LiveTiles Limited

LVT Details

FY21 Financial Performance: LiveTiles Limited (ASX: LVT) is a SaaS-based company that develops, sells employee experience workplace software and also deliver solutions that drive employee communication and collaboration in Australia, North America, Europe, and the Asia Pacific.

• The company has recorded an improvement in operating revenue by over 19% to $44.9 million in FY21, compared to $37.7 million in FY20, driven by subscriber growth across all markets.
• LVT has reported a loss in underlying EBITDA of $1.134 million in FY21, a decrease by 91% from a loss of $12.55 million in FY20, due to revenue growth and disciplined operating cost management.
• The cash position of the company stood at $16.80 million as of 30 June 2021.

Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks:

• Foreign Currency Risk- The company’s operations are exposed to the global market, due to which the company could face the foreign currency risk.
• Stiff Competition- The company is exposed to intense competition in the market, which is vulnerable to opportunity cost risk.

Outlook:

• The company is consistently underpinning opportunities to improve ROI, CAC, customer upsell, and increase market share in a US$300 billion TAM.
• The company is strategising to be refined to increase scale, the velocity of growth and marketing efforts for a new scalable SaaS mobile product and further, leveraging the core intranet customer base for profitable expansion in FY22.
• The management has three strategic goals to be recognised as the world leader in Employee Experience, have more than 10 million contracted licences, and count in 50% of the top 300 companies to be achieved by 2024.
• LVT is continuing to expand and accelerate the existing product roadmap and scale up the innovation with an increase of R&D expenditure of approximately 25-35% of revenue.

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 LVT is trading below its average 52-weeks' levels of $0.135-$0.305. The stock of LVT gave a negative return of ~8.33% in the past one month and a negative return of ~32.92% in the past one year. 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 might trade at a slight discount to its peers, considering the currency fluctuation risk and a lower net margin. For the purpose of valuation, peers such as Class Ltd (ASX: CL1), Over The Wire Holdings Ltd (ASX: OTW), ReadCloud Ltd (ASX: RCL) have been considered. Considering the current trading levels, indicative upside in valuation, decent balance sheet, increase in ARR per customer, optimistic outlook, and the key risks associated with the business, we recommend a 'Speculative Buy' rating on the stock at the current market price of $0.135, as on 14 September 2021, 10:39 AM (GMT+10), Sydney, Eastern Australia.

LVT Daily Technical Chart, Data Source: REFINITIV

5G Networks Limited 

5GN Details

FY21 Financial Performance: 5G Networks Limited (ASX: 5GN) is a licensed telecommunications carrier that provides cloud-based solutions and network services. It also engages in website creation and advertising campaigns for businesses in Australia. 

• The company has recorded a record total revenue of $91.69 million in FY21, up by 84.3% from $49.76 million in FY20, driven by the acquisition of Webcentral, which provides a highly complementary customer base and successful launch of the wholesale portal strategy.
• The company reported an improved EBITDA growth of 72% to $7.8 million in FY21 against $4.5 million in FY20. The achievement of significant operational synergies within the Webcentral business resulted in increased EBITDA.
• In addition, it has received receipts from the customer amounting to $95.7 million in FY21, an increase from $53.59 million in FY20.
• However, there is an increase in the net loss by 4% to $6.5 million in FY21 against a loss of $1.3 million in FY20.
• The cash position of the company stood at $19.17 million as of 30 June 2021.

Operating Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks:

• Macro Factors Risk- Any adverse macroeconomic event could affect the customers' ability to settle the amount outstanding that might have an impact on the company's financials.
• Compliance Risk- The company is exposed to compliance risk with regards to its Cloud Computing Arrangements that could impact the company’s operations.

Outlook:

• The company is expecting capex to be circa $5 million in the near term and an increase in free cash flow.
• The company has anticipated with webcentral merger by October/early November 2021, proforma revenue of $110 million, proforma EBITDA margin more than 20%, and further to issue Scheme Booklet to 5GN Shareholders in September 2021.
• The management has strategized to drive organic growth, expansion in infrastructure and target strategic acquisition.

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 5GN is trading below its average 52-weeks' levels of $0.850-$1.920. The stock of 5GN gave a negative return of ~13.04% in the past one month and a negative return of ~45.28% in the past one year. 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 might trade at a slight premium to its peers, considering an increase in topline in FY21 and higher asset turnover. For the purpose of valuation, peers such as Superloop Ltd (ASX: SLC), Hubify Ltd (ASX: HFY), Spark New Zealand Ltd (ASX: SPK) have been considered. Considering the current trading levels, indicative upside in valuation, strategic acquisition, investment in infrastructure & marketing, optimistic outlook and the key risks associated with the business, we recommend a 'Speculative Buy' rating on the stock at the current market price of $0.900, as on 14 September 2021, 10:39 AM (GMT+10), Sydney, Eastern Australia.

5GN 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.

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