Sezzle Inc.

SZL Details

Q3FY21 Financial and Operational Highlights: Sezzle Inc. (ASX: SZL) is a growing fintech company, which operates a payment platform. During the quarter, the company witnessed a positive stride in consumers adopting its products, evident by the growth of 77% in Active Consumers to 3.2 million at the end of the quarter. SZL added that the top 10% of its users (as measured by UMS) remained highly engaged, transacting 49x on average over the TTM period ended 30 September 2021

• Strong Merchants Connectivity: During the quarter, merchant connectivity was robust, supported by the growth of 112.5% in active merchants to 44,000 on a YoY basis. In addition, repeat usage witnessed continuous improvement as it increased for the 33rd consecutive month to 92.3%.
• Consistent Improvement in Net Interest Expense: The company witnessed an improvement for the sixth consecutive quarter net interest expense as a percentage of Underlying Merchant Sales (UMS) to 0.25% in Q3FY21 due to Lower borrowing costs and Reduced utilization of the credit facility.
• Signing of Agreement: After the end of the quarter, the company inked an agreement with Alliance Data Systems Corporation, wherein Alliance Data’s Bread business will provide long-term loans through SZL’s merchant network

Net Interest Expense as % of UMS (Source: Analysis by Kalkine Group)

Key Risks:

• Credit Risk: The company’s operational and financial performance could be impacted by failure done by counterparties in fulfilling their obligations.
• Regulatory Risk: SZL is exposed to a more complex regulatory environment as it operates in financial transactions. Any failure in maintaining compliance could lead the business to fines, penalties, etc.

Outlook:

• The company anticipates UMS to attain an annualized run rate of more than US$2.5 billion by the end of 2021.
• SZL believes that it is in a decent position for attaining future growth, which would be backed by available credit of US$87.77 million at the end of 21.
  

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: At the end of Q3FY21, the company had a total cash balance of US$46.89 million against US$60.02 million as on 30 June 2021. This decline was mainly due to uses in operating and investing activities. The stock of SZL is trading at par to its 52-week low level of $4.160, offering a decent opportunity for accumulation. The stock of SZL has been corrected by ~24.22% and ~35.20% in the past one and three months, respectively. 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’ average EV/Sales multiple, considering the COVID-19 disruptions and low efficiency in generating profits, etc. For the purpose of valuation, peers such as Tyro Payments Ltd (ASX: TYR), Humm Group Ltd (ASX: HUM), and Splitit Ltd (ASX: SPT) have been considered. Considering the indicative upside in valuation, growing customer base, decent merchants’ connectivity, declining cost of capital, partnership with the US company, deleveraged 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 $4.160, down by ~7.350% as on 26 November 2021.

SZL Daily Technical Chart, Data Source: REFINITIV  

Nearmap Ltd

NEA Details

FY21 Financial and Operational Highlights: Nearmap Ltd (ASX: NEA) is in the provisioning of geospatial map technology for businesses, enterprises, and government customers. During the year ended 30 June 2021, the company recorded a substantial growth in Annual Contract Value to $133.8 million, which surpassed the initial guidance of $120-$128 million. This was mainly generated by the growth of 26% in Incremental Annual Contract Value to $21.8 million because of record growth from the North American portfolio, validating refined go-to-market strategy.

• Substantial Growth in Revenue: During the year, NEA’s statutory revenue soared by 17% to $113.4 million, and as a result, it reached the milestone of surpassing $100 million in revenue. The revenue growth was achieved 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.
• Progress in HyperCamera3: NEA recorded progress in HyperCamera3, evident by the completion of designing and prototype system has been tested in flight.
• Rising Global Subscription and ARPS: The company’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.
• Healthy Balance Sheet: At the end of FY21, the company had a strong balance sheet, evident by the increased cash balance of $123.4 million as compared to $33.8 million as on 30 June 2020.

Cash Balance Trend (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 believes that it has a large and growing global addressable market opportunity for location intelligence data sets generated from aerial imagery.
• On a constant currency basis, the company expects Annual Contract Value (ACV) in the range of $150 million and $160 million for FY22.
• Looking forward, 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 near to its 52-week low level of $1.565, offering a decent opportunity for accumulation. The stock of NEA has been corrected by ~25.82% and ~24.76% 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’ average 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, significant growth in ACV, rising revenue, improving losses, 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 $1.580, down by ~3.952% as on 26 November 2021.

NEA Daily Technical Chart, Data Source: REFINITIV  

Pushpay Holdings Limited

PPH Details

Decent Performance in 1HFY22: Pushpay Holdings Limited (ASX: PPH) provides donor management systems, church management system and streaming solutions, to the faith sector, non-profit organisations and education providers. In the past year, the company has established a foundation for future growth, evident by the increased number of products purchased and the entry of new Customers. During 1HFY22, the company wrapped up the acquisition of Resi Media at a consideration of US$150 million in cash and Pushpay shares. After the acquisition, PPH made significant improvements to its existing product suite.

