share of peers could impact its financial health.
• Foreign Exchange Risk: BVS operates in multiple geographies, which leaves the business exposed to a risk arising from adverse movement in foreign currency.

Outlook:

• The total addressable market (TAM) in the UK and Australia is at ~GBP1.2 billion per annum and ~$1.0 billion per annum of client IT spend, respectively, which may support the business for new growth avenues.
• Looking forward, the company would continue to assess numerous acquisitive and organic growth opportunities.
• For FY22, BVS expects NPAT growth to be in the mid-teens relative to FY21 adjusted NPAT of $32.3 million.

Valuation Methodology: P/E 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 BVS is trading below its 52-week low-high average of $2.310 - $3.980, respectively. The stock of BVS has been corrected by ~19.67% and ~31.56% in the past three and six months, respectively. The stock has been valued using P/E 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 premium to its peers’ average P/E multiple, considering the decent addressable market, and focus on acquisitive opportunities. For the purpose of valuation, peers such as Hansen Technologies Ltd (ASX: HSN), TechnologyOne Ltd (ASX: TNE), and Reckon Ltd (ASX: RKN) have been considered. Considering the expected upside in valuation, huge addressable market, higher business margins, decent outlook, and current trading levels, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $2.360 as on 08 December 2021, 10:45 AM (GMT+10), Sydney, Eastern Australia.

BVS Daily Technical Chart, Data Source: REFINITIV  

Nearmap Ltd

NEA Details

Quarterly Rebalance of S&P/ASX200: Nearmap Ltd (ASX: NEA) is engaged in the provisioning of geospatial map technology for businesses, enterprises, and government customers. As per the recent quarterly rebalance of the S&P/ASX indices, NEA has been removed from S&P/ASX 200 Index, which will be effective prior to opening of trading session on 20 December 2021.

FY21 Financial and Operational Highlights:

• During FY21, the company achieved a milestone of surpassing $100 million in revenue, which amounted to $113.4 million, reflecting a growth of 17% over pcp. The revenue growth was attained by the record ACV expansion of the North American portfolio. Statutory loss after tax improved to $18.8 million as compared to $36.7 million in FY20.
• NEA’s global subscriptions rose by 8% to 11,255 as compared to 10,458 in FY20, and the Average Revenue Per Subscriber (ARPS) increased by 12% to $11,391 against $10,178 in FY20.

(Source: Analysis by Kalkine Group)

Key Risks:

• Data Security and Cybersecurity Risk: The company’s business is exposed to a risk arising from the failure in maintaining data and cybersecurity, and as a result, operational health could be hampered.
• Technology Risk: NEA is exposed to risks pertaining from the shift in technology, which can change the way of doing business.

Outlook:

• NEA expects to report Annual Contract Value (ACV) in the range of $150 million and $160 million for FY22 on a constant currency basis.
• The company would continue to target growth of 20-40% in ACV in the medium to long term and to maintain underlying retention above 90%.

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 NEA is trading below its 52-week low-high average of $1.370 - $2.790, respectively. The stock of NEA has been corrected by ~32.43% and ~24.99% in the past one and three months, respectively. The stock has been valued using 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’ median EV/Sales multiple, considering the COVID-19 disruptions, and leveraged balance sheet, etc. For the purpose of valuation, peers such as Altium Ltd (ASX: ALU), TechnologyOne Ltd (ASX: TNE), LiveHire Ltd (ASX: LVH), and others have been considered. Considering the indicative upside in valuation, record growth in revenue, improvement in losses, rising global subscription, strong balance sheet, decent outlook, current trading levels, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the closing price of $1.495, up by ~2.397% as on 08 December 2021.

NEA Daily Technical Chart, Data Source: REFINITIV 

Note 1: The reference data in this report has been partly sourced from REFINITIV

Note 2: Investment decisions 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 analysis has been achieved and subject to the factors discussed above alongside support levels provided.

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.

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine and its related entities do not hold interests in any of the securities or other financial products covered on the Kalkine website.

Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.