One Beaten Down Technology Stocks to Invest - BTH

Bigtincan Holdings Limited

BTH Details

Achievements of 1HFY22 (Ended 31 December 2021): Bigtincan Holdings Limited (ASX: BTH) offers AI (artificial intelligence) driven learning management solutions and sales enablement software. The product suite consists of Bigtincan Zunos, Bigtincan Life Sciences (LS), Bigtincan Hub, Onboarding and Learning, etc.

• The company reports a stable gross margin of ~85%-86% from 1HFY21-1HFY22.
• Adjusted EBITDA turned positive from ~$(3,574) million in 1HFY21 to ~$1,182 million in 1HFY22.
• BTH is accruing scale advantages as operating leverage improved from ~133% of revenue in 1HFY18 to ~77% in 1HFY22.

Growth Trend of Subscription Revenue; (Analysis by Kalkine Group)

Key Risks: The company faces technological shifts in the industry, deeper penetration in markets, new product launches, expanding new verticals, and low demand from customers. 

Outlook: The company expects an ARR of ~$119 million and revenue of ~$109 million in FY22. It continues to seek opportunities to expand to new verticals or geographies.

Valuation Methodology: EV/Sales 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 BTH gave a negative return of ~25.99% in the past three months and a negative return of ~42.63% in the past six months. The stock is currently trading below its 52-weeks’ average price level band of $0.615 - $1.530. The stock has been valued using the EV/Sales 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’ median EV/Sales multiple, considering its negative bottom line, negative operating cashflows, and risk of technological shifts. For this purpose of valuation, a few peers like Infomedia Ltd (ASX: IFM), Iress Ltd (ASX: IRE), Nearmap Ltd (ASX: NEA) have been considered. Considering the current trading levels, growth in subscription revenue, and operating leverage, an indicative upside in valuation, expected growth in ARR in FY22, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the closing market price of $0.740, down by ~1.334% as of 22 March 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.

BTH 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

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