Pendal Group Limited

PDL Details

Recent News: Pendal Group Limited (ASX: PDL), through the segments Pendal Australia, Pendal EUKA, and the Pendal US, provide investment management services.

• On 18^th February 2022, the company announced that it would issue 471,603 ordinary shares under the terms of the Fund Linked Equity (FLE) program.
• As per its Financial Calendar, the company will release its half-year accounts on 31^st March 2022.
• For its 1QFY22, the funds under management (FUM) came out as ~$ $135.7 billion, including cash of ~$10 million and majorly coming from the US, i.e., $65.7 million.

Change in Substantial Shareholding (Source: Analysis by Kalkine Group)

Key Risks: The company runs its business globally, making it prone to currency fluctuations, regulations compliances, other market-sensitive factors like interest and equity markets.

Outlook: From the acquisition of TSW, the company expects a double-digit EPS accretion in FY22. More guidance and sneak peek will be seen in its upcoming Half-Yearly results on 31^st March 2022.

Valuation Methodology: P/BV Multiple Based Relative Valuation (Illustrative)

Stock Recommendation: The stock of PDL is currently trading at its 52-week low of $4.130. The stock has been corrected by ~19.37% and ~25.85% in the past one month and three months, respectively. The stock has been valued using a P/BV multiple-based illustrative relative valuation, and the target price so arrived reflects a rise of low double-digit (in % terms). Accordingly, a slight premium has been applied to P/BV Multiple (NTM) (Peer Average), considering the higher gross margins in FY21 versus the industry median. For valuation, peers such as Perpetual Ltd (ASX: PPT), Insignia Financial Ltd (ASX: IFL), and Navigator Global Investments Ltd (ASX: NGI), and others have been considered. Considering the expected upside in valuation, higher current ratio than industry median, low debt-to-equity levels, high market volatility due to Russian and Ukraine crisis, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $4.130, at 02:00 PM (GMT+10), Sydney, Eastern Australia, as on 7^th March 2022.

Technical Analysis:

Daily Price Chart

Source: REFINITIV, Note: Purple color line reflects Relative Strength Index (14-Period)

Thorney Opportunities Limited

TOP Details

1HFY22 News: Thorney Opportunities Limited (ASX: TOP) majorly makes investments in listed and unlisted securities covering a variety of sectors like media, automotive, energy and pharmaceutical. As of 3^rd March 2022, out of 16,510,146 shares, a total of ~3,140,587 shares have been repurchased via the scheme of on-market.

• On 16^th February 2022, HUB24 LTD reduced its substantial shareholding from 8.63% to 6.64%.
• As per its half-year results 2022, its NTA per share after tax (net tangible assets) grew by ~3.1% on a pcp basis to AU 72.6 cents. While, the net profit after tax was recorded as ~$6.9 million, down by ~68% on a pcp basis.
• As a fully franked interim dividend, the company contributed AU 1.0 cents, over ~25% versus 1HFY21.
• Strong portfolio performance was contributed mainly by 20 Cashews Pty Ltd, Money3 Corporation, Austin Engineering and MMA Offshore, while AMA Group was severely impacted by COVID-19.

 Dividend History (Source: Analysis by Kalkine Group)

Key Risks: TOP runs its operations by investing in various industries, making it susceptible to the impact caused by changing market conditions and industrial data.

Outlook: TOP remains quite positive about its 2^nd largest portfolio holding - Money3 Corporation (ASX: MNY), as the company is not focussing on pursuing the loan book growth to $1 billion and further franked dividends for shareholders. The company is bullish on the potential the infrastructure and resource services portfolio companies hold and plans to reduce and eliminate the share price discount to NTA and proceed with active on-market buyback.

Stock Recommendation: The stock of TOP has given a negative return of ~5.40% in the past nine months and is trading below the average of its 52-weeks low and high levels of ~$0.500 to ~$0.615, respectively. In addition, the stock is trading at a P/BV multiple of 0.70x compared to the industry mean (Investment Banking & Investment Services) of 2.00x on a TTM basis. Thus, it seems that the stock is undervalued at the current trading levels. Considering the valuation on a TTM basis, getting back dilution from buyback, decent liquidity position, dividends distributed, current trading levels, and critical risks associated with the business, we recommend a "Speculative Buy" rating on the stock at the closing price of $0.525, as of 7^th March 2022.

Technical Analysis:

Daily Price Chart

Source: REFINITIV, Note: Purple color line reflects Relative Strength Index (14-Period)

Openpay Group Limited

OPY Details

Index Rebalance: The company was listed on ASX in 2019, and it operates in BNPL (Buy Now Pay Later) area covering automotive, healthcare, home improvement, memberships and education industries. As per the 4^th March 2022 news, OPY was removed from the All Ordinaries Index, effective from 21^st March 2022.

1HFY22 Updates:

• Substantial Shareholder News: As per the 1^st March 2022, Credit Suisse Holdings (Australia) Limited became a substantial holder by gaining voting power of ~5.12%.
• Strong Growth: The company signed major platforms and aggregator partners with ~57% growth in active merchants. The company recorded $15 million revenue for 1HFY22 and ~23% increment in the active customers, thereby ~44% increment in its TTV to $160 million, having a solid growth across all key verticals and market-leading unit economics.
• Net Transaction Loss Improvement: Though the loss for the half-year increased from ~$25.48 million in 1HFY21 to ~$41.99 million in 1HFY22, the net transaction loss (NTL) rate improved significantly from -2.3% on pcp to -1.4% of TTV.
• Balance Sheet Items: The company has an undrawn debt facility for AUS as ~$41 million with a cash balance of $32.1 million at the end of 31^st December 2021.

1QFY22 Highlight (Source: Analysis by Kalkine Group)

Key Risks:

• Competition from Peers: The company works in a very competitive environment, which risks new providers or existing competitors providing a comparatively superior solution or experience.
• Regulatory Risk: OPY is exposed to a complex regulatory environment as it deals with the payment solution, which is being regulated by the authorities.

Outlook:  OPY suggested that the US market will be the primary growth market opportunity for the Group. To focus on AUS & US, the Group worked upon a strategic review for the UK market and decided to reduce its UK operations materially and release capital and cost savings to re-invest in Australia and the US. With the expectation CAGR of ~72% in its ANZ TTV, the company is on the path to hopefully become profitable soon in its ANZ market.

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

Stock Recommendation: The company is trading at its 52-week low-high average of $0.320. The stock of OPY has been corrected by ~75.28% in past six months. 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’ mean EV/Sales multiple, considering the COVID-19 disruptions, negative ROE, and high debt to equity ratio. For the purpose of valuation, peers such as Laybuy Holdings Ltd (ASX: LBY), Sezzle Inc (ASX: SXL), and others have been considered. Considering the expected upside in valuation, growth in revenue, rising active customers and merchants, record growth in TTV, current trading levels, collaboration with American Express and key risks associated with the business, we recommend a “Speculative Buy” rating on the stock at the current market price of $0.320 as on 7^th March 2022 at 10:30 AM (GMT+10), Sydney, Eastern Australia.

Technical Analysis:

Daily Price Chart

Source: REFINITIV, Note: Purple color line reflects Relative Strength Index (14-Period)

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

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 for 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 is 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 the 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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