LiveTiles Limited

Launch of AI-Driven Solution: LiveTiles Limited (ASX: LVT) is engaged in the operations of sale & development of business software in Australia and other parts of the world.

The AI-driven data-centric security solution has been launched by the company in collaboration with its partner Nucleus Cyber. LiveTiles will do the promotion and sell the solution to enterprise customers as a premium feature of its intelligent workplace platform. The solution is capable to replace a wide variety of existing security tools, user training and complicated configurations with a streamlined AI-powered solution which is more effective.
 
The addressable market for this type of security solution is significant and targets over 400,000 customer organisations and over 85% of Fortune 500 companies that leverage Microsoft’s SharePoint Online as part of their Office 365 subscription.
 

Annualized Recurring Revenue (Source: Company Reports)
 
The company reported a robust top-line for 1HFY19 with revenue of ~$5.67 million in 1HFY19 against ~$1.90 million in 1HFY18, representing a significant rise of 198% on PCP basis. However, the growth in revenue did not aid the profitability and the company reported a loss of $22,769,721 in 1HFY19 vs a loss of $5,921,020, an increase of 285%, primarily driven by higher operating expenses.

The ARR has more than tripled over the last twelve months to add $23 million. It is one of the fastest-growing SaaS companies globally. LVT completed the acquisition of Wizdom, Europe’s leading ‘plug and play’, Microsoft aligned digital workplace software business, in Feb 2019.

The company reported a healthy rise in customer numbers, growing by 153 on a year-on-year (up 34%) to reach 598 paying customers as at 31 December 2018.Of these, 39 customers contribute at least $100,000 (termed as large customers), up from 14 as at 31 December 2017. The Average ARR per customer was up 145% on YoY basis continuing its robust growth since past one year.

Guidance For ARR: The company has revised its guidance and as per the new guidance, LiveTiles’ objective is to organically grow ARR to at least $100 million by 30 June 2021.

LVT’s share price exhibited significant volatility with a yield of 34.33% over the past six months and a negative return of 1.10% in the last one month. The company has completed the acquisition of Wizdom, in February 2019. Further, based on the recent launch of the company’s AI-driven solution along with ARR growth in 1HFY19 and looking at current trading level, we maintain our “Speculative Buy” recommendation on the stock at the current market price of $ 0.440 (down 2.22% on June 7, 2019).
 

Creso Pharma Limited

Definitive Agreement For Recommended Acquisition of Creso Pharma by PharmaCielo:Creso Pharma Limited (ASX: CPH) mainly focusses on providing pharmaceutical expertise through delivery of the highest quality products in the cannabis domain.The company has footprints in many markets and aims to offer a diversified portfolio of solutions globally.

The company has entered into a definitive agreement with Canadian cannabis company PharmaCielo Limited, for a recommended acquisition of Creso Pharma by PharmaCielo. The acquisition will be effective by a scheme of arrangement between the shareholders of Creso Pharma and the company, and a separate consistent scheme of arrangement between Creso Pharma and its listed option-holders. The Creso Pharma shareholders will receive 0.0775 PharmaCielo shares for each Creso Pharma share held representing a value of AUD$0.63 based on the PharmaCielo VWAP. As per the release, it was advised that Creso Pharma securityholders should not take any action at this stage. And, the company will give an opportunity to vote on the share scheme and listed optionholders of Creso Pharma will also get an opportunity to vote on the Option Scheme at the scheme meetings to be held later this year.
 
Creso Pharma listed option-holders will receive 0.0185 PharmaCielo shares for each Creso Pharma listed option held representing a value of AUD$0.15 based on the PharmaCielo VWAP. The offer price of AUD$0.63 for each Creso Pharma share will be paid in PharmaCielo shares determined at a fixed price of AUD$8.1261/CAD$7.61661 being the PharmaCielo VWAP. The proposed transaction is expected to create a well-capitalised, publicly traded company with a strong growth profile and significant strategic advantages.
 
Key Investment Highlights: The acquisition will create a supply chain with vertical integration with PharmaCielo contributing its expertise in terms of price, quantity and quality in cannabis cultivation, production and extraction. The combination will benefit from experienced Board and Management team, expansion of cultivation and processing facilities along with an expanded commercial network. The acquisition will lead to an expansion of the product portfolio as it will expand the on-shelf product portfolio of PharmaCielo on the back of the availability of Creso Pharma existing products to be marketed through the PharmaCielo’s global market presence precisely in South America.  
 

Key Information (Source: Company Reports)
 
On the financial front, the total product sales of Creso Pharma increased by 510% from $91,609 in 2017 to $558,382 in 2018 for the year ended. The company’s revenues were supported by repeat purchase and geographic expansion as well. The net loss of the company, however, was reported at $16.84 million in FY18 as compared to $15.07 million in FY17. This was primarily on the back of higher operating expenses.
Stock Performance and Outlook:Given the backdrop of today’s release related to a definitive agreement for recommended acquisition of Creso Pharma by PharmaCielo, the stock price climbed up 30.952% on 07 June 2019 with a market capitalisation of circa $56.17Mn. On the other hand, the stock has generated a negative return of ~43% in the last 1-year. PharmaCielo’s proposed acquisition of Creso Pharma is expected to harness the synergies between the two and to create a combined company, poised to become a significant powerhouse in the medicinal cannabis industry. Considering the key investment highlights of the definitive agreement, we are of the view that the proposed acquisition is in proposed acquisition looks in favour and even shareholders can consider taking profits from the stock given the upside and offer price.

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