Stocks’ Details

Praemium Limited

Decent Growth in Platform Inflows: Praemium Limited (ASX: PPS) provides portfolio administration services. The market capitalisation of the company stood at $305.89 million as on 13^th January 2021. During the quarter ended 31^st December 2020 (Q2 FY21), the company recorded platform inflows of $1.1 billion, reflecting a rise of 128% over Q2 FY20. In addition, the company witnessed a growth of 10% in funds under administration (FUA) to $34.3 billion. With respect to Australian and International segments, the company generated record net inflows of $813 million and $303 million, respectively. Despite the challenges posed by COVID-19 pandemic, the company reported strong financial results during FY20. Revenue for the year moved up by 11% to $38.8 million aided by growth in both platform and portfolio reporting and administration.

Platform Inflows and FUA (Source: Company Reports)

Outlook: Looking forward, the company would support its growth plans around the world by making a concerted investment in improving CX, the client experience. In addition, the company would also expand the UK sales team and support with further brand awareness to raise its profile.

Valuation Methodology: Price to Book Value Multiple Based Relative Valuation (Illustrative)

Price to Book Value Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: During Q2 FY21, PPS was focused on the development of its Australian and International platforms. The stock of PPS has surged 135% in the last nine months. As a result, the stock is trading towards its 52-week high level of $0.740. Considering this, we have valued the stock using the price to book value multiple based illustrative relative valuation and arrived at a target price with correction of high single-digit (in percentage terms). In addition, we have considered 14-day RSI, and it was observed that the stock is currently in the overbought zone and may witness some correction, going forward. On a technical analysis front, the stock has a support level of ~$0.470 and a resistance level of ~$0.742. Hence, considering the returns on stocks, higher valuation, RSI levels, and current trading levels, we advise investors to book profit and give a “Sell” rating on the stock at the current market price of $0.705 per share, up by 15.573% on 13^th January 2021, owing to release of decent quarterly results.

Mach7 Technologies Limited

Completion of Acquisition: Mach7 Technologies Limited (ASX: M7T) provides imaging data sharing, storage and interoperability for healthcare enterprises globally. The market capitalisation of the company stood at ~$301.61 million as on 13^th January 2021. Recently, the company has inked a seven-year contract with Trinity Health for the license and associated support services for its eUnity enterprise viewer and value of the contract stood at A$5.26 million. During the quarter ended 30^th September 2020 (Q1 FY21), the company finished the acquisition of Client Outlook Inc. for an all-cash transaction of $40.8 million, which was funded through an entitlement offer and existing cash reserves. In addition, the company is likely to pay an additional $2.7 million in Q2 FY21 to the vendors for working capital which has been contributed to the Mach7 Group because of the acquisition. In addition, the company generated a total contract value of $3.3 million of new sales orders, and recurring revenue has increased by $0.9 million per annum. In addition, M7T added 9 new customers and recorded cash flow from operations of $1.8 million.

Decent Growth in Topline: During FY20, the company reported revenue amounting to $18.9 million, indicating a rise of 102% over pcp. In addition, it finished 29 new sales order contracts from a mix of new and existing customers, reflecting a growth of 115%. M7T recorded Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) and Net Profit After Tax (NPAT) of $3.3 million and $0.2 million, respectively, which were supported by robust growth in revenues as a result of customer take-up and installation progress.

Key Financials (Source: Company Reports)

Outlook: Looking forward, the company is optimistic about the delivery of strong double-digit revenue growth, EBITDA growth and positive free cash flows into the future. In addition, the company seems to be well-placed to continue delivering great outcomes for its customers, employees and investors.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The company closed the Q1 FY21 with a cash balance of $17.8 million. The stock of M7T has surged 137.22% in the last nine months. Currently, the stock is trading towards its 52-week high level of $1.360. Considering this, we have valued the stock using an EV/Sales multiple based illustrative relative valuation method and arrived at a target price with correction of high single-digit (in percentage terms).  For the purpose, we have taken peers such as Volpara Health Technologies Ltd (ASX: VHT), Nanosonics Ltd (ASX: NAN) and Sonic Healthcare Ltd (ASX: SHL), to name few. In addition, we have considered 14-day RSI, and it was observed that the stock is currently in the overbought zone and may witness some correction, going forward. On a technical analysis front, the stock has a support level of ~$1.151 and a resistance level of ~$1.335. Hence, considering the volatile returns on stocks, higher valuation, RSI levels, and current trading levels, we advise investors to book profit and give a “Sell” rating on the stock at the current market price of $1.270 per share, down by 1.168% on 13^th January 2021.

Austco Healthcare Limited

Change of Name: Austco Healthcare Limited (ASX: AHC) is engaged in the manufacturing, service, supply and distribution of Healthcare and communications equipment. The market capitalisation of the company stood at $31.26 million as on 13^th January 2021. Recently, the company has changed its name from Azure Healthcare Limited (ASX: AZV) to Austco Healthcare Limited (ASX: AHC), which became effective on 27^th November 2020. The company has also received a claim of $489,000 with respect to a legal proceeding commenced in respect to a breach by a party of a non-compete clause.

Winning of Significant Contracts: On 14^th December 2020, the company has secured a contract of $1.3 million to refresh nurse call system for JurongHealth Campus in Singapore. Also, the company’s subsidiary Austco Canada has won a contract of $1.6 million to supply its industry-leading Tacera Nurse Call platform for a new 27-acre integrated 350 bed hospital. During FY20, the company recorded total revenue amounting to $33.0 million, reflecting a rise of 3.9% over the prior year and NPAT on a reported basis amounted to $2.5 million, indicating a growth of 293%.

Revenue (Source: Company Reports)

Outlook: The strategic objectives of the company revolve around improving margins, revenue growth, building brand awareness in growth markets and increasing software and SMA (Service and Maintenance Agreements) revenue.

Stock Recommendation: The company closed FY20 with a cash balance of $6.4 million and nil debt. In the last six months, the stock of AHC has moved up by 57.14%. As a result, the stock is trading towards its 52-week high of $0.125. On a TTM basis, AHC has EV/EBITDA multiple of 7.0x, which is higher than the industry average of 2.1x. In addition, we have considered 14-day RSI, and it was observed that the stock is currently in the overbought zone and may witness some correction, going forward. On a technical analysis front, the stock has a support level of ~$0.085 and a resistance level of ~$0.11. Hence, considering the steep price movement in past months, higher valuation, RSI levels, and current trading levels, we advise investors to book profit and give a “Sell” rating on the stock at the current market price of $0.100 per share, down by 9.091% on 13^th January 2021.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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