Appen Limited

APX Details

Change in Substantial Holding: Appen Limited (ASX: APX) provides quality data solutions and services for machine learning and artificial intelligence applications for global technology companies, auto manufacturers and government agencies. Recently, Mondrian Investment Partners Limited (in capacity of Fund Manager) has made a change to holdings in the company with a voting power of 7.37% against the previous voting power of 6.18%.

1HFY21 Financial Summary:

• During the half-year ended 30^th June 2021 (1HFY22), the company witnessed a small fall of 2% in revenue to US$196.6 million due to lower Global Services revenue.
• Backed by the investments of global customers in new AI use cases supported by APX’s annotation platform and tools, APX witnessed a growth of 15.2% in global product revenue to US$22.3 million.
• Due to higher costs in relation to growth investments, underlying EBITDA for the period moved down by 14.3% to US$27.7 million.

Revenue (Source: Analysis by Kalkine Group)

Key Risks: The company’s performance could be impacted by the uncertainties arising from the evolvement of the COVID-19 pandemic. In addition, the company’s performance could also be impacted by adverse movement in foreign currency.

Outlook:  For FY21, the company expects mid to high single-digit growth in global services revenue. For FY21, the company has reduced its underlying EBITDA guidance to US$81 million - US$88 million from the previous guidance of US$83 million - US$90 million due to planned investment in Quadrant. The company has scheduled to release FY21 results on 24 February 2022.

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 APX is trading below its 52-week low-high average of $8.360 - $25.460, respectively. The stock has been corrected by ~8.33% and ~8.16% in the past one and three months, respectively. The stock has been valued using a 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 discount to its peers’ average P/E multiple, considering COVID-19 related risks and inefficiency in rising profits. For the purpose of valuation, peers such as Data#3 Ltd (ASX: DTL), Infomedia Ltd (ASX: IFM), and Over The Wire Holdings Ltd (ASX: OTW) have been considered. Considering the expected upside in valuation, growing global product revenues, decent liquidity position, decent outlook, current trading levels, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $9.770, as on 1 February 2022, 10:30 AM (GMT+10), Sydney, Eastern Australia.

APX Daily Technical Chart, Data Source: REFINITIV 

Laybuy Group Holdings Limited

LBY Details

Q3FY22 Financial and Operational Summary: Laybuy Group Holdings Limited (ASX: LBY) provides Buy-Now-Pay-Later (BNPL) payment solution to customers and merchants through its platforms. During the quarter ended 31 December 2021, the company attained a record annualised Gross Merchandise Value (GMV) of NZ$1.1 billion, reaching its GMV target of NZ$1 billion for FY22.

• The company recorded a growth of 42% in revenue to NZ$13.5 million, aided by strong growth in GMV through increased active customers and active merchants.
• LBY witnessed a growth of 35% and 61% in Active Customers and Active Merchants to 930,000 and 12,900, respectively.
• The company has finalised partners for the Growth (PFG) debt facility and commenced first drawdowns.

GMV Trend (Source: Analysis by Kalkine Group)

Key Risks: The company is exposed to risks arising from the adverse movement in foreign exchange as it operates in multiple geographies. LBY’s operational and financial health could be impacted by the failure of obligations by the counterparties.

Outlook:  For FY22, the company is focused on achieving revised revenue targets, i.e., growth of 60-70% over FY21. LBY is also focused on ramping up the growth in the UK and driving its position in the market. The strategic focus of the company revolves around enhancing its market share in already established markets.

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 LBY is currently trading near to its 52-week low level of $0.150, offering a decent opportunity for accumulation. The stock has been corrected by ~14.89% in the past one month. The stock has been valued using an EV/Sales Multiple based illustrative relative valuation method 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 led uncertainties and inefficiency in generating profits. For the purpose of valuation, peers such as Openpay Group Ltd (ASX: OPY), Sezzle Inc (ASX: SZL), and Link Administration Holdings Ltd (ASX: LNK) have been considered. Considering the expected upside in valuation, increasing GMV, increasing merchants and customers rising income, 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 $0.195 as on 01 February 2022.

LBY Daily Technical Chart, Data Source: REFINITIV 

LiveTiles Limited

LVT Details

1HFY22 Financial and Operational Updates: LiveTiles Limited (ASX: LVT) is engaged in the development and sale of business software in Australia and overseas. For the half-year ended 31 December 2021 (1HFY22), the company reported a growth of 32% in operating revenue to $26.7 million, backed by strong performances in Software subscriptions.

• LVT witnessed a rise of 15% in contracted licence base to 2.7 million as compared to 2.3 million as on 30 June 2021. As on 31 December 2021, Annualised Recurring Revenue (ARR) stood at $65.2 million, reflecting a growth of 12% over pcp.
• The company’s acquisition of BindTuning (a leading digital workplace software company) is supporting to ramp up the development of LiveTiles Marketplace for Employee Experience solutions.
• LVT had a cash balance of $17.6 million on 31 December 2021. The company also has access to $4 million to draw from the OneVentures debt facility, which brought total cash to $21.6 million.

Operating Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks: The company is exposed to risks arising from the adverse movement in foreign exchange as it operates in multiple geographies. In addition, its performance could also be impacted by regulatory risk.

Outlook: Looking forward, the company would be focused on growing operating revenue and contracted licences. In addition, it will work on new product innovation and investment to increase its presence in the Employee Experience market.

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 company is trading near to its 52-week low level of $0.072, offering a decent opportunity for accumulation. The stock of LVT has been corrected by ~34.99% in the past three months. 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 inefficiency in driving profits. For the purpose of valuation, peers such as 99 Technology Ltd (ASX: 99L), Adacel Technologies Ltd (ASX: ADA), Skyfii Ltd (ASX: SKF), and others have been considered. Considering the expected upside in valuation, increasing operating revenue, rising ARR, enhanced contracted licences, decent outlook, current trading level, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.077, as on 01 February 2022, 12:20 PM (GMT+10), Sydney, Eastern Australia.

LVT 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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