February 2019 Reporting Season Highlights (Part 2)

This week we provide you with Part 2 of the highlights and our key takeaways from reporting season for the TAMIM All Cap portfolios.

EML Payments (EML) reported a better than expected 1H results with cash generation the key highlight. GDV was up 16% to $4.15B leading to a 39% increase in revenue to $47.2M. EBTDA increased by 50% to $13.74M highlighting the positive margin leverage in the business. Cash flow conversion was 80% and the company is on track for $60M in net cash by end of June. 

We expect a dividend to be announced at the full year result. Management upped its guidance range by 8% and we expect EBTDA to exceed guidance this year to circa $30M. EML is our largest holding and we see continued growth for the foreseeable future driven by the global trend away from cash and cheques, to electronic and mobile payments. Our valuation of EML has now increased to $2.50+.

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​Noni B (NBL) delivered a solid result following the acquisition and integration of the Specialty Fashion brands (SFG) it acquired in July last year. Sales were up 140% to $465M, EBITDA was up 31% to $29M, cash balance almost doubled to $65M and the company declared a 9 cent dividend for the half. The key takeaway from the result was that the integration of the SFG brands is ahead of expectations and further material synergies have been identified. Management has retained its historical conservatism and has not quantified this upside. 

We believe investors are underestimating synergistic potential and are taking a "wait and see" approach heading into FY20. Consensus is currently sitting at $75M EBITDA for next year, but on our maths, we expect $100M+ as a base case. Further upside will come from an identified new store roll out opportunity of 850 stores. Our base case for next year is 45 cents EPS, with 70 cents EPS as an upside scenario. With the stock trading at circa $3, we see NBL as the most undervalued retail stock on the ASX. We value NBL at $5+.

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Infomedia (IFM) reported another strong result and outlook. IFM is a leading global software provider of parts catalogue and services to the automotive industry. 1H19 revenue was up 14% to $40M, EBITDA increased by 36% and NPAT was up 28% to $7.3M. The company is looking for acquisitions in adjacent verticals or additional products it can sell into its global customer base. The stock was up 15% heading into the results and since then is up a further 20%. We value IFM at $1.80+.

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Catapult Group (CAT), the leading global player in wearable technology and video tracking to the elite sports market, met investor expectations with 1H19 sales up 32% to $43M, underlying EBITDA $3.6M and free cash flows of $4M. Pleasingly, annualised recurring revenue (ARR) grew 25% to $57.5M. Management confirmed the business is on track to achieve guidance of $88M elite sports revenue, underlying EBITDA of $13M and ARR of $65M. The company has cut back spending to drive the new segment of the Prosumer market, and may see cash flow break even on a group level in FY20. 

We see a possible joint venture partner to drive the Prosumer segment as the biggest catalyst for the stock in the near term. We took a position in CAT prior to the results at 67 cents as we saw a unique opportunity to own the leading wearable tech company in the entire world to over 2,500 sports teams. At the current EV of $130M, CAT is trading on 2x ARR, which is extremely cheap for its leading global position in its industry. We see a possible takeover of CAT by a hungry data company such as Google or IBM as a possibility. We value CAT at $1.20+, although we see a possible takeover scenario in excess of $2.

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Money3 (MNY) is a fast growing lender to the second hand automotive market in Australia. The company delivered a strong growth in the 1H and provided further good news with the sale of its pay day lending retail network (SACC) for $46M and an acquisition in NZ of an established smaller competitor. 1H19 saw 9% increase in revenue to $66M, 13% increase in EBITDA to $31M and similar increase in NPAT to $17.5M. The gross loan book is currently sitting at $352M with ample funding capacity to accelerate growth. 

The stock is currently trading on FY19 PE multiple of 10x and we see this multiple expanding in future as the company is no longer dragged down by sentiment from its SACC division and can further achieve a reduction in its cost of funding. We view MNY as a beneficiary from the royal commission as banks further retreat from lending in this space. We bought MNY at $1.70 and value the company at $2.50+.

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