WiseTech Global Limited

WTC Details

Latest Updates: WiseTech Global Limited (ASX: WTC) develops and provides global software solutions to the logistics execution industry.  

• Director Richard White sold ~149,927 shares of WTC at ~$43.19 per share in an on-market deal between 29 April to 5 May 2022.
• WTC issued ~7,876 share rights to Andrew Cartledge and Brett Shearer (key management personnel) on 2 May 2022 regarding base-salary remuneration equity.

Financial Overview of 1HFY22 (ended 31 December 2021):

• The company posted an increase in gross profit from ~$199.7 million in 1HFY21 to ~$238.6 million in 1HFY22, up by ~19% Y-o-Y, primarily led by growth in the CargoWise revenue and cost reduction measures.
• WTC continued to invest considerably in product innovation to enhance its software platform and build an innovation pipeline. Net R&D spending rose by ~1% Y-o-Y due to efficiency and acquisition benefits exceeding investment made in expanding the CargoWise ecosystem.

Growth & Break-Up of Revenue Components from 1HFY21 to 1HFY22; (Analysis by Kalkine Group)

Key Risks: The company faces the risk of product development, integration risk from multiple acquisitions, macro headwinds, and forex rate changes as it prepares invoices in various currencies. 

Outlook:

The company provides revenue guidance of ~$600 - ~$635 million for FY22 (up by ~18% - ~25% Y-o-Y on FY21). The EBITDA guidance range has been upgraded from ~$260 - ~$285 million to ~$275 - ~$295 million for FY22. 

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

Source: 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: The stock of WTC gave a negative return of ~11.21% in the past three months. The stock is currently trading lower than the 52-weeks’ average price level band of $25.150 - $60.400. The stock has been valued using the Enterprise Value to EBITDA based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount than its peers’ average EV/EBITDA multiple, considering its the risk of increased investment, adverse forex changes, and a decline in revenue from acquired platforms and support services. For this purpose of valuation, a few peers like Altium Ltd (ASX: ALU), NEXTDC Ltd (ASX: NXT), Objective Corporation Ltd (ASX: OCL), and others have been considered. Considering the current trading levels, growth in revenue, net profit, continuous investment in R&D, plans to tap acquisition opportunities, an improved EBITDA guidance for FY22, an indicative upside in valuation, we give a ‘Buy’ rating on the stock at the closing market price of $39.330, down by ~4.931%, as of 9 May 2022. 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.

WTC Daily Technical Chart, Data Source: REFINITIV 

Infomedia Limited

IFM Details

Latest Updates & 1HFY22 (31 December 2021) Highlights: Infomedia Limited (ASX: IFM) develops and provides SaaS (Software as a Service) based service quoting software systems and electronic catalogue parts to the automotive industry.

• On 9 May 2022, Mr Daniel Wall joined IFM as the new General Counsel and Company Secretary, whereas Mr. Mark Grodzicky ceased to be the Company Secretary from 6 May 2022.
• The company reported an increase in net operating cashflows from ~$17.0 million in 1HFY21 to ~$20.3 million in 1HFY22.
• Recurring revenues now account for ~95% of the total revenue in 1HFY22.
• All regions posted revenue growth with the US depicting ~57% Y-o-Y rise, APAC - up by ~15% Y-o-Y, and EMEA posting ~6% Y-o-Y rise in 1HFY22 revenue.

The Revenue Trend from FY16-FY21; (Analysis by Kalkine Group)

Key Risks: The company faces technological changes, acquisition risk, COVID-19 related shortages of semiconductor chips, and the risk of new customer contracts.

Outlook:

• The company plans to align resources for further growth avenues in the business with its investments (in Infodrive solutions, SimplePart acquisition, and the NextGen platform), contributing to growth in 1HFY22.
• IFM confirms the revenue guidance for FY22 in the range of ~$119 - ~$123 million (versus ~$97.44 million in FY21).

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

Source: 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: The stock of IFM gave a negative return of ~22.84% in the past three months and a negative return of ~19.93% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $1.157 - $1.805. The stock has been valued using the P/E-multiple-based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount than its peers’ average P/E multiple, considering the decline in net margin, the risk of realising synergies from the acquisition, and persistent shortages of semiconductor chips. For this purpose of valuation, a few peers like Appen Ltd (ASX: APX), Readytech Holdings Ltd (ASX: RDY), Schrole Group Ltd (ASX: SCL) have been considered. Considering the current trading levels, growth in the top-line, underlying EBITDA, and increased shareholder returns in 1HFY22, an encouraging revenue guidance for FY22 Vs. FY21 actual, an indicative upside in valuation, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the closing market price of $1.165, down by ~2.100%, as of 9 May 2022.

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.

IFM Daily Technical Chart, Data Source: REFINITIV  

Integrated Research Limited

IRI Details

1HFY22 (31 December 2021) Results: Integrated Research Limited (ASX: IRI) offers performance management solutions for collaborative systems and payment transactions to companies in the US, Europe, and the Asia Pacific.

• IRI posted ~$32.28 million revenue (down by ~5% on pcp), owing to ~24% decline on a year over year basis in the US revenues. Notably, IRI reported~$1.78 million NPAT (up ~1,286% on pcp), driven by robust revenue performance from Europe (~80% Y-o-Y) and Asia Pacific (up ~19% Y-o-Y) in 1HFY22.
• The cloud and hybrid solutions saw increased momentum with ~440,000 users on the platform, up by ~424% from 1 July 2021

Comparative Liquidity Position; (Analysis by Kalkine Group)

Key Risks: The company faces the risk of macro headwinds, an increase in talent acquisition costs, technological shifts, and the risk of new product launches.

Outlook:

IRI plans to self-finance the innovation and new product initiatives with its cashflows. It foresees an improved financial result in 2HFY22 based on recent sales traction on its cloud platform and growth of SaaS solutions. It plans to turn US performance around with a solid pipeline and strong leadership.

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

Source: 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: The stock of IRI gave a negative return of ~3.95% in the past month. The stock is currently trading lower than the 52-weeks’ average price level band of $0.620 - $2.530. The stock has been valued using the P/E -multiple-based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at some discount than its peers’ mean P/E multiple, considering the decline in 1HFY22 top-line, risk of launch of new solutions and revenue timing, and technological shifts. For this purpose of valuation, a few peers like Infomedia Ltd (ASX: IFM), Bravura Solutions Ltd (ASX: BVS), and Adacel Technologies Ltd (ASX: ADA) have been considered. Considering the current trading levels, growth in TCV and bottom-line, continuous investment in R&D, launch of new SaaS solutions, an indicative upside in valuation, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the closing market price of $0.730, down by ~1.351%, as of 9 May 2022. 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.

IRI Daily Technical Chart, Data Source: REFINITIV  

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision 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 Valuation has been achieved and subject to the factors discussed above. 

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.

Disclaimer

Kalkine New Zealand Limited is authorised to provide general advice only. The information on this website does not take into account any of your investment objectives, financial situation or needs. Before you make a decision about whether to acquire a financial product, you should obtain the Product Disclosure Statement from the product issuer. You should consider the appropriateness of advice taking into account your own objectives, financial situation and needs and seek independent financial advice before making any financial decisions.