Appen Limited

Section 1: Company Overview and Fundamentals Insights

1.1 Company Overview

Appen Limited (ASX: APX) provides data solutions and services for artificial intelligence and machine learning (AI). Global Services and New Markets are the two divisions that make up the company's business.

1.2 The Key Positives, Negatives, Investment Highlights, and Risks

1.3 Top 10 Shareholders: The top 10 shareholders together form ~25.84% of the total shareholding. Mondrian Investment Partners Ltd and C&J Vonwiller Pty Ltd are holding a maximum stake in the company at ~8.39% and ~7.34%, respectively.

1.4 Key Metrics:

During 2HFY21, the company recorded a gross margin of 41.2% against 39.4% of the Industry Median. In addition, the asset turnover ratio for 2HFY21 stood at 0.53x, compared to 0.11x of the Industry Median.

Section 2: Business Updates and Financial Highlights

2.1 Business Updates:

2.2 Results Highlights of FY21 & Group Revenue by Segment: The revenue from Global Services increased by 5%, and New Markets surged by ~21% relative to FY20. The revenue from China in 4QFY21 was around USD 9.8mn leading to FY21 revenue of USD 24.7mn from China contribution, depicting a growth of 422% YoY.

Section 3: Key Risks and Outlook:

Section 4: Stock Recommendation Summary

4.1 Price Performance and Technical Summary

4.2 Fundamental Valuation

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation (Illustrative)

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is July 22, 2022. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Technical Indicators Defined: -

Support: A level at which 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 at which 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: In general, it is a level to protect further losses in case of any unfavourable movement in the stock prices.

Disclaimer

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