Venture Advisory Monthly Wrap – March 2018

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Venture Advisory Monthly Wrap – March 2018

Venture Advisory Monthly Wrap – March 2018

Monthly Markets Wrap and Company Updates - March 2018

Key Takeaways

  • The country’s top media companies have demanded a blanket public interest exemption for journalists in response to Coalition's amended foreign interference bill. According to the companies, the proposed amendment could seriously affect public interest journalism
  • Tech giant Microsoft announced plans to launch new subsidised cloud computing training programs for Australia’s public sector workers to address the growing skills shortage and advance its plans to establish the Azure platform in government agencies
  • The federal government announced the launch of a transnational alliance to promote revolutionary technology in healthcare. Australian Advisory on Technology and Healthcare Competitiveness has been newly established to partner with the US-based Council on Competitiveness on improving engagement between the nations’ businesses, universities and research institutions in the development of pioneering health tech. The alliance is expected to encourage Australian entrepreneurship and increase the competitiveness of products in the US market. Additionally, according to MTPConnect, the number of jobs in the medical technology, biotechnology and pharmaceutical industries increased 10.0% to 62,000 during 2015–16, and manufacturing exports 30.0% to A$5.2bn. The staggering growth surge in what is the 10th largest export category in Australia resulted in 27,000 publications in 2016, 242 patents lodged and R&D investments totalling A$1.4bn

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 March 2018 were as follows:

Key company announcements

  • Bulletproof Group Ltd (01 March) responded to Macquarie Telecom's notice dated 01 March 2018 freeing its takeover offer dated 7 December 2017 from all defeating conditions, by recommending to shareholders to reject the takeover offer at 11 cents per share. The independent Board Committee also showed its commitment to act in the best interest of all shareholders by stating the fact that it has worked diligently to procure a materially superior offer of 15.2 cents per share from Klikon Group Pty Limited
  • Macquarie Telecom Group Ltd  (29 March) extended the unconditional takeover offer to 7.00pm Sydney time on Monday, 30 April 2018
  • Macquarie Telecom Group Ltd (01 March) gave notice to Bulletproof in its off-market takeover bid stating that the offer is free from all of its defeating conditions
  • Megaport Ltd (21 March) announced successful completion of A$50.0mn fully underwritten share placement to institutions, sophisticated and professional investors. The placement resulted in issue of ~13,333,334 new fully paid ordinary shares at a issue price of A$3.8 per share representing a discount of 7.4% to the company's closing price of A$4.1 per share as on 19 March 2018
  • Megaport Ltd (20 March) requested Trading halt to ASX in the wake of a proposed announcement by the company in regards to material capital raising
  • Megaport Ltd (20 March) announced that it will raise A$50.0mn in new equity via a share placement to institutions and sophisticated and professional investors. The company also plans to raise up to A$10.0mn via a share repurchase plan
  • Speedcast International Ltd (09 March) announced partnership with SRH Marine to provide maritime vessels with Navigation as a Service(NaaS), a simplified electronic distribution of electronic navigational charts and updates
  • Spark New Zealand Ltd (19 March) announced New Zealand's first live 5G mobile test suite in wellington, with minister of broadcasting, communications and digital media Clare Surran becoming the first member of the public to run a 5G speed test achieving speeds of 9GB per second
  • Superloop Ltd (26 March) announced appointment of Drew Kelton as CEO effective 1 July 2018. Drew has extensive executive leadership experiences across UK, Europe, Asia and US
  • Telstra Corporation Ltd (05 March) announced that Nehemiah Richardson, Telstra's M&A boss since December 2015 is expected to leave the company in few more weeks for an undisclosed role
  • Telstra Corporation Ltd (04 March) signed an outdoor Advertising deal with Sydney based start-up Cab Digital Media with an aim to get 1000 digital advertising boards fitted on the back of taxis nationally. The three-year-old business in partnership with Telstra has developed an Internet of Things (IoT) product that will leverage the mobile network of Australia's largest telecommunications provider for its flagship TaxiLive product

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 10.6x and a median forward EV / EBITDA of 8.1x

