Agilysys, Inc.

AGYS Details

Agilysys, Inc. (NASDAQ: AGYS) is a technology company that specializes in developing software for managing businesses in the hospitality industry. It offers a variety of technological solutions, including property management (PMS), point-of-sale (POS), and dining reservations, among others, to its four major market sectors: 1) Tribal Gaming, 2) Hotels, Resorts, and Cruise, 3) Foodservice Management, and 4) Restaurants. As of July 01, 2021, the company’s market capitalization stood at USD 1.36 billion.

Agilysys Solutions Gaining Traction: In June 2021, AGYS announced that La Valencia Hotel, California, and Manor Vail Lodge, Colorado chose the company's InfoGenesis POS, IG Flex, and Agilysys Pay Connect, to improve the overall efficiency and client service in their food and beverage (F&B) operations. Previously, on May 25, 2021, InfoGenesis POS was also chosen by Halepuna Waikiki by Halekulani Hotel for contactless F&B ordering and payment mechanism. InfoGenesis POS is a comprehensive system that combines an easy-to-use terminal with mobile tablet touchscreen applications, IG Flex is a portable solution offering full POS capabilities on tablet devices, and Agilysys Pay Connect is a cloud-native solution enabling third-party gateways and adapters to make contactless payments.

FY21 Results: AGYS reported total revenues of USD 137.18 million for FY21 (ending March 31, 2021) compared to USD 160.76 million in FY20, registering a decline of 14.67% YoY. The contraction of the topline can be attributable to the COVID-19 pandemic which had a devastating impact, especially on the hospitality industry. Gross profit improved by 10.40% YoY in FY21 to USD 89.38 million as compared to USD 80.95 million in FY20, driven primarily by savings in software development amortization cost. AGYS reported a reduction in the net loss by USD 13.07 million to USD 21.00 million in FY21 vs USD 34.07 million in FY20.

Key Risks: AGYS operates in the hospitality industry, which suffered a huge hit due to the outbreak of the COVID-19 pandemic. The imposition of lockdowns and travel restrictions to prevent its spread led to a sharp decline in global commercial activity across the industry. Should this declining trend continue, it will impact the discretionary spending of consumers on travel and leisure activities, which in turn could harm the financials of the company. Furthermore, AGYS relies on third-party manufacturers based out of the US (including China) for its hardware and other component requirements, exposing the company to risks associated with international operations. The issuance of stricter restrictions on international trade and an increase in tariff for goods imported in the US could adversely impact the company’s operations.

Outlook: In FY22, AGYS expects to generate revenues in the range of USD 160-170 million, representing a 16-24% growth over FY21 revenues. The adjusted EBITDA margin is estimated to be slightly higher than 15%.

 Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company’s FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

AGYS Daily Technical Chart

Stock Recommendation: AGYS has increased 14.46% and 48.46% in the past 3 and 6 months, respectively, and is currently close to the higher band of the 52-week range of USD 16.18 to USD 64.09. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is 61.43. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 48.62. Considering the consistent uptick in stock price, we believe the current share price sufficiently reflects the strong business fundamentals and have chosen to remain on the sidelines. Therefore, we recommend an “Expensive” rating on the stock at the closing price of USD 56.98, down 0.19% as of July 01, 2021.

* All forecasted figures and Industry Information have been taken from REFINITIV.

* The reference data in this report has been partly sourced from REFINITIV.

Identiv, Inc.

INVE Details

Identiv, Inc. (NASDAQ: INVE) is a security technology company that safeguards data and physical places in the Americas, Europe, the Middle East, and the Asia-Pacific. Its operating segments are 1) Premises, which offers security services like access control, video surveillance, access readers, etc. to government and private establishments, and 2) Identity, which authorizes secure access to information by providing logical access and cybersecurity, and securing the data of connected devices with the help of radio-frequency identification (RFID) embedded security.  As of July 01, 2021, the company’s market capitalization stood at USD 373.72 million. 

Road to Recovery in Commercial Markets: On June 28, 2021, INVE announced that it has collected software license revenues of over USD 1.1 million from Banco Azteca, a leading bank in Mexico. Aided by the technological solutions provided by INVE, Banco Azteca expanded the scale of its existing video and data analytics to over 400 new locations. Similarly, in April 2021, Ross Stores renewed the order for service and maintenance of cameras installed at their retail stores, along with an order for the installation of new appliances.

Innovative RFID Solutions for Smarter Healthcare: On June 21, 2021, the company joined the DoseID Consortium intending to contribute to the development of the healthcare industry standards for RFID use. The consortium is focused on connecting industry participants in the healthcare industry and maintaining the quality and performance of RFID for pharmaceuticals and medical devices.

Q1FY21 Results: INVE reported total revenue of USD 22.16 million for Q1FY21 (ended March 31, 2021) compared to USD 18.12 million in Q1FY20, registering a growth of 22.30% YoY. Revenue from the Identity segment, which accounted for 61.63% of the total revenue in Q1FY21, increased 38.15% YoY driven by higher demand for RFID transponder products and smart card readers. The gross margin declined by 670 bps to 34.70% in Q1FY21 as compared to 41.40% in Q1FY20. The operating expenses ratio improved by 11.37% to 40.22% in Q1FY21 vs 51.59% in Q1FY20. The company’s net loss for Q1FY21 was USD 1.47 million in contrast to USD 2.05 million in Q1FY20.

Key Risks: In FY20, ten customers accounted for 33% of INVE’s total revenue. Therefore, the loss of any of these customers could harm its financial performance. In addition, INVE depends on a limited number of suppliers for its key components. Any lag in the supply of the requisite quantity or unfavorable pricing could distort its operation and negatively impact the overall performance. Furthermore, a majority of INVE’s revenue comes from indirect sales channels (dealers, resellers, system integrators, etc.). Any conflict of interest with these channel partners could negatively impact the company’s financials.

Outlook: In H1FY21, the INVE expects to achieve YoY growth of 20-25% in its revenue. This guidance rides on new bookings for Q2FY21 to the tune of USD 9.8 million, up 45% YoY.

 Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company’s FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

INVE Daily Technical Chart

Stock Recommendation: INVE has increased 39.90% and 90.60% in the past 3 and 6 months, respectively, and is currently close to the higher band of the 52-week range of USD 4.21 to USD 18.49. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is 49.39. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 13.75. Considering the significant uptick in the stock price, we believe the current share price sufficiently reflects the strong business fundamentals and have chosen to remain on the sidelines. Therefore, we recommend an “Expensive” rating on the stock at the closing price of USD 16.20, down 4.71% as of July 01, 2021.

* All forecasted figures and Industry Information have been taken from REFINITIV.

* The reference data in this report has been partly sourced from REFINITIV.