Integrated Research Limited

IRI Details

Quarterly Rebalancing of S&P Dow Jones Indices: Integrated Research Limited (ASX: IRI) is engaged in designing, developing, implementing and sale of systems and applications management computer software for business-critical computing. As per the recent quarterly rebalance of S&P Dow Jones Indices, IRI has been removed from S&P/ASX 300 Index, which became effective on 20^th September 2021.

FY21 Financial Summary

• Positive Momentum Shift: For the year ended 30^th June 2021, the company recorded revenue amounting to $78.5 million against $110.9 million in FY20. IRI experienced a positive momentum shift in the 2H FY21 in all product lines but was insufficient to facilitate growth during the year.
• Fall in Profit: NPAT for the year went down by 67% to $7.9 million against $24.1 million in FY20.
• Launch of New Products: During the year, IRI continued its transformation journey with the rollout of new cloud-based products for driving long term growth as well as recurring subscription revenues.
• Tight Cost Control: IRI also worked on cost control, evident by a fall of 12% in total expenses to $68.7 million in FY21.

Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks:

• COVID-19 Disruptions: The company’s growth is exposed to risk arising from the on-going global uncertainty caused by COVID-19 and other geo-political uncertainties.
• Forex Headwinds: Any unfavourable movement in the foreign currency could impact the financial health of the company.

Outlook:

• The company’s strategic partnerships and significant product innovation, and a renewed customer-centric focus in FY21 led the company to take on 24 new logos in the collaborate space and build a strong new pipeline of opportunities for FY22.
• IRI is likely to witness further product innovation in FY22, and it is optimistic about the strong Collaborate solution suite.
• IRI has scheduled to conduct the 2021 Annual General Meeting on 24^th November 2021.

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: IRI closed FY21 with a net cash position of $5.5 million against $4.7 million as on 30^th June 2020. The stock of IRI is trading below its 52-week low-high average of $1.565 - $3.890. The stock of IRI has been corrected by ~23.33% and ~9.55% 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 premium to its peers’ average EV/Sales multiple, considering the launch of new products and tight cost control measures, etc. For the purpose of valuation, peers such as Reckon Ltd (ASX: RKN), Class Ltd (ASX: CL1), Infomedia Ltd (ASX: IFM), and others have been considered. Considering the expected upside in valuation, rollout of new products, improving costs, decent outlook, rising cash position, 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 $1.610, down by ~5.848% as on 05 October 2021.

IRI Daily Technical Chart, Data Source: REFINITIV  

Laybuy Group Holdings Limited

LBY Details

Internal Projections Surpassed: Laybuy Group Holdings Limited (ASX: LBY) operates a business of consumer financing through a buy now, pay later mode. Recently, the company stated that the rollout of the Affiliate Marketing Network is surpassing internal projections with both orders processed and GMV reached five times ahead of its internal one-month forecast.

Q1 FY22 Financial Summary:

• Decent Growth in GMV: During the quarter, the company witnessed accelerating growth in all regions, mainly in the United Kingdom. This was evident by an increase of 58% in Gross Merchandise Value (GMV) to NZ$738 million.
• Increase in Revenue: LBY posted a growth of 70% in revenue to NZ$10.4 million, backed by strong GMV growth and rising merchant fee income.
• Rising Active Customers: The company’s active customers reached 829,000, reflecting a rise of 75% on a YoY basis.

FY21 Financial Summary:

• Growth in Operating Metrics: For the year ended 31^st March 2021, the company recorded strong growth in all its key operating metrics. LBY achieved a growth of 159% in Gross Merchandise Value (GMV) to NZ$589 million.
• Rising in Total Income: During the year, the company’s income increased by 138% to NZ$32.6 million, supported growth in active customers and active merchants.

GMV Trend (Source: Analysis by Kalkine Group)

Key Risks:

• Cybersecurity and Data Protection: The company collects and holds a wide variety of personal and commercial data about its customers and merchant partners. Any failure in managing privacy could lead the business to litigation, claims, fines, and penalties, as well as reputational damage.
• Capital and Funding: LBY’s business model is dependent on the ability to finance merchants by enabling customers to use its services to acquire products. The company’s operations and performance could adversely be impacted if it does not have ample liquid funds to satisfy its contractual obligations.

Outlook:

• For FY22, the company is targeting to surpass GMV of NZ$1 billion, which is likely to be supported by customer and merchant growth along with increased repeat usage.
• In FY22, LBY is expecting income growth in the range of 90% - 100% over FY21.

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: During Q1 FY22, the company successfully wrapped up a capital raising of A$40 million in order to support the acceleration of growth in the UK. At the end of August 2021, the company terminated the debt facility with Victory Park Capital, LLC, as it has been repaid. The stock of LBY is trading near to its 52-week low level of $0.415. The stock of LBY has been corrected by ~12.38% and ~52.08% in the past one and six 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 uncertainties from COVID-19 and negative business margins and deteriorating operations cash flows. For the purpose of valuation, peers such as Sezzle Inc (ASX: SZL), Link Administration Holdings Ltd (ASX: LNK), Computershare Ltd (ASX: CPU) have been considered. Considering the expected upside in valuation, rising GMV, growth in revenue and net income, 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 $0.460, down by ~5.155% as on 05 October 2021.

LBY 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.

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.