Media Monthly Wrap

Media Best and Worst Monthly Performers

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

Key Company Announcements

  • APN Outdoor Group Ltd (05 March) announced appointment of Philip Knox as CFO. Prior to this, Knox served as COO, CFO and Company Secretary of Garvan Institute of Medical Research
  • Carsales.com Ltd (02 March) announced the retirement of  its Chairman, Jeffrey Browne effective 23 March 2018. Richard Collins, previously the Deputy chairman, will take over.
  • Fairfax Media Ltd (09 March) announced sale of ~28 New Zealand newspapers due to drop in earnings to NZ$38.5mn down from NZ$83.0mn a year ago
  • Fairfax Media Ltd (06 March) announced that Merger implementation agreement to effect the proposed merger of Stuff Limited and NZME Limited has been terminated. However the parties will continue to pursue the appeal of the New Zealand High Court decision upholding the New Zealand Commerce Commission’s decision not to clear or authorise the merger and will re-engage on potential transaction terms pending the outcome of the appeal
  • GTN Group (26 March) announced resignation of  Mark Anderson, Director of GTN effective 26 March 2018. The board also announced that it is considering its options for an additional Non-Executive director to join the board in the near future
  • GTN Group (14 March) announced departure from US market with immediate effect. The company has transferred 100% ownership of its indirect subsidiary United States Traffic Network LLC, to Fair and Equal, LLC, an entity controlled by the President of USTN for nominal consideration. The company decided on an exit as their efforts in the US market were unsuccessful -  revenues were not growing at fast enough pace to make USTN a viable business in the near future. The company reiterated to shareholders about their focus on Cash flows flowing from Australia, Brazil, Canada and UK operations
  • HT&E (12 March) announced that Adshel has extended all precincts under the Sydney Trains contract, due to expire at the end of FY18, for multiple years. Adshel's contract covers premium and metropolitan concourse and platform assets across Sydney's rail network, and includes 186 digital screens
  • Nine Entertainment Co Holdings Ltd (29 March) announced an agreement with Tennis Australia for rights to all premium tennis played in Australia for the 2020-24 seasons. The rights also includes live rights and Free-to-air, subscription television, streaming, mobile and social media) together with extensive catch-up rights to the Australian Open as well as the lead up tournaments around Australia. The annual cash cost over the five-year period is A$60.0mn
  • Nine Entertainment Co Holdings Ltd (4 March) advised that News Corp has confirmed that it had conducted talks with Nine Entertainment regarding a finance reporting joint venture. The proposed alliance would distribute finance content on free-to-air, pay-TV and online channels, and could potentially include the launch of a new business channel. Nine and News Corp may also jointly bid for cricket broadcasting rights
  • News Corporation (6 March) announced that it has signed definitive agreement to combine Foxtel and FOX SPORTS Australia in order to deliver premium and innovative content. As per the agreement, News Corp will have 65.0% shareholding in the combined entity and will have rights to appoint 4 directors including chairman. News Corp will consolidate the new entity into its financial statements
  • Pacific Star Network Ltd  (29 March) announced that it has completed the merger with Crocmedia and placement for A$10.0mn by issuing 40.0 million new shares. The company also announced appointments of its top executives and board. Craig Hutchison, co-founder and CEO of Crocmedia was appointed as the CEO and managing director of PNW
  • SEEK Ltd (22 March) announced that Colin Carter has retired from the board as part of the board's succession and renewal plan
  • SEEK Ltd (05 March) increased its stake in SEEK Asia from 86.3% to 100% by investing A$157mn with a FY17 EV/EBITDA multiple of 16.0x. The aim is to make SEEK Asia more integrated in the AP&A structure. The transaction will be funded by existing debt facilities in SEEK Ltd
  • Sky Network Television Ltd (26 March) announced that John Fellet, CEO of SKY television has advised the board of his intention to retire within the next 12 months. SKY chairman Peter Macourt said a global search process would be undertaken including New Zealand based and internal candidates
  • Seven West Media Ltd  (28 March) announced that Seven West Media CEO, Tim Worner has sold the broadcaster's 50.0% stake in Yahoo7 to joint-venture partner Oath Inc, so it can have control over its own digital assets
  • WPP AUNZ (27 March) announced resignation of Paul Heath as a Non-executive Director of the company
  • WPP AUNZ (15 March) announced that Peter Bosilkovski will join Y&R as regional CEO, Australia & NZ. Bosilkovski was most recently CEO of Leo Burnett Sydney where he worked for nine years, during which time the agency was named AFR's 4th Most Innovative Company in Australia, Adnews & AWARD Agency of the Year, 6th Ranked Creative Company in the World (Gunn Report) and Cannes Lions Media Agency of the Year

