Bigtincan Holdings Limited

BTH Details

Recent Updates: Bigtincan Holdings Limited (ASX: BTH) was incorporated in 2012, it’s a software provider which provides AI (Artificial Intelligence) powered sales enablement software and solutions related to learning management.

• R&D Investment: BTH joined hands with the Scottish Enterprise to advance the existing products and R&D for new products. The Scottish Enterprise has already invested £4 million grant to grow BTH’s Glasgow site.
• Initial Substantial Shareholding: MA Financial Group Limited (MAF) and other entities became shareholder with voting power of ~5.05%.

Q1FY22 & FY21 Highlights:

• The company recorded a hike of ~218% with an organic growth hike of ~174 in the cash receipts from customers to ~$14.38 million. The cash outflow from operating activities was reported as ~$19.3 million for its 1QFY22, where ~$1.8 million was related to significant acquisition of Brainshark. The company closed its quarter with the cash balance of ~$55.70 million at the end of 30^th September 2021 versus ~$56.7 million the end of 30^th June 2021.
• The revenue was up by ~42% Y-o-Y to ~$43.9 million in FY21. With a retention percentage of 89%, its annual Accounting Rate of Return (ARR) increased by ~48% and reported as ~$53.1 million for FY21.

Key Results Highlight (Source: Analysis by Kalkine Group)

Key Risks:

• Technology Risks: Its business is reliant on technology and has its related challenges. Failure in regular keep-up and upgradation to which could lead to operational risks of lower efficiencies and temporary halts, thereby affecting its revenue.
• Competition from Peers: Due to stiff competition, it leads to a risk of new providers or existing competitors providing a comparatively superior solution or experience.
• Regulatory Risk: Working in online space sometimes is bound to face issues related to complex regulatory environment.

Outlook:  With an anticipation of a growth of ~$3.4 billion in the addressable market of Sales Intelligence Market, it expects to achieve ~$119 million of ARR with ~$109 for the FY22. BTH strategies to expand in UK market along with expansion strategies planned with BrainShark. One of them is to start cross selling and upsell opportunities in FY22.

 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 below its 52-week low-high average of $0.761 - $1.530, respectively. The stock of BTH has been corrected by ~10.94% in past six 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’ mean EV/Sales multiple, considering the COVID-19 disruptions, actual synergy from BrainShark, and negative ROE, etc. For the purpose of valuation, peers such as Iress Ltd (ASX: IRE), Class Ltd (ASX: CL1), Janison Education Group Ltd (ASX: JAN) have been considered. Considering the expected upside in valuation, FY22 expected growth ARR and revenue, current trading levels, UK expansion strategies and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the closing market price of $0.990, down by ~0.503%, as on 24 December 2021.

BTH Daily Technical Chart, Data Source: REFINITIV 

DUG Technology Limited

DUG Details

Change in Directors’ Interests: DUG Technology Ltd (ASX: DUG) works in a technology space and provides scientific data analysis services, software solutions and high-performance computing as a service (HPCaaS). As per the announcement on 13^th December 2021, Francesco Sciarrone a director in the ocmpany acquired 15,425 ordinary shares for nil consideration.

1QFY22 & Other Updates:

• DUG welcomed the NRI Roadmap for 2021 on 8^th December 2021, by stating that HPC’s demand is increasing the supply and it will address towards making the related polices more flexible and making Geraldton’s HPC campus climate positive.
• The company completed its placement of ~AU$15.0 million along with reduction in CBA term debt to ~US$12.45 million in 1QFY22.
• DUG commenced restructuring in its services business line and reported revenue from external customers as ~US$8.69million for the quarter.
• With the cash receipts from external customers of ~US$8.56 million for 1QFY22, the company closed its quarter with the cash balance of ~US$10.54 million at the end of 30^th September 2021 versus ~US$10.02 million at the end of 30^th June 2021.

Cash Balance Highlight (Source: Analysis by Kalkine Group) 

Key Risks:

• COVID-19 and Omicron: The company is vulnerable to the risks associated with the impacts of COVID-19 and lockdown due to the new variant Omicron, which might further affect its operations.
• Regulatory Risks: The company is prone to non-approval from regulatory bodies, due to which its operations are at risk.

