Venture Advisory Monthly Wrap – April 2018

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Venture Advisory Monthly Wrap – April 2018

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Venture Advisory Monthly Wrap – April 2018

Monthly Markets Wrap and Company Updates - April 2018

Key Takeaways

  • The Australian Competition and Consumer Commission (ACCC) suggested the separation of the National Broadband Network (NBN), citing privatisation of the network would provide an opportunity to deliver effective infrastructure-based competition. ACCC stated its view on the separation of NBN, which currently has a final cost estimate of about A$49.0bn, comes after an independent cost-benefit analysis of broadband and a review of regulations in 2014, which encouraged the split for infrastructure-based competition. ACCC added this should be done prior to the privatisation, and early systems, accounting and reporting arrangements should be put in place to ensure the split is carried out smoothly in future
  • The Australian government awarded an around A$150mn master media agency services contract to UM, ending the tenure of DentsuX. UM, OMD and the incumbent had been in the running at later stages of the account (which posted billings of A$175mn in an election year, but is more consistently around the A$150mn mark). DentsuX (mostly under the Dentsu Mitchell brand) has held the campaign for the federal government's MMA for the past three years, business it won from UM. The federal government’s master media account is among the largest and most prestigious in the country in terms of annual billings
  • Microsoft announced the launch of two new regions in Australia: Azure Australia Central and Central 2. To deliver these new regions, Microsoft entered a strategic partnership with Canberra Data Centers

Telco Monthly Wrap

Media Monthly Wrap

Tech Monthly Wrap

Telco Monthly Wrap

Telco Best and Worst monthly performers

The 5 best and worst performers for the month of April 2018 were as follows:

Key company announcements

  • Bulletproof Group Ltd (10 April) announced that Federal Court of Australia approved the convening of meeting of Bulletproof shareholders to consider and approve the scheme of arrangement for the proposed acquisition of Bulletproof by Klikon Group Holdings Pvt. Ltd. If the scheme is approved, Bulletproof shareholders will receive a consideration of A$0.2 for each share they hold on record date in accordance with the terms of the scheme
  • Chorus Ltd (4 April) announced that 7 banks have extended the terms of A$350mn credit facility by a year, the evergreen facility will now run through to May 2021
  • Megaport Ltd (26 April) announced a solid 3Q FY18 performance, including new cloud, data centre, and sales channel partnerships, while increasing monthly recurring revenue growth of 12.0% QoQ
  • Megaport Ltd (25 April) announced support for Google Cloud’s Partner Interconnect, a service from Google Cloud that allows customers to privately connect to Google Cloud from anywhere
  • NEXTDC Ltd (17 April) announced Trading halt pending announcements by the company
  • NEXTDC Ltd (17 April) announced intention to purchase 3 new commercial property sites for future data centre developments in Sydney, Melbourne and Perth
  • NEXTDC Ltd (5 April) announced that it has received and rejected a new pre-emptive first right of refusal offer of A$265mn from Asia Pacific Data Centre Group in relation to the purchase of 3 data centres owned by the APDC Trust
  • Singapore Telecommunications Ltd (12 April) signed an agreement with Etisalat, SoftBank and Telefónica to create the first Global Telco Security Alliance offering enterprises access to a comprehensive portfolio of cyber security services. The alliance will form one of the world’s biggest managed security services platforms with a combined customer base of more than 1.2bn customers in over 60 countries across Asia Pacific, Europe, the Middle East and the Americas
  • Speedcast International Ltd (23 April) generated a revenue of A$514mn in FY17, up 136% from 2016 as the satellite network operator began leveraging its acquisitions of U.S. companies Harris CapRock and UltiSat. The company seeks to refinance its existing bank facilities with a five year, A$100mn revolving credit line and a seven-year, A$425mn loan
  • Speedcast International Ltd (19 April) announced that Rating Agencies, Moody's Investors Services and S&P Global has assigned the company a corporate credit rating: Moody's assigned the company a corporate credit rating of Ba3 with a stable outlook and the proposed facility an instrument rating of 'Ba3', S&P has assigned the company a corporate credit rating of BB- with a stable outlook and the proposed facility a preliminary instrument rating of BB-
  • Speedcast International Ltd (19 April) announced its intentions to pursue refinancing of existing bank debt with a new a US$425mn Senior Secured Debt and US$100mn Senior Secured Revolving Credit facility. The existing bank loan includes a 3 year US$425mn Senior secured loan and US$20.0mn revolving credit facility
  • Speedcast International Ltd (9 April) announced that Clive Cuthell will join as CFO of SpeedCast and will report to CEO, Pierre-Jean Beylier. He has 25 years of industry experience
  • Spark New Zealand Ltd (16 April) announced that it has secured rights to broadcast The Rugby World Cup to New Zealanders including The Women's Rugby World Cup, The Rugby World Cup Sevens 2018 and World Rugby Under 20 championships 2018 and 19
  • Telstra Corporation Ltd (30 April) signed an intellectual property license agreement with TiVo. Under the agreement, Telstra will have access to TiVo's IP portfolios for devices and applications
  • Telstra Corporation Ltd (27 April) has been fined A$10.0mn by the Federal Court because of the allegations from ACCC that Telstra misled customers and breached the ASIC Act when it charged them for digital content, such as games and ringtones which they unknowingly purchased
  • Telstra Corporation Ltd (18 April) provided an update on Reseller Arrangements in Australia: Telstra and Buddy cease negotiations for Telstra to become the primary Buddy Ohm reseller in Australia