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 10.2x and a median forward EV / EBITDA of 8.5x

Tech Monthly Wrap

Tech Best and Worst Monthly performers

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

Key Company Announcements

  • Aconex Ltd (15 March) announced that its shares will be suspended from quotation and trading in accordance with Listing Rule 17.2, following announcement  and approval of scheme of arrangement of Oracle's acquisition of the company's shares
  • Aconex Ltd (14 March) announced that its shareholders voted in favour of the proposed acquisition with >75.0% of the votes in favour of the resolution
  • Aconex Ltd (08 March) - S&P Dow Jones Index announced that it will remove Aconex Limited from S&P/ASX 200 pending shareholder and final court approval for proposed acquisition scheme of arrangement whereby the company will be acquired by Oracle Corporation
  • Aconex Ltd (01 March) announced approval of Foreign Investment Review Board (FIRB) confirming that the Australian Government had no objections in terms of its Foreign Investment Policy to the proposed acquisition of Aconex by Oracle Corporation through its Australian Subsidiary Vantive Australia Pty Ltd
  • Afterpay Touch Group (15 March) announced appointment of Luke Bartoli as Chief Financial Officer commencing May 2018. The announcement came after the group's current Chief Financial Officer, Nadine Lennie resigned. Bartoli has significant experience in the technology/gaming sector and also held senior level positions in Investment Banks
  • Big Un Limited (22 March) announced appointment of Nicholas Jorden as Non-Executive chairman effective immediately. Jorden is an Investment Banker with an extensive global financial background and has held various senior management positions at a number of leading US and European Investment Banks
  • Big Un Limited (13 March) announced resignation of David Conley and Elissa Lippiatt as Company Secretaries and appointment of Francis Farmakidis
  • Bravura Solutions (01 March) announced that Ironbridge Capital Funds sold its remaining shares in Bravura Solutions pursuant to an underwritten block trade
  • Catapult Group International (26 March) requested Trading halt to ASX in the wake of a proposed announcement by the company in regards to material capital raising
  • Catapult Group International (26 March) announced launch of a fully-underwritten institutional placement of new ordinary shares raising A$25.0mn at A$1.1 per share, representing a 6.8% discount to the last traded price
  • Data#3 Ltd (9 March) announced its appointment by the Digital Transformation Agency (DTA) representing the Commonwealth of Australia as the sole provider of Microsoft licensing solutions to the Australian Government after a tendering process. The contract will benefit the company in leveraging innovative technology and benefitting the Australian economy as a whole
  • ELMO Software (28 March) announced successful completion of institutional placement to raise A$45.0mn through the issue of approximately 8.3 million new shares. The company increased the size of the offer to A$45.0mn from A$40.0mn as a result of strong demand for the offer
  • ELMO Software (27 March) requested Trading halt to ASX in the wake of a proposed announcement by the company in regards to material capital raising
  • ELMO Software (27 March) announced Institutional placement of $40.0mn and an offer of Share repurchase plan to shareholders. The Institutional Placement will be undertaken at a fixed price of A$5.4 per share, representing a 10.1% discount to the closing price on 26 March 2018, and a 9.5% discount to the 5 day VWAP
  • Gentrack Group Ltd. (26 March) announced a new contract to supply velocity utility billing and customer management solution to E.ON, one of the world's largest investor-owned energy utility service providers. The contract will focus on delivery of the Velocity software to support E.ON's energy supply business in the UK and Romania
  • Gentrack Group Ltd. (22 March) announced issuance of 78,040 performance rights (PR) to senior executives for nil consideration under the Gentrack Long Term Incentive Scheme. The performance hurdle is that 50.0% of the PR will vest if the CAGR in EPS over 3 financial years is 7.0%. The number of PRs that vest will increase linearly to 100% if EPS CAGE is 12.0%
  • Gentrack Group Ltd. (13 March) announced confirmation by S&P Dow Jones Indices to include the company in S&P/NZX 50 portfolio index and the S&P/NZX Midcap Index
