PureProfile Ltd (PPL) Cheap turnaround story? (+152% at $0.22)
When I last wrote about PPL (then 12.5c, high today 23c, close 16.5c), I discussed possible corporate appeal given the attempted removal of the chairman by parties involved with Cohort, a troubled acquisition, and the connection to Unlockd, an unlisted market darling with interesting shareholder connections. Given the Cohort spill has been resolved, and Unlockd is in administration after being "locked out" of its market by Google, this is now less about the corporate appeal and more about earnings turnaround. This mornings announcement (Here), announced fixed costs rebased down $5m to $20m, gross margin improving (44% to 49%), improvement in EBITDA, and new signings around the corner.
This business is highly sensitive to any improvement in the revenue line, thus the positive move today.
See prior note when $0.125 - Pureprofile (PPL.ASX) - cheap turnaround + possible takeover play evolving?
To refresh - what do the numbers look like? From my previous note in italics, and updated comments in bold.
If PPL's revenue stands still for the next year, the numbers might look something like this.
- Annualised revenues of ~$60M and a gross margin of 44%+ (~$26M gross profit). Rebased cost line of ~$20M. Leaving a healthy ~$6M EBITDA opportunity. (As announced this morning, cost line achieved, gross margins improving from 44% to 49%)
- D&A ~$4m (mainly A, which is non-cash) (same)
- $1m in Interest (CBA facility is $10m @ 10% and has no earnings-based covenants, no exit fees - scope to look for a better deal on that facility. (this has been refinanced, similar in terms of rate)
- Net Debt is $5.6M (might be slightly higher at $7m)
- No Tax due to tax losses (same)
- Small NPAT of ~$1m ($0.0083 per share) ( FY19- I expect this could be more now, given today's update, working on numbers)
More news to come!
From the announcement, today - "Progressed to sign-off stages of new domestic and international partnership opportunities that I look forward to updating the market on shortly"
Who with and how big in terms of $'s, is what we need to see next.
Given this reset in the business, incremental contract wins will now be significant for PPL. Back of the envelope, another $10m in Revenue could flow through to an additional $4-5m in EBITDA. Revenue is already >$60m. And they have crimped the Capex on tech spend, so it should flow through.
Keep on the watch list for more.
Disclosure - The author of this desk note owns shares in PPL.ASX
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Tom is a Founder and Head of Wealth Management. For the past 10 years, he has been running the Wentworth Model Portfolios, focusing on macroeconomics and tactical equity positioning. These portfolios were initially created as a solution for "core...