LiveChat: Focus on ARPU works
We keep a BUY rating on LVC but cut our FV to PLN 58.4 (from PLN 61.8) due to higher SG&A costs mainly related to Live Chat’s fast organic development with currently ca. 160 headcount (ca. +50% YoY) and ongoing salary pressure especially among IT specialists. We expect the SG&A ratio to be ca. 24-25% for 1YF/2YF/3YF vs ca. 17.5% previously. Net adds have stabilized at ca. +200-300/month (LTM at +250/month) but ARPU has started to grow, reaching a record high USD 99.2, +4% YoY in recently reported 2Q19/20 which is mainly a result of client cross-sell with an expanded product portfolio (LiveChat 3.0, ChatBot, HelpDesk, KnowledgeBase, Marketplace) but also upsell (clients upgrade to more expensive plans). Cross-sell and upsell should be the main growth driver in the short-term. Apart from that, a short-term trigger could be implementation of a IP BOX tax allowance which according to our estimates adds ca. PLN 10/per share to LVC’s valuation (tax rate down to 5% from current 19%). Apart from that, LVC’s exposure to global ecommerce makes its more immune to an economic slowdown while high margins and cash generation allow it to pay hefty dividends at a ca. 5.2-5.8% DY 1YF/2YF.Livechat Software SA is a Poland-based company engaged in the software industry. The Company is a producer and global provider of software as a service (SaaS) LiveChat, communication software for business. LiveChat enables fast and intuitive communication between company's employees and customers visiting corporate Website. The application also tracks customers' activity on a Website. The Company produces and distributes software for business-to-consumer (B2C) and business-to-business (B2B) communication. Its product portfolio includes three types of LiveChat plans: Solo, dedicated to single user and offering such features as unlimited chats, ticketing system, enhanced security and basic reporting; Team, for numerous teams that additionally includes chat routing and groups creation; and Enterprise, for companies that, additionally to previous ones, provides advanced reporting, work scheduler and unlimited visits on a Website.
Haitong is the first international Chinese investment bank and our goal is to be the primary channel for capital flows into and out of China. During 2015 the Senior Management Team in London was expanded significantly to focus on this objective and to provide a full-service cross-asset markets business coupled with sector-focused investment banking. We work closely with our world-wide network of offices to bring a true depth of understanding to all client situations.
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