Rhipe Limited 

RHP added to All Ordinaries index, more demand for the shares: The leading cloud channel company, Rhipe Limited (ASX: RHP) on 8th March 2019, announced to the exchange that RHP stock, as per March 2019 Quarterly Rebalance of the S&P/ASX Indices, was added to All Ordinaries, effective from March 18, 2019. It is to be noted that Exchange Traded Funds (ETF’s) allocate capital based on the index constitution and the security weightage in the index, hence addition/deletion of security to the index would result in increasing the trading activity in that security.

On the other hand, the company appointed Mr. Gary Cox as a Non-Executive Director and Chair of the Company, effective from 26^th March 2019. Mr, Cox was previously the Executive Officer for the Enterprise and Partner business for Microsoft Japan. Before assuming his roles in Japan, Mr. Cox was responsible for the leadership pf Microsoft’s Office 365 cloud business in Asia.


RHP’s Financial Results (Source: Company Report)

The company had reported a robust set of numbers for 1HFY2019. The total sales for 1HFY2019 came in at $114.7 million vs. $85 million in 1HFY2018, resulting in a growth of 30% on a YoY basis.The reported EBITDA for 1HFY2019 came in at $4.6 million vs. $2.8 million in 1HFY2018, a growth of 66% in EBITDA.

The company reported total operating expense growth of 18% on a YoY basis, hence RHP was able to report operating profit growth of 79% better than revenue growth of 30%.On the outlook front, the company is expected to deliver $11.5 million to $12 million of operating profit for FY19. Meanwhile, the share price of the company has delivered returns of 41.13% and 17.06% in the past three months and one month respectively and is trading slightly towards the 52-week higher level of $1.825. The company might, however, be overvalued at the current juncture as it trades at the PE and EV/EBITDA multiple of 47.43x and 27.37x, respectively which is higher as compared to peers. Thus, considering the expensive valuation at current juncture despite a decent outlook, we maintain our “Hold” rating on the stock at the current market price of $1.750.
 

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