Outlook:  DUG sees its macro trend as growing in Climate, Military and Space and Resources sales areas and plan to change its pHPC (High Performing Computing) funding models. As per 8^th December Newsletter, DUG stated that due to COVID-19 the company has faced major setback and they will be performing some major restructuring in the company.

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

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 the company has been corrected by ~48.18% in the past nine months. Currently, the stock is trading lower than the average of its 52-week low and high levels of $0.525 and $1.455, respectively. The stock has been valued using the EV/Sales multiple based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in % terms). After considering the expected cyclical effects related to COVID-19 and anticipated restructuring, the company can trade at a slight discount to its peers. For the purpose of its valuation, peers like Bigtincan Holdings Ltd (ASX: BTH), LiveTiles Ltd (ASX: LVT), and Integrated Research Ltd (ASX: IRI) have been considered. Considering the company’s 1QFY22 updates, increase in revenue, current trading levels, indicative upside in the valuation, and key risks associated with the business, we give a “Speculative Buy” rating on the stock at the closing market price of $0.57, up by ~5.555%, as on 24 December 2021.

DUG Daily Technical Chart, Data Source: REFINITIV 

LiveTiles Limited

LVT Details

Signing of Agreement: LiveTiles Limited (ASX: LVT) is involved in the development and sale of business software in Australia and overseas. As announced on 15^th December 2021, the company reached a binding agreement to acquire 100% stake in BindTuning over a 24-month period. The company would pay an initial payment of US$ 540k for a 19.99% stake and the balance payment calculation linked to ARR performance hurdle.

Q1FY22 Financial and Other Updates:

• On 3^rd December 2021, LVT was removed from S&P/ASX All Technology Index.
• During the quarter, the company recorded Annualised Recuring Revenue of $64.5 million, reflecting a rise of 13% Y-o-Y.
• LVT secured a $10 million loan facility, with $6 million received and fully drawn. The remaining $4 million will be issued as convertible notes.
• The company recorded cash receipts of $14.6 million, indicating an increase of 21% Y-o-Y. Net operating cash outflow (excl. grants and non-recurring items) stood at $0.5 million, showcasing an improvement of 58% over Q4FY21 and 33% over pcp.

FY21 Financial Highlights:

• As a result of growing subscribers in all markets, the company witnessed growth of 19% in operating revenue to ~$45 million and the contracted licence base rose by 48% to $2.3 million
• LVT posted an improvement of 91% in underlying EBITDA loss to $1.1 million against $12.55 million loss in FY20 because of declining operating expenses.

Operating Revenue (Source: Analysis by Kalkine Group)

Key Risks:

• Forex Headwinds: As the company operates in multiple geographies, which leads the business to a forex risk caused by unfavourable movement in foreign exchange.
• Regulatory Risk: LVT’s increasing presence globally may increase regulatory requirements and can create regulatory risk for the business.

Outlook:

• The company aims to grow licenced user numbers, by minimum 5 times by 2024.
• The company would work continuously to leverage the operating model for efficiencies for maximising commercial opportunities.
• LVT anticipates strong medium to long-term growth potential, which would be backed by increased remote working and the demand for Employee Experience solutions to said organisations in a post-pandemic working environment.

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 the company has been corrected by ~59.53% in the past nine months. Currently, the stock is trading lower than the average of its 52-week low and high levels of $0.082 and $0.303, respectively. The stock has been valued using the EV/Sales multiple based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in % terms). After considering the expected cyclical effects related to COVID-19 and regulatory risks, the company can trade at a slight discount to its peers. For the purpose of its valuation, peers like Adacel Technologies Ltd (ASX: ADA), ReadCloud Ltd (ASX: RCL), and Skyfii Ltd (ASX: SKF) have been considered. Considering the expected upside in valuation, recent agreement with BindTuning, rising ARR, decent long-term 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 $0.085, as on 24 December 2021, 12:00 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 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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