SLI Systems (SLIZ)

Business description

SLI Systems' core products are e-commerce site search and navigation tools that learn from customer behaviours to improve the relevance of search results and therefore increase sales conversion.

Stock data

Market cap.NZ$21.2m
Last closeNZ$0.34
High / Low (52 weeks)NZ$1.1 / NZ$0.3
Stock market listingNZ
Forecast net cash (NZ$m)5.7
Forecast gearing ratio (%)N/A
TeamTechnology
SectorTechnology

Price performance

%1m3m12m
Actual(5.6)(24.4)(68.5)
Relative *(9.1)(25.6)(69.9)

* % Relative to local index

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YuuZoo
Y/E Jun Revenue (NZ$m) EBITDA (NZ$m) PBT (NZ$m) EPS (c) P/E (x) P/CF (x)
2015A 28.6 (6.7) (7.0) (11.1) N/A N/A
2016A 35.7 1.1 0.7 1.1 30.9 28.0
2017E 32.3 (0.5) (0.8) (1.3) N/A N/A
2018E 34.7 0.9 0.5 1.0 34.0 N/A

Last updated on 30/03/2017

Investment summary

SLI’s financial performance in H1 reflected its current transitional phase with ARR remaining flat as the business is realigned to focus on value over volume through a number of initiatives. The key customer retention rate is reverting to historical levels and with an operationally geared model, we believe that only a modest recovery in new business momentum should support robust upside. Net cash stands at NZ$6m. At 0.5x EV/Sales, SLI is trading at an acute recovery rating and a substantial discount to search/SaaS peers (typically 2x+). However, any recovery momentum should drive operationally geared growth in profitability and a re-rating upwards. Our DCF scenario analysis suggests that sustaining 5% growth in the mid-term should generate upside, while 7.5% mid-term growth and 20% EBITDA margins result in a DCF valuation of NZ$0.77, twice the current share price.

Last updated on 04/04/2017

Industry outlook

The global retail e-commerce market is estimated to be $3.6tn by 2019, growing at c 16% CAGR from $1.7tn in 2017, indicating increasing demand for SLI’s product suite. SLI estimates its global market opportunity at $1.7bn. The competitive landscape is crowded, however, with direct competition, e-commerce platforms and in-house solutions in the competitive mix.

Last updated on 04/04/2017

Key management

Greg Cross, Chairman
Chris Brennan, CEO
Rod Garrett, CFO

Company address

78-106 Manchester Street
Christchurch 8011
New Zealand
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