Brokers are circling global technology company Livetiles Ltd (ASX: LVT) – a $233 million market cap company headquartered in Times Square, New York, offering digital workplace solutions for the commercial and education markets.
Livetiles’ share price has stormed higher in recent times, up 108% from 23c per share at this time last year to land at 48c in early morning trade today.
Last month a Citi broker slapped a buy rating on the stock with a 56c per share price target, and advisory firm Moelis Australia has issued its own buy rating on Livetiles off the back of its acquisition of Microsoft-aligned artificial intelligence (AI) software company Hyperfish.
Hyperfish is a software solution using AI and bot technology to collect and store valuable employee data for large-scale organisations.
The $8.9 million acquisition is to be paid for with 100% scrip and two earn-out provisions over the next 13 months. Moelis is so buoyed by the agreement its price target has risen from 42c per share to 75c per share.
The acquisition further strengthens Livetiles’ ties with Microsoft. Moelis said it makes “strategic sense” with Hyperfish an “additive” to Livetiles’ product suite – providing cross-sell opportunities and high-margin incremental growth.
In more good news out of Livetiles the company announced on June 1 it had seen strong early adoption of Livetiles Bots – an AI solution range for financial services, healthcare, manufacturing, professional services and education sectors within the Fortune 500.
The company announcement reported early take-up of Livetiles Bots has “surpassed expectations” generating annualised recurring revenue from the product of $0.8 million since April 1, 2018.
There are a couple of negatives appearing on the horizon for Livetiles however, these involve a shareholder dispute in respect to an unrelated company involving Livetiles’ CEO. In response to this issue the company put out an announcement that labelled the report as “frivolous and without merit”.
According to a report in the AFR Livetiles is also being sued for US$25 million by a former employee for unlawful sacking. Livetiles’ management have rejected the claim, but this is another risk to watch investors.
Livetiles also carries plenty of other risks associated with tech startups including not much in the way of revenue versus an already high market cap.
All-in-all Livetiles looks to be, as the brokers are suggesting, a buy at present, albeit a speculative one, with its position in the highly-competitive tech sector yet to be cemented.
Other ASX software and services players worth keeping an eye on include a software products player targeting the wealth management and funds administration industries – Bravura Solutions Ltd (ASX: BVS) – whose share price has zoomed up from $1.40 at this time last year to open today at $3.20 today.
Advisory firm Wilsons last week labelled Bravura in buy territory – despite its shares hovering around 52-week high territory – with the broker pointing to its solid customer pipeline and various regulatory drivers as strong enablers of growth.
Bravura is well-positioned to take advantage of any merger and acquisition opportunities that could arise supported by its $24 million cash balance sheet as at the first-half of 2018.
Morgan Stanley also noted its interest in cloud-based software solutions player ELMO Software Ltd (ASX: ELO) in May, placing a $6.30 price target on the stock which was sitting at $5.20 at the time of writing.
In a similar space is larger-scale online accounting and business services software provider Xero Limited (ASX: XRO) whose share price has rocketed up from $24.70 at this time last year to $41.13 at the time of writing.
Livetiles’ acquisition of Hyperfish is a definite boon for the company and investors could see decent returns from the uptake as early as FY18. Livetiles seems focused on ways to drive growth in the medium-term, so it’s likely other similar mergers or acquisitions will come into play and although the sector can be a volatile one, Livetiles looks well set-up to deliver returns in the foreseeable future and its close alignment with Microsoft certainly makes strategic sense.
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Motley Fool contributor Carin Pickworth has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended ELMOSFTWRE FPO. The Motley Fool Australia owns shares of Bravura Solutions Ltd and Xero. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.