Nearmap Limited

NEA Details

Grant of Options Post Shareholder Approval: Nearmap Limited (ASX: NEA) is a location intelligence company, offering cloud-based geospatial information services (aerial photomaps) to business customers via subscription. On 11 November 2021, NEA had announced its decision to issue ~793,027 options to the MD & CEO, Dr. Rob Newman at ~$2.23 per option post shareholder sanction at the AGM (annual general meeting).

NEA held AGM on 15 November and declared the meeting results including the carried out decision for the grant of option shares to the CEO.

Operation and Financial Highlights of FY21:

• Investment in Technology: During FY21, NEA completed the design and series of tests on the customized components of HyperCamera3, its new proprietary camera system in aerial flight.
• Growth in Subscription Revenue: The subscription revenue rose to ~$93.1 million in FY21 compared to ~$90.1 million in FY20.
• Rise in Gross Margin: The company reported a gross margin of ~74% in FY21 compared to ~69% in FY20, driven by revenue growth.
• Focus on North American Business: The company focuses on strengthening the North American team through aggressive marketing campaigns and increasing industry specialists. It is also evaluating more geographies for expansion.

Group ACV Highlights from FY17-FY21; (Analysis by Kalkine Group)

Key Risks: The company faces the risk of technological changes and innovation to deliver the latest technology services to customers. It is exposed to liquidity changes to fulfil financial obligations, data security, and cybersecurity risks.

Outlook:

• The company estimates the ACV (Annual Contract Value) portfolio in the range of ~$150 - ~ $160 million on a constant currency basis for FY22.
• NEA targets an increase of ~20-40% in the ACV in the mid-to-long term and intends to keep the underlying retention above 90%.
• The company will utilise the recent capital proceeds for growth initiatives, scale-up, and spend ~$30 million in net cash in FY22.
• NEA has conducted a series of tests on the customized components of HyperCamera3 in aerial flight and is on track to manufacture and launch it 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 stock of NEA gave a negative return of ~16.04% in the past three months and a positive return of ~3.43% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $1.620 - $2.790. The stock has been valued using the Enterprise Value to Sales based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount than its peers’ median EV/Sales multiple, considering its continuing trend of net losses, negative ROE, technological changes, and cyber security related risks. For this purpose of valuation, few peers like Class Limited (ASX: CL1), Praemium Limited (ASX: PPS), LiveHire Limited (ASX: LVH) have been considered. Considering the current trading levels, decent financial results in FY21, a decline in debt-to-equity ratio, the launch of HyperCamera3 in FY22, evaluation of new geographies to expand, upside in valuation, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the current market price of $1.805, as of 15 November 2021, 10:30 AM (GMT+10), Sydney, Eastern Australia.

NEA Daily Technical Chart, Data Source: REFINITIV  

Bigtincan Holdings Limited

BTH Details

Issue of Shares: Bigtincan Holdings Limited (ASX: BTH) provides artificial intelligence (AI) driven sales enablement software and learning management solutions. BTH’s product portfolio suite comprises Bigtincan Hub, Bigtincan automation, Bigtincan Life Sciences (LS), Bigtincan Zunos Pricing platform, etc. across Life Sciences, financial services, technology, telecom, energy, and other sectors. On 4 November 2021, BTH issued 239,603 ordinary shares at ~$0.021 per share due to the exercise of options or other convertible securities released as per an employee incentive scheme.

Q1FY22 (Ending 30 September 2021) Highlights:

• During the quarter, BTH acquired 100% of Brainshark Inc. and integrated their Sales Enablement Platform to increase the enterprise-grade capabilities. Notably, in Q1FY22, BTH initiated cross selling of a combined offering with its current customers T-Mobile and State Street. Brainshark Inc. reported a net positive operating cash flow of ~$0.2 million as of 30 September 2021.
• BTH witnessed significant new customer wins such as Alyaxis, Trinetx, and Bio-Rad Laboratories. The expanded customer base comprised Ashfield Healthcare, Linx Cargo, State Street, Reddit, and T-Mobile. At Q1FY22-End, BTH secured a contract with Asurion for Content Hub and Learning Hub for ~$2 million.
• The Board welcomed two new Non-Executive Directors in October 2021, Inese Kingsmill and Farouk Hussein.
• As of 30 September 2021, the company had ~$55.7 million cash and cash equivalents post- payment for the purchase of Brainshark and ~$136.5 million of related capital raise.

