eServGlobal Limited

ESV Details
 
Stock being added to All Ordinaries: eServGlobal Limited’s (ASX: ESV) stock will be added in All Ordinaries effective from March 19, 2018, as per the latest S&P DJ Indices’ March quarter rebalance. On the other hand, ESV in FY 17 (for 14 months) reported 43% fall in the revenue to $12.2 million. During FY 17, the loss after tax rose 71% to $37.2 million. While the company reported cash at 31 December 2017 of $10.8 million, FY17 EBITDA was at a loss of $29.6 million at the back of foreign exchange losses against FY16 EBITDA loss of $11 million.
 
For the 14 months ended December 31, 2017, the group had earlier reported to witness shortfall in core business revenue forecasted to be in the range of Euros 8.3m to 8.5m. This has been impacted by delay in signing of orders. For instance, Euro 3 million orders were signed in January instead of the earlier schedule of 4Q17, but this will be recognizable over a three-year period. The cost reduction in the core business has been on track with fund raising of about Euros 2 million. Particularly, in FY 17, the company raised fund through issue of new shares and through the Entitlement offer, which has been used in part to fund the capital raise by the HomeSend JV to fund its short-term cash requirements and to provide further capital for future cash calls, thus enabling the company to maintain its ownership in the HomeSend JV. Further, ESV has paid down all the group’s debt to strengthen the statement of financial position and for general working capital purposes. The group aims to have a long-term sustainable level of cost base based on the FY17 revenue and recurring revenue of about Euros 5 million with upgrades from existing customers. The group still aims to achieve operational EBITDA breakeven during FY18 (at 50% of the breakeven point of 2015) and has repaid its debt in full. The group also hopes to benefit from the opportunities through HomeSend JV. HomeSend is gaining momentum with over 20 agreements secured with banks.
 
The group expects 2018 to be a transformational year with increase in volume run-rate with more number of banking clients to be added through HomeSend. The group is in discussion in terms of signing larger opportunities which remain open.
 

FY 17 Financial Performance (Source: Company Reports)
 
Meanwhile, ESV stock has fallen 15.38% in three months as on March 12, 2018 at the back of lower than expected result and volatile environment. Looking at the current trading scenario and financial performance, we give a “Hold” recommendation on the stock at the current price of $0.165
 

ESV Daily Chart (Source: Thomson Reuters)

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