Shedding light on tech and consumer discretionary stocks – MMM, OCL, ELO, KGN

Summary

• As digital capabilities are improving and connectivity is becoming omnipresent, technology is radically changing nearly every sector of the nation’s economy.
• While ELO’s latest robust balance sheet depicts the Company is well capitalised to invest in organic growth and execute strategic acquisitions, MMM is expecting to reach positive operating EBITDA in Q2 period, six months earlier than previously guided.
• OCL has a strong balance sheet, as noted in its trading update on 15 July 2020, which could further support its plans of extending the market reach and broadening of customer offerings in the coming period.
• KGN noted the completion of the share purchase plan and raised AU$20 million, earlier in July; the proceeds would further support the financial flexibility to boost upcoming opportunities.

In the contemporary world, technology has become a catalyst for the transformation of businesses; the lines seem to be blurring amid the entities and technology related functions.

Numerous organisations are reimagining the role of technology and reshaping their organisational models and structures. Thus, enabling entirely new digital products and business models.

This digital transformation is creating both significant economic value and change in the nature of work for millions of people.

In a nutshell, irrespective of the business size, multiple companies are embracing technology with open arms.

Let us appraise ourselves with some of the ASX players that are embracing technology and delivering economic value.

Marley Spoon AG (ASX:MMM)

MMM is engaged in subscription-based meal kit service business across Australia, the US and Europe.

On 1 July 2020, the Company unveiled that Perennial Value Management Limited made a change to its substantial holding in the Company effective 29 June 2020. Its current voting power stands at 11.46% as compared to the previous voting power of 12.68%.

In early May, the Company completed an oversubscribed placement and raised AU$16.6 million. The Company would be using proceeds from the placement for bolstering its balance sheet to accelerate its global growth strategy further.

The Company had received robust demand from new institutions, as well as from existing eligible shareholders.

Furthermore, the Company noted strong growth during Q1 FY20 closed 31 March; revenue witnessed an upsurge of 46% over pcp due to COVID-19 crisis. MMM achieved positive operating cash flow on a global basis for the first time in Q1 FY’20.

The Company expects to achieve positive operating EBITDA in Q2 FY’20, six months before than earlier guided.

On 15 July 2020, MMM last traded flat at AU$2.190 per share.

Objective Corporation Limited (ASX:OCL)

Objective Corporation engaged with developing data and governance solutions that are simple to utilise, facilitating entities to enhance their digital transformation as well.

On 15 July 2020, the Company provided trading update, including the strengthened balance sheet with a cash balance of AU$51 million at the end of FY’20 (on the basis of unaudited management accounts, as on 30 June).

Some of the other business updates were as follows:

• Revenue soared by 13% to AU$70 million in comparison with pcp.
• Annual recurring revenue witnessed a growth of 21% and stood at AU$56.6 million. Moreover, recurring revenue represented 75% of total revenue.
• Key subscription product noted strong growth in their revenues; ECMaaS revenue rose by 101%, Connect revenue grew by 34%, Trapeze revenue surged by 51% and Alpha One revenue increased by 49%.
• The Company’s EBITDA, Net profit after tax (NPAT) and Operating cash flow delivered strong growth of 22% and stood at AU$17.2 million, AU$11 million, AU$28.5 million respectively.

Outlook for FY’21

OCL is expecting a material uplift in its revenue and profitability. Furthermore, the Company plans to extend its market reach with enlarged global digital marketing capacity and broadening its offering to every consumer.

Earlier this month, the Company acquired Itree Pty Ltd, a Government RegTech solution specialist. The transaction had an Enterprise value of the AU$18.5 million (net cash consideration). It is anticipated that the acquisition would be cash flow positive and EPS accretive.

On 15 July 2020, shares of OCL moved up 2.258% and closed the market session at AU$9.510.

ELMO Software Limited (ASX:ELO)

ELO offers cloud-based HR and payroll solutions across Australia, New Zealand, and Singapore.

On 15 July 2020, ELO released its boosted cash report for the period ending 30 June 2020 (Q4 FY’20) with the following highlights:

• The Company achieved annual cash receipts of AU$57.5 million during FY’20, up 27.4% on FY’19.
• In Q4 FY’20, ELO’s cash receipt increased by 26.2% to AU$16.8 million as compared to Q3 FY’20.
• At the end of FY’20, the Company had a cash balance of AU$139.9 million with zero debt.
• During the quarter, the Company launched a new communication module- ELMO Connect; This module is empowering businesses to instant message and establish Zoom Conference calls from within its cloud-based platform.
• The Company was admitted to S&P/ASX300 Index in June.

Source: ASX announcement

Furthermore, the Company had successfully raised AU$70 million via institutional placement in May and AU$2.8 million via Share Purchase Plan on 4 June 2020. The Company plans to utilise the proceeds from the placement to fund the organic growth and execute its strategic acquisitions.

On 15 July 2020, ELO’s shares settled the day at AU$6.250, up by 2.796% from its previous close.

Kogan.com Limited (ASX:KGN)

On 15 July 2020, online retailer, KGN announced that its directors have recently changed their interests effective 10 July 2020; primarily due to issue of fully paid ordinary shares under Share Purchase Plan (SPP).

The details of the change in interests are as follows:

• Mr Greg Ridder acquired 2,620 ordinary shares at a value of AU$11.45 per share. Post the change, the director now holds 173,620 ordinary
• Mr David Shafer acquired 2,620 shares at a value of AU$11.45 per share. Post the change, the director currently owns 8,100,856 ordinary shares under the name of Shafer Corporation Pty Ltd ATF the Shafer Family Trust.
• Mr Harry Debney acquired 1,561 ordinary shares at a value of AU$11.45 per share. Post change, the director now holds 13,561 direct and indirect shares of 78,538.
• Post change, Mr Ruslan Kogan holds following ordinary shares in the name of-
  • Walsh St Management Pty Ltd ATF Walsh St Trust to 337,620, and
  • Kogan Management Pty Ltd ATF the Ruslan Tech Trust to 20,800,14.

On 8 July 2020, the Company advised that the SPP that was revealed to the market on 10 June 2020 was oversubscribed subsequent to its closure on 3 July 2020.

In light of above statement, the SPP was open to 13,015 eligible shareholders, and valid applications from over 6,793 eligible shareholders were received for AU$115,283,000 proceeds.

Owing to the strong support from its eligible shareholders, KGN had decided to enlarge the size of SPP by AU$5 million above its original goal of AU$15 million, raising a total of AU$20 million.

On 11 June 2020, KGN noted the completion of AU$100 million institutional placement at AU$11.45 price per share. The Company highlighted that the funds from the placement would be utilised to support the financial flexibility to boost upcoming opportunities.

Did you read; A look at Kogan.com Share Price: A rich list e-tailer

On 15 July 2020, KGN stock swelled by 6.882% and closed the market session at AU$18.170.