Nearmap Limited

NEA Details

Latest Updates: Nearmap Limited (ASX: NEA) offers cloud-based geospatial information services such as aerial photomaps to business customers in construction, government, transportation, telecom, etc. through subscription.

• On 4 January 2022, NEA issued ~140,295 shares (ASX: NEAAJ) at ~$1.41 per share to employees due to the conversion of long-term incentive RSUs.
• On 1 January 2022, NEA issued ~376,031 shares/ RSUs (restricted stock units) (ASX: NEAAJ) for nil consideration to employees under a long-term incentive scheme.

Growth in North America & ACV Portfolio:

• NEA reported that its North America ACV (annualised contract value) Portfolio is expected to outperform the combined ACV portfolio of Australia & New Zealand by the close of Q2FY22 (December 2021).
• The North American business is anticipated to constitute most of the Group ACV portfolio driven by market momentum and a refined go-to-market strategy. A US-based Advisory Board member or a non-Executive Director will be appointed to foster the growth plans in the region.
• NEA touched a milestone with ~US$50 million ACV in its North America portfolio and ~US$100 million in Group ACV in 1HFY22.

FY21 Key Takeaways:

• The average revenue per subscription grew from $10,178 in FY20 to $11,391 in FY21.
• NEA held ~$123.43 million of cash as of 30 June 2021 versus ~$36.14 million as of 30 June 2020. It holds ~$9.82 million of total debt constituting lease liabilities as of 30 June 2021.

Gross Profit Growth from FY17-FY21; (Analysis by Kalkine Group)

Key Risks: The company faces the risk of increased technological investment, COVID-19 uncertainty, cybersecurity changes, and adverse forex movements.      

Outlook:

ACV Guidance: NEA provides ACV guidance of ~$150 - ~$160 million on a constant currency basis for FY22 versus ~$128.2 million in FY21.

Plans: NEA is evaluating further geographic expansion with a key focus on North America. It is on track to manufacture and begin the launch of HyperCamera3 in FY22.

FY22 Dates to Look Forward: NEA plans to declare the 1HFY22 (ended 31 December 2021) financial results on 16 February 2022. It will hold a briefing on the said date at 9:30 AM. AGM has been proposed to be held on 10 November 2022.

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 gave a negative return of ~37.10% in the past three months and a negative return of ~36.81% in the past six months. The stock is currently trading closer to its 52-weeks’ low level of $1.355. 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 some discount than its peers’ average EV/Sales multiple, considering the negative bottom line, negative ROE, forex changes, and the persistent COVID-19 risk. For this purpose of valuation, a few peers like FINEOS Corporation Holdings Plc (ASX: FCL), LiveHire Limited (ASX: LVH), Infomedia Limited (ASX: IFM), and others have been considered. Considering the current trading levels, growth in ACV portfolio, further execution of the go-to-market strategy, expansion plans for North America & other geographies, and decent outlook, an indicative upside in valuation, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the current market price of $1.390, as of 20 January 2022, 11:58 AM (GMT+10), Sydney, Eastern Australia.

NEA Daily Technical Chart, Data Source: REFINITIV  

Airtasker Limited

ART Details

AGM & September Quarterly (Q1FY22) Highlights: Airtasker Limited (ASX: ART) runs an online community marketplace and provides outsourcing services to local people in Australia. The users can post tasks online and select from the ratings and reviews.

• With the hiring of a new CMO, ART has started building the marketing infrastructure. It plans to ramp up investment in brand marketing and customer acquisition in 2HFY22.
• ART has initiated the development of superstores - new marketplace models to cater to new service categories. It is witnessing rapid growth in customer bookings for its second marketplace model- Listings. A re-booking model is being developed for which ART has started receiving positive user feedback from the initial testing results.
• The international GMV (gross marketplace volume) rose by over 100% YoY in Q1FY22 led by robust growth in the UK market. The US and the UK markets are now entering a seasonally slower period due to winters.
• As the COVID-19 restrictions eased down in Melbourne & Sydney, ART witnessed a sharp rebound in the latest weekly (26 October 2021) GMV of $3.6 million. ART is entering the most robust seasonal growth period in the Southern Hemisphere.
• ART reported cash and cash equivalents of ~$40.18 million as of 30 September 2021 compared to ~$33.85 million as of 30 June 2021.

