Ron Shamgar provides an update on a number of the companies held in TAMIM’s Australian equities portfolios. This is an excerpt from the January 2021 TAMIM Fund: Australia All Cap monthly report, you can access the full report here.
Note: Some of these stocks may have released results since publication of this report.
Healthia (HLA.ASX) provided a strong trading update and guidance for 1H21 with revenues up 45% to $64m and NPATA up 106% to $5m. Organic revenue growth of 14.5% was impressive and partially a result of pent-up demand for physio and podiatry services from the Covid lockdowns. Pleasingly the company has recruited 60 undergraduate health professionals commencing in 2021, a good sign of continued organic growth. We value HLA at $2.50.
Readytech (RDY.ASX) announced the finalised agreement to acquire OpenOffice and revised terms due to the business being shortlisted to win a $5m SaaS contract with a government agency. This highlights the quality of the OpenOffice growth prospects. We see RDY as a candidate for a profit upgrade in upcoming results. We see its major private equity shareholder selling down post-results as a positive for a share price re-rate. RDY is one of the cheapest software companies on the ASX and we see it valued at $2.80.
National Tyre & Wheel (NTD.ASX) provided another strong trading update and its third profit upgrade of the half. EBITDA is now on track for $15m in 1H. We estimate FY21 EPS of 13 cents and an interim dividend of 2 cents. The acquisition of Tyres4U is benefitting the company with good demand in the agricultural and heavy machinery sectors. NTD is a real covid winner, as border closures over the next 1-2 years will continue to see elevated demand for domestic travel and thus tyre and wheel servicing. We value NTD at $1.50.
Market freaking out about $NTD losing its distribution agreement for Cooper tyres have not read slide 11 carefully □
It clearly states the agreement is locked in until Sep 2027 □
That’s many years of profits and cash to come their way and enough time to diversify away □
— Ron Shamgar (@RonShamgar) February 23, 2021
Smartpay (SMP.ASX) continues to grow its Australian terminal business with transacting terminals at the end of December 2020 numbering 5,775 with quality new merchants added, higher margins and increased total transaction values. The current annualised run rate for revenue is now at $24m, with the company adding approximately 500 new terminals a month. Recent connectivity issues with its main competitor, Tyro (TYR.ASX), are only accelerating growth. We believe SMP is on track for group revenues of $100m within three years. We also believe corporate activity may emerge again later this year. Our valuation is $1.30.
Aussie Broadband (ABB.ASX) provided a trading update that was significantly ahead of prospectus forecasts. Residential broadband customers were up 86% to 313k connections and business customers exceeding forecasts, up 113% to 29.4k. Management is guiding to 1H21 EBITDA of $8.5m, which is what market analysts had for the full 2021 year. We believe ABB is taking significant market share from competitors while offering excellent customer service. Business customer connections are adding higher margin revenue. We value ABB at over $3.50.
Humm Group (HUM.ASX) is now officially the most profitable BNPL company in Australia and possibly the world. Management has given guidance of 1H cash NPAT of $43m, up 25% on the prior period. 2H of year will see increased marketing costs and investment into the entering of two new international markets. We estimate that HUM will achieve NPAT of approximately $70m for FY21 and is trading on a PE of 9x. Unfortunately, HUM is extremely profitable and investors valuing BNPL companies are ascribing higher valuations to their loss-making competitors. Eventually that bizarre paradigm will shift and the stock will re-rate to our estimated valuation of $2.00+.
Disclaimer: All stocks highlighted in this article are held in TAMIM portfolios.
