The Pushpay Holdings Ltd (ASX: PPH) share price hit a record high during lunch time trade and it could potentially go higher, according to Credit Suisse.
Shares in the donor management system provider has already surged by 50% since the start of the year, but its latest profit result convinced Credit Suisse to upgrade the stock to “outperform” from “neutral”.
While the earnings numbers were impressive, the real standout was the accelerated shift to digital transactions over the last six weeks – and shareholders have the COVID-19 pandemic to thank for this.
Surge in subscribers
“We had assumed a strong uplift in digital giving over FY21, but the transition is clearly running well ahead of that,” said Credit Suisse.
“PPH has only provided FY21E guidance for EBITDAF [earnings before interest, tax, depreciation, amortisation and fair value adjustments].
“However, the implied processing volumes for the year of ~US$6.8bn is a level we previously expected would take until FY22E to reach.”
Looking less risky
The company’s latest report card also eased two key concerns that the broker held. These were slowing customer growth and processing margin risk.
The structural change to digital payments due to coronavirus took care of the first worry and the rapidly growing customer base will help address the second concern.
“Processing margin compression remains a key concern over the longer term,” said the broker.
“However, the added scale of the group offsets some of that risk, with PPH’s operating leverage expected to yield strong growth over the mid-term.”
Pushpay is listed on the ASX and the New Zealand Stock Exchange. Credit Suisse’s price target on the NZ-listed stock is NZ$6.54 a share.
On the A-REIT list
But Credit Suisse isn’t stopping there. The broker also upgraded Growthpoint Properties Australia Ltd (ASX: GOZ) to “outperform” from “neutral” following its March update.
Australian property trusts have lost favour with investors during this COVID-19 crisis and its commercial property that is particularly hard hit. The forced closing of businesses to stem the spread of the virus triggered a wave of rent relief demands.
But Growthpoint is more insulated from this headwind than its peers.
“We note government tenants contribute 24% of income, listed entities 57%, large private companies 15% with small to medium enterprises (SME’s) only 4%,” said the broker.
“Despite a 31% portfolio weighting to the Industrial sector, we think the share price is being impacted by market concerns over its weighting to Office (69%) and possibly its gearing.”
But Credit Suisse doesn’t think the property trust will need to raise capital as it can conserve cash by cutting capital expenditure or even its dividend.
The stock is trading at around a 20% discount to its net tangible asset value and the broker’s price target on the stock is $3.15 a share.
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Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended PUSHPAY FPO NZX. 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.
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