Why the hell is this price dropping, page-168

Investors are rapidly losing perspective on LVT. Here's part of the latest Citi research (Buy/High Risk recommendation with a target price of $0.91). They forecast LVT will need to raise $25m in FY20 which probably won't be enough to get them to cashflow breakeven, but hopefully won't be too far off. Compare this future relatively minor need for capital (in return for most likely the best revenue growth profile on the ASX) to the current market cap. of $190m (although this will presumably be lower today) and the stock looks well undervalued to me.


LiveTiles Limited (LVT.AX)
All Tracking Well, LVT Has “Great Confidence” in FY19e
 Reiterating Buy — Following the recent Annualised Recurring Revenue and
cashflow announcements, we have further confidence in our recommendation and
forecasts. We see today’s considerable dislocation in the LVT stock price (-16%) as
unwarranted and reiterate our Buy call. Our forecasts remain largely unchanged but
our target price falls -19% to $0.91 which reflects our forecast revisions (-2% 20E
sales), peer multiple de-rate (-4%) and a reduced multiple premium for lower risk
appetite (from 40% to 20%).
 Key Insights —
– Customer Cash Receipts were softer than we expected at $2.4m (Citi: $3.4m)
and we estimate were ~64% of revenue, but note this may have been a timing
issue, with 4Q18 receipts of $3.4m, $1m higher than we expected. We also note
that cash conversion of ~64%, while low, is volatile (4Q18: 122%) and is best
looked at on an annual basis (FY19e: 84%).
– Operating Leverage Is Expected given LVT is forecasting 2Q19e gross cash
operating expenses of ~$13.2m to be lower than 1Q19e ($13.4m).
– Average ARR per Customer almost more than doubled (from $12k to $33k). Note
- the number of customers >$100k in ARR jumped from 5 to 23 in the 4Q18.
– Remains Capital Hungry, but for the Right Reason – We stand by our existing
forecast that LVT will need to raise capital in the coming 6-9 months (2Q19e
gross cash burn of $13.2m vs. 1Q19 cash balance of $32m).
– The Microsoft Partnership should not be underestimated, with LVT getting
material visibility at Microsoft’s annual global Inspire conference, where LVT
received the Modern Workplace Transformation award.
 Outlook Rhetoric Was Very Optimistic — LVT has “great confidence” in FY19e,
is “expecting significant growth in customer receipts in 2Q19e” and N3 is generating
“rapid sales pipeline growth”. We expect FY19e to be a seminal year for LVT with
strong organic growth driven by the N3 sales force hitting full momentum in 2Q19e
and the lumpy, but material, Bots offering driving our >3x revenue growth to $21m.