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.  Meanwhile, TSL is holding a 10% equity shareholding in Clearpay Finance Ltd.

Recent trend of dividend payments

TSL has a progressive dividend policy and declared a final dividend of AUD .052 per share to be paid on 8 December 2021, while the ex-dividend date will be 11 November 2021.

Growth Prospects

• Clearpay Disposal: The Company had sold around 90% shareholding in Clearpay to Afterpay and retained 10%. Moreover, the revaluation of Clearpay drove profitability higher by a £71.3 million during FY21.
• 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.
• Increase in Net Asset Value: The net asset value stood at 126.20 pence per share as of 30 June 2021, equivalent to £134.5 million. Moreover, it rose by around 63.78 pence per share in the last 12 months.

• Decline in Cash Balance: The Company’s cash balance went down by around 20% during FY21 when compared with the FY20 levels.
• Wrong Strategic Choices: The failure of partner relationships could adversely impact the business in the near term.
• Macroeconomic Risk: The likelihood of China Evergrande’s debt default risk poses a systematic risk to the financial markets.

Now, we will analyse the Key Fundamental Statistics & Shareholding Pattern of Thinksmart Limited.  

Montarello (Natale Ronald) is the most significant shareholder as it holds nearly 31.34 million shares as of 30 September 2021. 

FY21 Financial & Operational Highlights (for twelve months ended 30 June 2021, as of 14 September 2021)

(Source: Company result)

• Robust Profitability: The profit after tax surged by around 35% to £71.7 million during FY21, driven by a £71.3 million non-cash fair value gain on the independent valuation.
• Efficient Cost Management: TSL had managed to reduce the operating cost from £4.3 million in FY20 to around £3.4 million during FY21, boosted by the current volume performance.
• Legal Proceedings: TSL had reached a settlement agreement of £1.45 million in relation to the legal proceedings issued by the Group against Carphone Warehouse.

Financial Ratios (FY21)

Share Price Performance Analysis

 (Source: Refinitiv, Research done by Kalkine Group)

On 09 November 2021, at 08:01 AM GMT, TSL’s shares were trading at GBX 100.00, up by around 0.50% from the previous day closing price. Stock 52-week High and Low were 115.00 and GBX 45.96, respectively.

From a technical perspective, the stock price is hovering between the lower Bollinger band and the middle Bollinger band, indicating an upside potential in the stock price.

Over the last one year, TSL’s stock price has delivered a positive return of ~68.80%, and it has outperformed the FTSE All-Share Industrial Support Services index (benchmark sector) with a return of around 40.76% and FTSE AIM All-Share index (benchmark index) with a return of approximately 25.92%.

Valuation Methodology: Price/Book Value Approach (NTM) (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. Considering the penny nature of the stock, TSL may undergo adverse corrections because of the rising interest rates prospect, global inflation, and Evergrande fiasco. Overall, the Company aimed to deliver long-term growth depending upon the performance of ClearPay.

Considering the revaluation benefits of ClearPay, robust bottom-line business growth, strong leverage position, consistent dividend payments, and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on Thinksmart Limited at the current price of GBX 100.00 (as on 09 November 2021 at 08:01 AM GMT), with lower-double digit upside potential based on 1.39x Price/NTM Book value per share (approx.) on FY22E book value per share (approx.).

*The reference data in this report has been partly sourced from REFINITIV.

*All forecasted figures and Peer information have been taken from REFINITIV.

*Dividend Yield may vary as per the stock price movement.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

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