• Operating revenue for the half-year rose by US$7.9 million US$93.5 million (Including Resi Media) and anticipates continued revenue growth as its business executes on its strategy, achieved increased efficiencies, and added a further market share in the US faith sector.
• PPH maintained an average Annual Revenue Retention Rate of over 110% over the last five comparable periods ended 30 September 2021, in spite of the challenges posed by the COVID-19 pandemic.
• PPH posted consistent growth in gross margin to 69% in 1H FY22 as compared to 68% in 1HFY21 and 65% in 1HFY20.
• Earnings before Interest, Tax, Depreciation, Amortisation, Foreign Currency (gains)/losses and Impairments (EBITDAFI) for the period amounted to US$26.9 million, indicating a rise of 12% over US$26.5 million in 1HFY20.

Rising Gross Margin (Source: Analysis by Kalkine Group)

Key Risks:

• Stiff Competition: The company’s operational and financial performance could be impacted by the rising market share of competitors in the industry in which it operates.
• Technology Risk: PPH’s business could be impacted by the shift in new technology in the industry, and the operational performance could be under threat.

Outlook:

• For FY22, the company has downgraded its EBITDAFI guidance in the range of US$60.0 million and US$65.0 million from the previous guidance of US$64.0 million and US$69.0 million.
• Looking forward, the company would focus on investment in its long-term growth drivers. In addition, the company would continue to increase the appeal of its products to new customers in existing and new segments of the market in the longer term.
  

SValuation Methodology: EV/EBITDA 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: At the end of 1HFY22, the company had cash and cash equivalents of US$7.7 million as compared to US$4.84 million as on 31 March 2021. The stock of PPH is trading near to its 52-week low level of A$1.255, offering a decent opportunity for accumulation. The stock of PPH has been corrected by ~26.85% and ~24.70% in the past one and three months, respectively. The stock has been valued using an EV/EBITDA 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/EBITDA multiple, considering the downgraded guidance and disruptions in the industry. For the purpose of valuation, peers such as Link Administration Holdings Ltd (ASX: LNK), Appen Ltd (ASX: APX), Over The Wire Holdings Ltd (ASX: OTW), and others have been considered. Considering the indicative upside in valuation, entry of new customers, growth in operating revenue, consistent growth in gross margin, decent outlook, downgraded guidance, current trading levels, current market volatility, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $1.270, as on 26 November 2021, 10:30 AM (GMT+10), Sydney, Eastern Australia.

PPH Daily Technical Chart, Data Source: REFINITIV  

OpenLearning Limited

OLL Details

New Investment from Global Investor: OpenLearning Limited (ASX: OLL) offers an online learning platform to education providers and a global marketplace of world-class courses for learners of all levels. As announced on 26 November 2021, the company has added a strategic investment from a global investment group Alchemy Tribridge Sapphire Pty Ltd and raised around $2.9 million from the placement to ATL.

• In addition, OLL would undertake a non-renounceable rights issue to its eligible shareholders to raise circa $3.06 million.
• In addition, ATL would also be eligible to participate in the rights issue, provided that it will not acquire a relevant interest in the company in excess of 19.9% through its participation in the rights issue.
• The said capital raising of $5.96 million would increase its cash balance to $8.5 million, leaving the business with a strong balance sheet to capture opportunities for a step-change in growth in the upcoming years.

Q3FY21 Financial and Operational Highlights:

• Increase in Platform Revenue: During the quarter ended 30 September 2021, OLL recorded a substantial growth of 186% in platform revenues to $0.825 million, backed by TPO and consistent Platform Subscription revenue.
• Rising Registered Learners: During Q3FY21, OLL added ~0.1m registered learners, which took the total number of registered users throughout all geographies above 3 million for the first time in its history.

Platform Revenue (Source: Analysis by Kalkine Group)

Key Risks:

• Competitive Pressure: The company’s operational and financial health could be impacted by the rising market share of its peers and changing sentiments of clients and customers.
• Technology Risk: Any shift in new technology within the market in which it operates could pose an operational risk to the business.

Outlook:

• OLL remains focused on platform subscription and program delivery offerings, which may drive revenue growth in the upcoming years.
• The company believes that it is capable of five intakes in TPO during CY22. In addition, OLL is increasing its sales and marketing team to support go-to-market efforts in multiple geographies.
• OLL noted that Lifelong learning has a market share of 95% in the online education market of Australia, and it is cementing its position as a leading lifelong learning platform in Australia and Southeast Asia.
  

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: As on 30 September 2021, the company had a cash balance of $4.233 million against $5.744 million as on 30 June 2021. The stock has 52-week low-high levels of $0.090 - $0.305, respectively. The stock was down by ~67.36% in the past one year. The stock has support and resistance level of $0.075 and $0.115, respectively. The stock has been valued using an EV/Sales multiple-based illustrative relative valuation and arrived at a target price with a correction of high-single-digit (in % terms). The company can trade at a slight discount to its peers’ average EV/Sales multiple, considering the COVID-19 disruptions, and low efficiency in generating profits, etc. For the purpose of valuation, peers such as Livetiles Ltd (ASX: LVT), Skyfii Ltd (ASX: SKF), and Schrole Group Ltd (ASX: SCL) have been considered. Considering the expected correction in the valuation, current trading level, and key risks associated with the business, we give a ‘Sell’ rating on the stock at the current market price of $0.105 as on 26 November 2021, 12:15 PM (GMT+10), Sydney, Eastern Australia.

 OLL 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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