  • Hansen Technologies Ltd (21 March) announced that for the purpose of the interim dividend for FY18, the application price under the dividend reinvestment plan will be A$4.3 per share
  • Integrated Research Ltd (02 March) announced that Stephen John Killelea has sold further 15.0 million shares in the company
  • iSelect Ltd (15 March) announced appointment of Lennie as Chief Financial Officer effective 2 July 2018. Lennie has more than 20 years' experience as a CFO, Investment manager and financial advisor. Prior to this, she worked as a CFO of Afterpay Touch Group Limited
  • Impelus Ltd. (19 March) launched Solvers, a brand of premium digital and online assets connecting consumers with highly relevant offers. The aim of the product is to strengthen Impelus's Digital Customer Acquisition Capabilities
  • Impelus Ltd. (16 March) announced its intention to not seek an injunction or expedited action to prevent the services from being provided as the most appropriate claim being the claim for damages founded on misrepresentation by the service provider. The board however will continue to pursue its claim in a considered approach consistent with ensuring minimum disruption to the core areas of the company's business
  • Link Admininstration Holdings Ltd. (09 March) announced appointment of Cassandra Hamlin as Company Secretary, Link Group. Previously Cassandra worked as Group Company Secretary at Qantas and Senior Company Secretary at AMP. The appointment comes up in the wake of retirement of the company’s current secretary John Hawkins
  • Link Admininstration Holdings Ltd. (09 March) announced appointment of Andrew Green as an additional independent non-executive director with immediate effect
  • MYOB Group Ltd. (29 March) outlined ACCC's competition concerns with MYOB's proposed acquisition of Reckon's Accountants Group. ACCC thinks that in the case of an acquisition, MYOB will become the only supplier of practice software suitable for medium to large accounting firms. This would substantially reduce competition and result in additional risks for the consumers due to increased prices and decreased service levels
  • MYOB Group Ltd. (29 March) announced that the Australian Competition and Consumer Commission has continued its review of the proposed acquisition of Reckon's Accountant Group assets at A$180mn. The company expects to receive a decision both from ACCC and NZCC in Q2 FY18
  • Nearmap Ltd. (07 March) announced its New Zealand business results with sales of NZ$97.9mn in FY17 up from NZ$83.5mn during previous year. The company also posted an increase in profit to NZ$4.8mn from NZ$3.0mn during previous year
  • Nearmap Ltd. (06 March) announced appointment of Sue Klose as Interim Chief Marketing Officer (CMO). Previously she was associated with GraysOnline as Chief Marketing Officer where she was responsible for brand development, marketing operations and digital product strategy
  • Pro Medicus Ltd. (22 March) announced on-Market Share Buy-back for a period of 12 months. This will permit the company to acquire up to 10.0% of the ordinary shares on issue during the last 12 months
  • Trade Me Group Ltd (09 March) announced that Commerce Commission declined the proposed acquisition of Motorcentral which was announced by the company in July 2017. The company intends to consider its next steps after the full rationale for the decision in a written format is made available to them in coming weeks
  • Wisetech Global Ltd (14 March) announced acquisition of LSP Solutions, a leading provider of customs and warehouse management solutions in the Netherlands. The purchase cost comprises ~EUR3.2mn upfront, with a further multi-year earn out potential of up to EUR1.8mn related to integration, product development and customer conversion
  • zipMoney (26 March) announced a new partnership with Tigerair Australia to add Zip interest-free payment method to the low-cost carrier's suite of payment options

Forward EV / EBITDA Multiples Chart

The forward EV / EBITDA multiples for leading tech stocks at the end of the month is as follows:

Tech stocks were trading on an average forward EV / EBITDA of 13.1x and a median forward EV / EBITDA of 12.7x

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), Aconex Ltd (ACX-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), 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), Impelus Ltd (MBE-AU), Melbourne IT Ltd (MLB-AU), Megaport Ltd. (MP1-AU), MYOB Group Ltd. (MYO-AU), Nearmap Ltd. (NEA-AU), Netwealth Group Ltd. (NWL-AU), Nextdc Limited (NXT-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)