Total Revenue & Net Income from FY17-FY21; (Analysis by Kalkine Group)

Key Risks: The company faces technological changes, integration risk, product dependencies on Bigtincan Hub, and stiff competition from peers in the industry.

Outlook:

• The company will hold an online Annual General Meeting (AGM) on 24 November 2021.
• BTH expects accelerated opportunities for upselling and cross-selling throughout the remainder FY22.
• BTH is progressing well on track to surpass the guidance of ~$119 million Annualised Recurring Revenue (ARR) and expects ~$109 million revenue 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 stock of BTH gave a positive return of ~39.53% in the past six months and a positive return of ~4.33% in the past nine months. The stock is currently trading lower than the 52-weeks’ average price level band of $0.761 - $1.530. The stock has been valued using the Enterprise Value to Sales based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount than its peers’ average EV/Sales multiple, considering its continuing net losses & ROE in FY21, negative net operating cash flows in Q1FY22, and integration synergies’ risk. For this purpose of valuation, few peers like Readytech Holdings Limited (ASX: RDY), Praemium Limited (ASX: PPS), Class Limited (ASX: CL1) have been considered. Considering the current trading levels, increase in cash receipts, ongoing integration with Brainspark Inc. ahead of schedule, new customers, and valuation, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the current market price of $1.095, as of 15 November 2021, 10:30 AM (GMT+10), Sydney, Eastern Australia.

BTH Daily Technical Chart, Data Source: REFINITIV  

Integrated Research Limited

IRI Details

Director Resignation: Integrated Research Limited (ASX: IRI) develops, implements, and markets systems and applications management computer software for unified communication (UC) networks, business computing, and payment networks in the US, Europe, and the Asia Pacific. On 31 October 2021, Mr. Garry Donald Dinnie, ceased to be a Director in IRI.

FY21 Highlights:

• The overall revenue reported a fall of ~29% year over year in FY21 due to a decline in licence fees revenue by ~34% YoY to ~$47.35 million. Revenues from all territories in the US, Europe, and Asia declined during FY21.
• The 2HFY21 revenue and NPAT increased by ~30% and ~210% on 1HFY21. This growth was witnessed due to the renewed focus on customer-first strategies, expansion of new SaaS products, and execution of new key strategic alliances.
• IRI reported a ~10% increase in net spending on R&D to ~$19.1 million in FY21. The company completed the next phase of development of its cloud-based processing platform, Prognosis Cloud. The platform will become the basis of new SaaS-based products and services.
• IRI maintained a net positive operating cash flow position of ~$21.10 million during the year.
• IRI exited FY21 with a cash balance of ~$12.14 million as of 30 June 2021 compared to ~$9.74 million as of 30 June 2020.

Revenue from License Sales from FY17-FY21; (Analysis by Kalkine Group)

Key Risks: The company faces the risk of fluctuations in forex rates and technological changes in the business. NEA experienced longer sales cycle, modified customer buying patterns, and shorter contract terms due to COVID-19 crisis.

Outlook:

• IRI will have a virtual AGM (Annual General Meeting) on 24 November 2021.
• New customer acquisition is pivotal for continued business growth and IRI expects robust new customer growth in FY22 with the maturity of its SaaS offering and release of more new products.
• The company is witnessing organic growth in its TAM (the total addressable market for real-time and high-value payments and Unified Communications). IRI plans to develop new solutions for the high-value and real-time account-to-account payments market.
• With new strategic partnerships and the release of new 24 logos for the Collaborate suite, IRI has a robust new opportunities pipeline entering in FY22.
• IRI will keep innovating its Prognosis hybrid cloud platform and expects a rapid evolution of solutions.

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 IRI gave a positive return of ~23.24% in the past three months and a positive return of ~35.74% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $1.410 - $3.750. The stock has been valued using the Price to Earnings Per Share multiple based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount than its peers’ median P/E multiple, considering its decline in top-line FY21 result, COVID-19 disruptions, negative forex impact, and no dividend payment for FY21, etc. For this purpose of valuation, a few peers like PayGroup Limited (ASX: PYG), Nuix Limited (ASX: NXL), Iress Limited (ASX: IRE) have been considered. Considering the current trading levels, positive net operating cash flows, higher cash balance, development of Prognosis platform, new strategic partnerships, cost control initiatives in FY21, indicative upside in valuation, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the closing market price of $1.420, down by ~2.069%, as of 15 November 2021.

IRI 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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