2 Small-cap Stocks to Watch – ELO and MNY

ELMO Software Ltd (ASX:ELO)Â

Positive fourth quarter performance: During the fourth quarter ending June 2018, ELO has delivered a solid growth of 86% in cash receipts to $9.9m against prior corresponding period. Cash receipts for the full year of FY18 is of $28.2m, which is a growth of 55% compared to FY17. As at 30 June 2018, ELMO had a closing cash balance of $46.1m and the company is well capitalized to fund the company’s accelerated growth strategy. The company has entered FY19 having a strong sales pipeline and significant opportunity for organic and inorganic growth across the existing business with ELMO’s broad solution offering and growing customer base. Moreover, during the June quarter, the company has commercially integrated the Pivot’s SaaS remuneration solution with the rest of the ELMO product suite. On the other hand, ELO had signed a non?binding indicative offer letter with regards to the potential acquisition of a complementary business, the completion of which was subject to, amongst other things, due diligence. However, the due diligence conducted to date by the company has not met the Board’s demanding acquisition criteria and therefore the company has decided to withdraw from the acquisition process, which means that the acquisition will not proceed.

Positive outlook: The company’s Pivot is performing well and has met all the financial and non-financial conditions required to accelerate the next tranche of the earn-out consideration. Further, with regard to Payroll Integration, there is positive market response to ELMO Payroll, which has created a large and new market opportunity. The company’s payroll solution has achieved the ATO’s Single Touch Payroll (STP) compliant status for on-demand statutory payroll reporting to the ATO by substantial employers. The company has planned to continue to invest in R&D, and sales & marketing to boost its innovation and expand the customer base. Additionally, the company is focused to deliver organic growth across the business along with selective complementary acquisitions, backed by a rigorous due diligence process.

 Customer receipts – Quarterly growth ($A ‘000s) (Source: Company Reports)

Strong Performance: ELMO Software Ltd (ASX:ELO) stock has risen 9.91% in the last three months as on August 02, 2018 and now trades at a higher level. ELO has strong pipeline of opportunities to make further selective and strategic acquisitions over time. The company continues to apply a disciplined acquisition criterion and is focusing on opportunities which exhibit a cloud-based complementary technology and/or provide access to a high-quality customer base. Further, ELO continues to build foundations to support the next stage of growth across the business into FY19 and beyond. Overall, the company has demonstrated strong FY18 along with a strong fourth quarter 2018. The year is considered to be a milestone year for ELMO, as the company expanded the product set from seven to twelve modules, has increased the customer base and expanded the market opportunities across HR administration and payroll. Furthermore, the company with the enhanced opportunity set, broadened platform and enhanced competitive advantage, is laying the foundations for growth into FY19 and beyond.

Money3 Corporation Ltd (ASX:MNY)

Upgraded Earnings & Dividend Guidance, Changes to Executive Chairman Arrangements and Board Combination: Money3 Corporation’s stock rose 2.48% on August 02, 2018 after the company upgraded earnings & dividend guidance. The company has upgraded its net profit after tax guidance for the FY 18 to approximately A$32 million. MNY currently expects the final dividend to be at least 4.5 cents per share. Further, on the basis of MNY’s balance sheet capacity and funding arrangements, the company does not plan to conduct an equity capital raising in current scenario.

Management changes: ASX: MNY has appointed Ray Malone as Executive Chairman. After getting the shareholder feedback, the company has decided to amend the terms related to the Executive Chairman, which is subject to shareholder approval. Meanwhile, Mr Malone will remain as Executive Chairman for the period until 30 June 2019 to facilitate the company’s exit from Small Amount Credit Contract lending, after which he will then become Non-Executive Chairman. Moreover, Mr Kang Tan has advised the company that he plans to retire from his position after the announcement of FY18 financial results. Further, Mr Leath Nicholson has informed the Board that, due to other commitments, he has not planned to stand for re-election at the Company’s forthcoming Annual General Meeting in November 2018. Meanwhile, MNY stock has risen 15.97% in the last three months as on August 02, 2018 and traded at $2.08, as at August 03, 2018, market open.

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