Forward EV / EBITDA Multiples Chart

The forward EV / EBITDA multiples for leading telco stocks at the end of the month is as follows: Telecom stocks were trading on an average forward EV / EBITDA of 9.0x and a median forward EV / EBITDA of 8.0x

Media Monthly Wrap

Media Best and Worst monthly performers

The 5 best and worst performers for the month of April 2018 were as follows:

Key Company Announcements

  • HT&E (18 April) announced retirement of Peter Cullinane, Non-Executive Director with effect on 7 May 2018. Peter made the decision as he was recently appointed as Chairman of NZME Limited
  • HT&E (11 April) announced that the board has received a non-binding indicative offer from oOh!media Limited to acquire the Company's out of home division, Adshel. The board assessed the offer and determined that it does not adequately reflect the value of Adshel to company shareholders
  • Nine Entertainment Co Holdings Ltd (13 April) announced that the company has not been given rights in relation to broadcasting Australian International Cricket matches for the 2018/19 summer. This will have no impact on NEC's FY18 results. The likely impact on FY19 results is unknown as of yet
  • Nine Entertainment Co Holdings Ltd (4 April) announced that Southern Cross Austereo(SCA) will take on representation of Nine' Local Television sales in the Northern New South Wales license area
  • News Corporation (27 April) announced that it was in talks with potential buyers of its regional and local newspapers, including private equity bidders for sale. No decisions has not been made yet
  • News Corporation (3 April) announced completion of the transaction to combine Foxtel and Fox Sports Australia. The commercial arrangements are unchanged from those announced on March 6, 2018
  • REA Group Ltd (19 April) announced it has made a A$105mn final payment for acquisition of 100% of iProperty Group Limited. The same is in accordance with the terms of the Scheme Booklet
  • oOh!media Ltd (11 April) offered to acquire a division of HT&E outdoor media division, Adshel
  • Seven West Media Ltd (19 April) reported to be in fresh talks with Fairfax about embarking on a $2.3bn-plus merger. The attraction for Seven West Media (SWM) is the 60.0% stake Fairfax owns in the lucrative online real estate website group Domain while SWM brings a print portfolio and high profile free-to-air broadcaster to the table
  • Seven West Media Ltd (13 April) announced that it has signed a six year contract with Cricket Australia to broadcast All Australian domestic and Big Bash 20-20 competition. The annual cash rights cost is A$75.0mn per annum over 6 years
  • WPP AUNZ (14 April) announced resignation of Sir Martin Sorrell as Chief Executive Officer of WPP with immediate effect, Robert Quarta, Chairman of WPP, becomes Executive Chairman until the appointment of new CEO

Forward EV / EBITDA Multiples Chart

The forward EV / EBITDA multiples for leading media stocks at the end of the month is as follows: Media stocks were trading on an average forward EV / EBITDA of 10.3x and a median forward EV / EBITDA of 8.8x

Tech Monthly Wrap

Tech Best and Worst Monthly performers

The 5 best and worst performers for the month of April 2018 were as follows:

