Latitude Group Holdings Limited

LFS Details

Change in Director’s Interest: Latitude Group Holdings Limited (ASX: LFS) is a leading digital payment and finance business operating in Australia and New Zealand. Recently, the company notified the market that, Ahmed Fahour, a director of the company, had acquired 496,573 unquoted Performance Rights issued under the Long-Term Incentive Plan (LTIP) for a consideration of $1,249,998.

Digging Into H1FY21 Results:

• Higher Cash & Statutory NPAT: For H1FY21, the company reported a statutory NPAT of ~$89.5 million compared to a loss of ~$21 million reported in 1HFY20. Cash NPAT for the period increased 81% year over year and came in at $121 million.
• Reduction in Cost: During the half-year ended 30 June 2021 (H1FY21), the company witnessed a cost reduction of 10.5% year over year, which came in line with 1H21 guidance, owing to the simplification program and sustaining growth-associated investments.
• Product Launch: In 1HFY21, the company unveiled LatitudePay+, allowing BNPL customers to make bigger purchases of up to $10,000 using LatitudePay. The product is expected to go for a wider release in October 2021.

Expenditure Trend (Source: Analysis by Kalkine Group)

Key Risks: The company is exposed to the risks related to the change in technology, which could impact the company’s way of doing business, and COVID-19 led uncertainties.

Outlook: LFS completed the acquisition of digital personal lending business Symple Loans to fast-track consumer lending growth. The move will allow the company to provide a superior customer and partner experience as well as expand its product offer. The company expects the 2H21 dividend to remain in the range of 60-70% payout at 7.85 cents fully franked per share.

Valuation Methodology: EV/EBITDA 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: Over the last six months, the stock has been corrected by ~15.73%. Currently, the stock is trading lower than the average 52-week price level band of $2.03 - $2.99. The stock has been valued using an EV/EBITDA 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, considering decent volume momentum, acquisition synergies, a turnaround in profits, and a modest outlook. For the valuation purpose, peers such as Humm Group Ltd (ASX: HUM), Money3 Corp Ltd (ASX: MNY), etc., have been considered. Considering the rise in BNPL customers, LFS’s decent growth in lending across both personal and auto loans, higher cash NPAT, current trading level, indicative upside in the valuation, and associated key risks, we give a “Speculative Buy” rating on the stock at the closing price of $2.06, up by ~0.487% as on 15 November 2021.

LFS Daily Technical Chart, Data Source: REFINITIV

VGI Partners Limited

VGI Details

Sneak Peek at1HFY21 Results: A global equity manager, VGI Partners Limited (ASX: VGI), manages capital for high-net-worth individuals, family offices, and two Listed Investment Companies.

• In 1HFY21, the company recorded a statutory NPAT of $43.0 million, up from $3.6 million reported in the year-ago period, owing to fair value gains.
• During the half-year ended 30^th June 2021, the company witnessed increased pro-active client engagement, improvements to content creation and CRM upgrade.
• Net management fees stood at $22.2 million, during the period and were steadily in line with the 1HFY20 figure. Performance fees for 1HFY21 came in at $50.4 million, consistent with VGI Partners’ announcement on 21 July 2021, reflecting robust performance and comparing with $0.1 million in the year0ago period.
• On 10 September 2021, the company paid an interim dividend of 31.0 cents per share, which indicates a payout ratio of 50% on normalised Net Profit After Tax (NPAT) for 1H FY21. The company exited 1H FY21 with a cash balance of $34.6 million and nil debt.

Revenue Highlights (Source: Analysis by kalkine Group)

Key Risks: The company’s financial health could be impacted by adverse movement in foreign currency as its main activity is to invest in global markets. VGI’s funds’ performance is exposed to volatility in the equity market, wherein ups and downs of the market could impact its business growth.

Outlook: The company remains on track, thanks to its robust global investment capabilities. Despite the impact led by the COVID-19 outbreak, VGI has continued to deliver decent performance across both its global and Asian strategies. In addition, the company focuses on maintaining a disciplined risk management system and is confident about its existing portfolios and would continue to reap the benefits of opportunities in future.

Stock Recommendation: As on 30 September 2021, VGI’s funds under management (FUM) stood at A$2.8 billion compared to A$3.2 billion as on 30^th June 2021, mainly due to the performance of funds. The stock of VGI is trading near to its 52-week low level of $4.45, offering a decent opportunity for accumulation. The stock has been corrected by ~44.64% in the past nine months. The stock of VGI is trading at a P/E multiple of 4.9x, lower than the industry median (Financials) of 10.8x on a TTM basis, thus seeming undervalued. Considering the valuation on a TTM basis, healthy balance sheet, increasing top and bottom line, 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 $4.49, as on 15 November 2021, 12:30 PM (GMT+10), Sydney, Eastern Australia.

VGI 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 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 analysis has been achieved and 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 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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