Key Statistics

Taptica International Ltd. (TAP)

AIM-listed Taptica International Ltd is engaged in providing global end-to-end mobile advertising platform that facilitates the global companies to reach out to their target audiences with the diversified range of traffic sources available today. As on May 28, 2014, its shares got admitted to the Alternative Investment Market of the London Stock Exchange and a constituent of the FTSE AIM All-Share and FTSE AIM All-Share-Media. The group is headquartered in the Tel Aviv, Israel. The group work with advertisers including Amazon, Disney, Facebook, Twitter and many more.

The group is largely owned by the institutional investors, with Toscafund Asset Management LLP, Schroder Investment Management Ltd. and River & Mercantile Asset Management LLP are the major institutional holders in the company.

Recent developments
In the company filing made by the group with the LSE as on June 17, 2019, the group notified the share buy-back of 371,524 ordinary shares as on June 14, 2019, at a price of GBX 112.4/share. These shares will be kept as treasury stocks and would be reclassified as dormant shares.

On June 14, 2019, the board of the company approved a further share buy-back programme for an aggregate value of up to US$ 10 mn. This was in line with the group’s strategy to enhance shareholders value.

At the AGM held on June 13, 2019, the board of the company approved to change the name of the company to Tremor International Ltd (TRMR).

As on June 11, 2019, the group stated in the company filing that, Uber Technologies Inc has filed a complaint against Taptica Ltd and Taptica Inc and four unaffiliated companies in the Supreme Court of the State of California alleging fraudulent concealment, negligence and unfair competition.

Financial Performance – FY 2018

Source: Company filings

During the year under review, revenue surged to $276.9 mn from $210.9 mn recorded in the year-ago period. The company remains highly cash generative with a decent balance sheet. Reported gross profit stood at $111.4 mn and recorded a growth of 38% against the gross profit of $80.6 mn reported in the FY17. Gross margin during the period improved by 205 bps to 40.25% from 38.2% recorded in the FY17, on account of improved efficiencies enabled campaign optimisation.

Adjusted EBITDA expanded to $44.1 mn and registered a growth of 29% from $34.2 mn reported in the year-ago period. Reported earnings per share for the year under review stood at 32.81 cents against the EPS of 22.49 cents recorded in the corresponding period of the previous financial year.

Adjusted Dividend per share stood at 52.36 cents against 40.44 cents provided in the year-ago period. Net cash inflow from operation stood at $37.5 mn vs $30.8 mn recorded in the FY17.

As on December 30, 2018, the net cash position of the group stood at $54.4 mn against the net debt of $4.0 mn.  

Stock Performance – 1 Yr

Daily Price chart (as on June 17, 2019), after the market closed. (Source: Thomson Reuters).

At the closing (as on June 17, 2019), shares of the Taptica Ltd closed at GBX 118.0 and added approximately 2.6 per cent against the previous closing price. In the past 52wks, shares have touched a high of GBX 400 and a low of GBX 73.20.

Valuation Methodology


Conclusion
Taptica International ltd. is a global leader in advertising technologies for performance-based mobile marketing and brand advertising. The group's recorded ROE of 23.42 during the FY18 was considerably above the industry ROE of 16.06%. Also, 5-year average ROE of the company was significantly above the 5-year average ROE of the industry, that creates a competitive edge for the company and entails its dominance within the respective arena. The group has brought down its debt to zero in the FY18, which again is a strong fundamental indicator for the company from the investor’s points of view.

Despite, strong growth and decent fundamentals, the stock was quoting considerably below the 200-day simple moving average price level, which was a negative technical indication and also the stock has plunged significantly in the last one year.

However, the recent trend in stock price has been reversed since June 12, 2019, and stock was surging up since the last few couples of trading sessions. Therefore, based on the decent fundamental and taking consideration of recent fall in the stock price and other unfavourable technical indications, we have given a "Speculative Buy" recommendation at the closing price of GBX 118.0 (as on June 17, 2019), with single-digit upside potential, based on the 3.6x NTM Industry Median Price-to-Earnings (approx.) on the FY19E Earnings per share (approx.).

 

Scisys Group Plc (SSY)

AIM-listed Scisys Group Plc is engaged in providing information technology services. The group provided application services, products and provides business support services. The group is headquartered in Dublin, Ireland. As on November 28, 2018, its shares got admitted to the AIM market of the London Stock Exchange for trading and a key constituent of FTSE AIM All-Share and FTSE AIM All-Share- Technology.

Recent Developments
As on April 30, 2019, the group notified that it had secured two additional orders from Thales Alenia Space France to develop and implement security-related elements within the Galileo Ground Segment. The total value of the contract secured stood at €9.7mn.

Financial Performance – FY18
As on March 28, 2019, the group reported its financial results for the year ended December 31, 2018. Revenue during the year under review expanded by 10% to £58.4 mn as compared with the £53.2 mn reported in the year-ago period. This was primarily because of a 16% surge in the professional fee to £55.7 mn against £47.9 mn reported in the year-ago period. The order book during the year stood at £98.6 mn against £88.2 mn (restated) in FY17.

Adjusted operating profit during the period surged by 16% to £5.1 mn vs £4.4 mn reports in the year-ago period. However, statutory operating profit after amortisation costs adjustment, related to the acquisition of the Annova of £1.3 mn and net exceptional charges of £1.3 mn stood at £2.5 mn against the statutory operating profit of £4.5 mn in FY17.

Adjusted basic earnings per share expanded to 13.1 pence per share against 9.3 pence recorded in the year-ago period.

Dividend
During the FY18, the group announced an interim dividend of 0.65 pence per share and proposed a final dividend of 1.73 pence per share, this would make a total dividend of 2.38 pence per share for the FY18, as compared to the 2.16 pence recorded in the FY17.

Net Debt
At the end of FY18, Net debt contribution in the group’s total capital has reduced to £3.1 mn against £5.9 mn reported at the end of FY17.

Stock Performance – 1 Year

Daily price chart (as on June 17, 2019), after the market closed. (Source: Thomson Reuters).

At the closing (as on June 17, 2019), the share of the SSY ended at GBX 250 and declined by 0.79% against the previous day closing price. In the past 52-wks, shares have registered a high of GBX 254 and a low of GBX 134. The outstanding market capitalisation of the company stood at £74.36 mn, which ranks it among the small-cap companies listed on the AIM market of the London Stock Exchange, with the dividend yield of 0.95%.

Valuation Methodology


Conclusion
Despite a steep surge in the stock price over the last few months, several major technical parameters indicate a near term correction is due in the stock. As 14-day RSI of the stock stood at 83.25, which indicates the stock has entered into an overbought zone. Also, the stock is trading considerably above the upper Bollinger Band®, which indicate, the price could pull back from the current trading levels.

Also, the operating margin of the company stood at 4.27% whereas the industry average is 13.35%, Net profit margin of the group stood at 2.46% against the industry average of 8.56%. Return on Equity (ROE) of the company during FY18 was at 5.53%, whereas the industry average was 30.7%.
Therefore, on the basis of above fundamental and technical measures and valuation done using the above methodology, we have given a “Watch” recommendation on the stock at the closing price of GBX 250 (as on June 17, 2019), based on the 16.5x NTM Industry Median Price-to-Earnings (approx.) on the FY19E Earnings per share (approx.).

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