Key Company Announcements

  • Afterpay Touch Group (17 April) announced that it will undertake a 4 year senior unsecured notes offering to raise a minimum of A$40.0mn. The company went on to close the round of funding at A$50.0mn. The unsecured notes carry a fixed coupon of 7.3% PA. Accessing the wholesale A$ debt market will diversify APT's current debt funding sources, provide additional tenor to the company's debt maturity profile, and provide greater operating flexibility for future growth
  • Afterpay Touch Group (11 April) announced a business update for the 3 month ended 31 March 2018, with sales at A$1.5bn up 400% compared to PY. The company also reiterated the continued progress on key growth enablers like significant new enterprise retailers signing up to AfterPay, most recently including Catch of the Day, Red Balloon, Petbarn and Lululemon
  • Bravura Solutions (17 April) signed a long term contract with Commonwealth Superannuation Corporation for the implementation of the Sonata platform as a managed cloud service. Sonata is a next-gen wealth management solution, capable of supporting investment, wrap, pensions and life insurance products across multiple distribution channels. It provides clients with a customer - centric digital platform that can streamline administration and increase cost efficiencies through powerful inbuilt workflow process automation
  • Catapult Group International (18 April) released Cash Flow Statement for the quarter ended 31 March 2018 (3Q FY18) with cash of A$34.9mn. The unaudited cash flow report reflects group cash receipts from customers of A$13.1mn, up 23.0% on prior comparable period (Q3 FY17). Also includes placement of new fully paid ordinary shares with net proceeds of A$23.9mn
  • Computershare Ltd (19 April) announced a business update on investor day reaffirming the earnings guidance given by the company in February. Also assured the investors that the Karvy sale is ongoing and is not completed yet due to slow regulatory process in India
  • Citadel Group Ltd. (27 April) announced the acquisition of Anaesthetic Private Practice Pty Ltd in an all cash deal for A$2.0mn. Anaesthetic Private Practice is a provider of cloud-based Software as a Service (SaaS) practice management and billing tools to the anaesthetist market in Australia with EBITDA of ~A$500,000. The acquisition will expand its e-health capabilities and broadens the SaaS offerings
  • Crowd Mobile Ltd (20 April) announced buyback of ordinary shares for holders of less than marketable parcels of shares (i.e. shareholding valued at less than A$500)
  • Crowd Mobile Ltd (13 April) announced appointment of Antoaneta Ignatovska as the CFO of the company post resignation of Christian Shaw from the post of CFO. The company also announced that it will relocate the role of CFO from Melbourne, Australia to Amsterdam, Netherlands
  • ELMO Software (30 April) released Cash Flow Statement for the quarter ended 31 March 2018 (3Q FY18) with cash of A$7.9mn. The unaudited cash flow report reflects group cash receipts from customers of A$7.4mn, up 46.0% on prior comparable period (Q3 FY17). Also includes completion of A$45.0mn instiutional placement which was complemented by share purchase plan that raised over A$1.0mn in April
  • Integrated Research Ltd (13 April) announced appointment of Paul Brandling as Deputy chairman of the board. Brandling has an extensive 30 years of experience in hardware, services and software. Killelea the present chairman, is seeking to devote more of his future time to his philanthropic interests. The appointment of Brandling is part of company's succession planning process for the future when Killelea steps down as chairman
  • IRESS Ltd (04 April) announced acquisition of Regtech and data analytics leader Lucsan.  The transaction was completed in April 2018
  • iSelect Ltd (23 April) updated its guidance for FY18 underlying EBIT to be in the range between A$8.0mn and A$12.0mn (previously A$26.0mn-A$29.0mn). The company also announced the resignation of its CEO and MD Scott Wilson, effective immediately. Brodie Arnhold, a director on iSelect’s board and chair of the audit and risk committee, will be the acting chief executive
  • Impelus Ltd. (11 April) announced Business Update with HY18 revenue at A$15.5bn vs. A$27.1bn during PY, However the Group EBITDA increased from A$2.1bn to A$2.2bn during HY18
  • Kogan.com Ltd (23 April) released Cash Flow Statement for the quarter ended 31 March 2018 (3Q FY18) with cash of A$19.3mn. The unaudited management account reflects gross transaction value growth of 49.8% and Revenue growth of 46.1% versus the prior corresponding period (3Q FY17)
  • Kogan.com Ltd (12 April) announced extension of its partnership with Vodafone Hutchison Australia into fixed broadband internet, with an intention to launch NBN services in 2018
  • Link Administration Holdings Ltd. (18 April) announced successful completion of A$300mn fully underwritten Institutional placement at a price A$8.5 per share. The issue price represents a 2.4% discount to Link Group's last closing price of A$8.7 on 17 April 2018. The proceeds are expected to provide Link Group with balance sheet flexibility to continue to pursue strategic opportunities
  • Melbourne IT Ltd. (26 April) announced resignation of Gail Pemberton AO and John Armstrong as directors of the company effective 29 May 2018. The process of finding a new chair to the board is expected to be concluded by July
  • MYOB Group Ltd. (27 April) announced sale of subsidiary, RentPay (rental payments system), to Rent.com.au (Australian website dedicated to rental property) for A$0.4mn in cash
  • MYOB Group Ltd. (20 April) announced an update to the proposed acquisition of Reckon's Accountant Group assets by advising that both the Australian competition and Consumer Commission and the New Zealand Commerce Commission announced an extension to their review periods for the proposed A$180mn acquisition, with both decisions expected on 21 June 2018
  • Pushpay Holdings Ltd. (11 April) announced that the company has doubled its revenue to US$70.0mn over the fiscal year to 31 March 2018. The company also announced that it surpassed US$3.0bn in Annualised processing volume, an increase of 69.1% over PY
  • Wisetech Global Ltd (23 April) announced acquisition of two leading Latin American Freight forwarding and logistics solutions providers, Forward and Softcargo, and a leading French customs solutions provider, EsayLog. The aggregate consideration for these acquisitions consist of A$10.1mn upfront with further multi-year earnouts of up to A$14.9mn relating to activities for integration, native CargoWise One product development, customer conversion and revenue growth
  • zipMoney (27 April) released Quarterly Report and Cash Flow Statement. Unaudited results included Q3 FY18 revenue of A$11.2mn, which was an 138% increase on pcp (Q3 FY17)