Liquidity & Total Debt Position; (Analysis by Kalkine Group)

Key Risks: The company faces the risk of COVID-19 lockdowns, higher marketing and technological spending for expansion in new markets, achieving a profitable bottom line, and financial risks (liquidity & market risk). 

Outlook: ART is progressing on track to achieve the provided guidance - GMV annualised run rate of ~$8-$10 million by June 2022.  It plans to expand in the US with the integration of Zaarly, Inc. and the planned launch in Kansas City, Miami, Dallas, and Atlanta.

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 ART gave a positive return of ~34.07% in the past three months and a positive return of ~26.60% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $0.735 - $1.965. 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 expected increase in brand marketing & overseas expansion expenditure, the COVID-19 risk, and integration risk with Zaarly. Inc. For this purpose of valuation, a few peers like Seek Limited (ASX: SEK), Carsales.Com Limited (ASX: CAR), Domain Holdings Australia Limited (ASX: DHG), and others have been considered. Considering the current trading levels, increase in GMV (& international GMV), plans to increase spending on marketing infrastructure, ongoing integration with the US-based Zaarly, Inc., decent outlook, an indicative upside in valuation, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.745, as of 20 January 2022, 11:51 AM (GMT+10), Sydney, Eastern Australia.

ART Daily Technical Chart, Data Source: REFINITIV  

Integrated Research Limited

IRI Details

Structural Shift Driving Innovation: Integrated Research Limited (ASX: IRI) offers performance diagnostics, monitoring, and management software solutions for payment & unified communication (UC) networks, and business computing. IRI’s product line constitutes Collaborate, Transact, and Infrastructure. Following are the highlights from the management’s AGM address and business update:

• New modes of cashless payments are disrupting the payments market. It offers a significant market opportunity for IRI to provide card payment analytics for real time and high value transactions via its Transact product-line. The development of IRI’s SaaS platform (Prognosis Cloud) has facilitated the implementation of payments analytics use cases.
• IRI has a total addressable market (TAM) of ~$1.2 billion and a quality customer base with an established on-premises business.
• IRI reported growth in TCV on pcp on a year-to-date (YTD) 2022 basis from new products launched in hybrid working. The YTD22 NPAT and sales revenue are mostly in sync on a year-on-year basis, however, slightly affected by the new revenue model slowly transitioning to SaaS contracts.

The Trend of Licence Sales Revenue; (Analysis by Kalkine Group)

Key Risks: IRI faces financial risks (credit, liquidity, etc.), industry competition, technological disruptions, and regulatory reforms. 

Outlook:

• IRI will continue to invest in its platform to support real-time and high-value payments and tap avenues to upsell. It expects to foray into predictive analytics in the future to seek the benefits of AI and machine-learning.
• IRI is experiencing structural changes in its key market where customers are moving to cloud & SaaS based solutions driven by hybrid working and COVID-19 environments. It plans to leverage the market dynamics and move towards a self-funded SaaS business in addition to its established on-premium business. As IRI moves towards growing SaaS subscription revenues, it is confident of increasing its market relevance, TAM, launching new products faster, and fostering sales growth and profitability.
  

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 IRI gave a positive return of ~37.57% in the past three months and a negative return of ~47.92% in the past six months. The stock is currently trading very near to its 52-weeks’ low level of $1.000. The stock has been valued using the Price to Earnings-multiple-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’ median EV/Sales multiple, considering the uncertainty of SaaS revenue realisation, rise in cash cycle days, and decline in FY21 earnings. For this purpose of valuation, a few peers like Over the Wire Holdings Limited (ASX: OTW), Nearmap Limited (ASX: NEA), Nuix Limited (ASX: NXL), and others have been considered. Considering the low trading levels, favourable structural market changes, a growing, & billion-dollar TAM, launch of new SaaS products in FY21, continued focus on R&D and platform development in FY22, an indicative upside in valuation, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the current market price of $1.005, as of 20 January 2022, 12:44 PM (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.

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 unless those persons comply with certain safeguards, procedures, and disclosures.

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.