This report is an updated version of the report published on 26^th April 2022 at 09:45 AM GMT+1.

ThinkSmart Limited (LON: TSL)

ThinkSmart Limited is an FTSE AIM All-Share index listed Australia-based company focused on the digital payments platform business. The Company's primary operations deal with the provision of lease and rental financing services in the United Kingdom (UK) and the holding of a financial asset. 

Recent trend of dividend payments

The Company has a progressive dividend policy of paying its shareholders and paid a special dividend of 5.2 US cents per share totalling around £3.0 million in December 2021.

Growth Prospects

• Strong Legacy Operations: Smartcheck, which is a proprietary digital payments platform and credit decision-making engine, had produced positive cashflow through the managed wind down.
• Strong Capital Returns: On 29 March 2022, the Company announced that it had intended to return approximately £2.5 million to the shareholders in July 2022. .

Key Risks 

• Decline in Cash Balance: TSL has shown substantial decline in cash balance from £7.1 million as of 30 June 2021 to £4.1 million as of 31 December 2021.
• Russia Sanctions: The recent sanctions put by various nations on Russia may adversely impact the global digital payments industry.
• Federal Reserve Meeting: Federal Reserve Chairman, Jerome Powell, had hinted at an 0.5% increase in interest rates in the next Federal Reserve meeting due in early May 2022.
• Record UK Inflation: British inflation hit a 30-year high of around 7.0% in March 2022, which may cause a further interest rate hike.
• Weak Global Growth Forecast: The World Bank has reduced its global growth forecast for 2022 from 4.1% to 3.2%.
  

Key Fundamental and Shareholders Statistics of ThinkSmart Limited.

Montarello (Natale Ronald) is the most significant shareholder as it holds nearly 31.34 million shares.               

H1 FY22 Financial Highlights (for the six months ended 31 December 2021, as of 09 March 2022)

(Source: Company Website)

• Weak Top-Line Business: The top-line revenue demonstrated a substantial year-on-year decline of approximately 21% during H1 FY22.
• Turnaround into Bottom-line Loss: The decline in the market value of Afterpay Ltd had caused TSL to report a negative bottom-line during H1 FY22. In comparison, it had reported a positive bottom-line during H1 FY21.
  

Share Price Performance Analysis

(Source: Refinitiv, Research done by Kalkine Group)

On 26 April 2022 at 08:24 AM GMT+1, TSL’s shares were trading at GBX 33.45, down by around 0.15% from the previous day’s closing price. Stock’s 52-week High and Low were GBX 112.30 and GBX 25.00, respectively.

On a daily chart, the stock price is sustained very close to the lower Bollinger band. Hence, there could be an uptick in the stock price in the near term. Moreover, the 14-days RSI of ~36.37 reflects an oversold territory.

Valuation Methodology: EV/Sales Approach (FY22E) (Illustrative) 

 Business Outlook

The Company had expected the cash reserves to remain adequate over the next few years. Moreover, the Group's operating division continues to service its existing customer base during the orderly winding up of its existing agreements. Meanwhile, the Company’s 1,650,000 Afterpay shares were exchanged for 618,750 Block shares. In a nutshell, TSL remained well positioned to further benefit from the expected future growth in the value of its shareholding in Block.

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

Considering the strong shareholders’ returns, benefit from its holding in Block Inc, and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on ThinkSmart Limited at the current market price of GBX 33.45 (as of 26 April 2022 at 08:24 AM GMT+1), with lower-double digit upside potential based on 23.46x EV/NTM Sales (approx.) on FY22E sales (approx.).

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

Note 2: Investment decisions should be made depending on the investors’ appetite for 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 is subject to the factors discussed above.

Note 3: Target Price refers to a price level that the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

Note 4:  Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.

Note 5: Dividend Yield may vary as per the stock price movement.  

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 the 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 

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