Forward EV / EBITDA Multiples Chart

The forward EV / EBITDA multiples for leading tech stocks at the end of the month is as follows: Technology stocks were trading on an average forward EV / EBITDA of 14.3x and a median forward EV / EBITDA of 13.1x

Reference stocks

Our reference portfolio is as follows:

Telecom Stocks:

5G Networks (5GN-AU), amaysim Australia Ltd. (AYS-AU), Bulletproof Group Limited (BPF-AU), Chorus Limited (CNU-NZ), Hutchison Australia (HTA-AU), Inabox Group Ltd. (IAB-AU), Macquarie Telecom Group Limited (MAQ-AU), Megaport (MP1-AU), MNF Group Limited (MNF-AU), Netcom Wireless (NTC-AU), Nextdc Limited (NXT-AU), Over the wire (OTW-AU), Singapore Telecommunications Limited (Z74-SG), Spark New Zealand Limited (SPK-NZ), SpeedCast International Ltd (SDA-AU), Spirit Telecom (ST1-AU), Superloop Ltd. (SLC-AU),  Telstra Corporation Limited (TLS-AU), TPG Telecom Limited (TPM-AU), Vita (VTG-AU), Vocus Group Limited (VOC-AU)

Media Stocks:

APN Outdoor Group Ltd. (APO-AU), Carsales.Com Limited (CAR-AU), Domain Holdings Australia Ltd. (DHG-AU), Asia Pacific Digital Limited (DIG-AU), Event Hospitality & Entertainment Ltd. (EVT-AU), Fairfax Media Limited (FXJ-AU), HT&E Ltd (HT1-AU), iCar Asia Ltd. (ICQ-AU), Macquarie Media Limited (MRN-AU), Nine Entertainment Co. Holdings Pty Ltd. (NEC-AU), News Corporation Shs B Chess Depository Interests repr 1 Sh (NWS-AU), oOh media Ltd (OML-AU), Pacific Star Network Limited (PNW-AU), Prime Media Group Limited (PRT-AU), REA Group Ltd (REA-AU), Seek Limited (SEK-AU), SKY Network Television Limited (SKT-AU), Seven West Media Limited (SWM-AU), Southern Cross Media Group Limited (SXL-AU), Trade Me Group Limited (TME-NZ), Village Roadshow Limited (VRL-AU), WPP AUNZ Limited (WPP-AU)

Tech Stocks:

3P Learning Ltd. (3PL-AU), Altiumc (ALU-AU), Afterpay Touch Group Ltd. (APT-AU), Appen Ltd. (APX-AU), Big Un Limited (BIG-AU), Bravura Solutions Limited (BVS-AU), Catapult Group International Ltd. (CAT-AU), Citadel Group Ltd. (CGL-AU), Class Ltd. (CL1-AU), Crowd Mobile Limited (CM8-AU), Computershare Limited (CPU-AU), Data#3 Limited. (DTL-AU), DWS Limited (DWS-AU), ELMO Software Ltd. (ELO-AU), GetSwift Ltd. (GSW-AU), Gentrack Group Ltd (GTK-NZ), Hansen Technologies Limited (HSN-AU), Impelus Ltd (IMS-AU), Infomedia Ltd (IFM-AU), IRESS Limited (IRE-AU), Integrated Research Limited (IRI-AU), iSentia Group Limited (ISD-AU), Kogan.com Ltd. (KGN-AU), Link Administration Holdings Ltd. (LNK-AU), Melbourne IT Ltd (MLB-AU), MYOB Group Ltd. (MYO-AU), Nearmap Ltd. (NEA-AU), Netwealth Group Ltd. (NWL-AU),  OFX Group Ltd. (OFX-AU), Pro Medicus Limited (PME-AU), Pushpay Holdings Ltd (PPH-NZ), Reckon Limited (RKN-AU), Technology One Limited (TNE-AU), Webjet Limited (WEB-AU), Wisetech Global Ltd. (WTC-AU), Xero Limited (XRO-NZ), Zip Co Ltd. (ZML-AU)