Hot stock pick MYOB Group Ltd

This week Money asks independent equities research firm Kalkine for a hot stock pick - MYOB Group Ltd (ASX:MYO)

Key statistics:

4/11/15 closing share price: $3.330

52 week high: $3.920

Most recent dividend: - Annual dividend yield: -

The accounting software group MYOB (ASX: MYO) reported a revenue increase of 8% year-on-year to $161 million, while pro forma EBITDA (earnings before interest, taxes, depreciation and amortisation) growth of 14% to $72 million was recorded in the first half of 2015. About 94% of first-half 2015 revenue was recurring, driven by 10% growth in the paying user base to 528,000.

Moreover, an increase in the number of cloud users and 5% growth in ARPU (average revenue per user) among small and medium enterprises (SMEs) led to better retention rates during the period. Accordingly, MYOB achieved a record cloud solutions adoption, resulting in SME cloud subscriptions increasing to 142,000 and 150,000 during June 2015 and early August 2015 respectively. Overall, the group's forma NPATA (normalised net profit after tax and before amortisation) improved by 14% year-on-year to $40 million.

Operating expenses rose to $89 million in the first half of 2015, as sales and marketing and product costs rose by 6% and 4% respectively. Staff costs were $2.3 million more than the prospectus forecast due to enterprise solutions sales and service costs and investments by the firm in digital marketing capabilities.

MYOB delivered a solid cash conversion of 91%, which is better than the prospectus forecast of 82%. Net working capital change reached $5.9 million boosted by the impact of recent acquisitions and prepaid subscriptions. It incurred major capital expenditure on research and development, with capex reaching $8.9 million in first-half 2015.

Get stories like this in our newsletters.