Venture Advisory November 2017 report: Markets and company updates

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Venture Advisory November 2017 report: Markets and company updates

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Venture Advisory November 2017 report: Markets and company updates
Venture Advisory monthly report: Markets and company updates

 Industry news

In November 2017, the Australian information technology sector [AXIJ] was up 4.4% while the telco sector [AXTJ] experienced a modest decline of 1.6%. Both the All Ordinaries [AORD] and ASX 200 [AXJO] were up 1.4% and 1.0%, respectively

Monthly wrap up

Share price performance and valuations

November’s best and worst performers:

  • Technology – Elmo Software was up 32% following reaffirming prospectus guidance and the acquisition of two specialised, SaaS based, HR management software solutions, PeoplePulse and LiveSalary
  • Media – After successfully implementing the ASX listing and separation of its real estate classifieds business Domain Holdings, Fairfax saw its share price fall 35% throughout the month
  • Telco and ICT – Following receiving an off-market bid from Macquarie Telecom, cloud services provider Bulletproof Group traded up 62% for November. Telco reseller Inabox Group lost 58% of its market value after announcing poor performance by its Hostworks business

M&A and investment activity

The market saw a number of transactions announced:

  • IRESS entered into an agreemnt with MainstreamBPO to divest a part of the company's superannuation administration business for A$3.5m
  • MYOB Group entered into an agreement to acquire the Australian and New Zealand assets of the Accountant Group from Reckon Ltd for A$180m
  • Fairfax Media acquired the remaining 77.5% stake in Neighbourly Ltd for an undisclosed purchase price
  • Fairfax Media successfully seperated its Domain Holdings business which listed on the ASX with a market cap of ~A$2.25b
  • Carsales.com signed a binding MOU to purchase the remaining 50.1% of South Korea’s SK ENCARSALES.COM Ltd for KRW205b (A$244m)
  • Pacific Star Network has entered into a non-binding Term Sheet with Crocmedia, a leading sports media content business relating to a proposed merger of the two businesses
  • Over the Wire completed the acquisition of VPN Solutions for A$15.6m
  • Superloop compeled another acqusition for the year, acquiring GX2 Holdings

Technology Sector - Highlights

NOVEMBER SHARE PRICE PERFORMANCE (BEST AND WORST) — TECH

INDUSTRY UPDATE – TECHNOLOGY

Date Company Comments (all growth figures are based on pcp)
2 Nov 17 ELMO Software
  • ELMO Software announced the acquisition of two specialised, SaaS based, HR management software solutions, PeoplePulse and LiveSalary, in one transaction for A$12m.Under the terms, the consideration of A$8m is payable on completion of the transaction and A$2m to be paid on the first year anniversary from completion and an additional A$2m performance payment will be made should financial stretch targets be achieved in the first 12 months from completion. The acquisitions will broaden ELMO’s integrated product suite from 7 to 9 modules
9 Nov 17 Xero
  • Reported 1H18 revenue of NZ$187.8m (up 36.8% YoY) and net loss of NZ$21.1m (vis-à-vis loss of NZ$43.9m in 1H17). Total subscribers were 1,199,000 (up 39.1% YoY)
9 Nov 17 IRESS
  • Entered into an agreement with MainstreamBPO to divest a part of the company's superannuation administration business that provides services to customer owned banks for A$3.5m
14 Nov 17 OFX
  • Reported 1H18 flat revenue growth of A$58.7m, while EBITDA was A$13.4m (down 0.8% YoY) and net profit was A$8.3m (down 14% YoY)
16 Nov 17 Afterpay Touch Group
  • Responded to an article in The Australian Financial Review which speculated that ASIC intended to examine the emerging sector in which Afterpay operates. The company stated that it welcomed any industry review by ASIC and has already engaged with key regulators and industry stakeholders to establish best practice principles and processes for the emerging industry
16 Nov 17 zipMoney
  • Kogan.com, Australia's largest pure-play online retail website, joined the Zip platform. As a result, more than one million active Kogan.com customers would have access to the zipPay digital wallet at checkout, allowing shoppers a limit of up to A$1,000 and the ability to pay flexibly, over time for their purchases, interest-free
16 Nov 17 MYOB Group
  • Entered into a purchase agreement to acquire the assets of the Accountant Group in Australia and New Zealand from Reckon Limited, for A$180m. The acquisition strengthens MYOB’s growing adviser base by deepening the relationship with these advisers, creating an opportunity to accelerate online SME growth via a larger referral network
20 Nov 17 Technology One
  • Reported FY17 revenue of A$273.2m (up 10% YoY) and NPAT of A$58m (up 9% YoY). The strong results were underpinned by the continuing fast growth of the TechnologyOne Cloud, with Cloud Annual Contract Value (ACV) was A$27m (up 69% YoY)
22 Nov 17 Wisetech Global
  • Reported it expects revenue to grow between 35-41% to A$207-217m while EBITDA is expected to grow between 32-39% to A$71-75

SOURCE: Factset, AFR, ASX Company Announcements, Company websites

Note: Data collected 30 November 2017. See Appendix One for ticker and company details

Media Sector - Highlights

NOVEMBER SHARE PRICE PERFORMANCE (BEST AND WORST) — MEDIA

INDUSTRY UPDATE – Media

Date Company Comments (all growth figures are based on pcp)
1 Nov 17 Fairfax Media Ltd
  • Acquired the remaining 77.5% stake in Neighbourly Ltd for an undisclosed amount
10 Nov 17 REA Group Ltd
  • Reported 1QFY18 revenue of A$190m (up 21% YoY) and EBITDA of A$104m (up 24% YoY) driven by the Australian residential business, and the inclusion of its new financial services revenue from August
13 Nov 17

Nine Entertainment Co

  • Nine Entertainment Co expects FY18 EBITDA to be at the upper end of the range of analysts’ forecasts of A$186-207m
16 Nov 17 Seven West Media
  • Announced a new partnership with Newzulu Limited to build a new app which will allow Seven to harness the power of their live audiences by collecting usergenerated content at the largest sporting events for which they have broadcast rights
20 Nov 17 Carsales.com Ltd
  • Signed a binding Memorandum of Understanding for carsales to purchase the remaining 50.1% of South Korea’s SK ENCARSALES.COM Ltd for KRW205b (A$244m). This will give carsales 100% control and ownership of South Korea’s leading online auto classifieds business
22 Nov 17 Fairfax Media Ltd
  • Implemented the Scheme of Arrangement for the separation of Domain Holdings Australia Limited from Fairfax. The company also issued 574,871,064 Domain ordinary shares. Domain commenced trading on the ASX on 23 Nov 17
23 Nov 17

Pacific Star Network

  • Announced that it has entered into a non-binding Term Sheet with Crocmedia, a leading sports media content business relating to a proposed merger. If the proposed transaction proceeds, the merged Group would be led by CEO elect, Craig Hutchison
28 Nov 17 Asia Pacific Digital
  • The company received multiple non-binding, indicative proposals to invest in or acquire its operating business. The company further stated that the bidders were well known and directors believed there is a reasonable probability a transaction would be concluded, assuming due diligence and negotiations are concluded satisfactorily
29 Nov 17 Seek
  • SEEK Ltd affirmed revenue growth in the range of 20% to 25% and NPAT in the range of A$220-230m and EBITDA growth of approximately 13% for FY18

SOURCE: Factset, AFR, ASX Company Announcements, Company websites

Note: Data collected 30 November 2017. See Appendix One for ticker and company details

Telco and ICT Highlights

NOVEMBER SHARE PRICE PERFORMANCE (BEST AND WORST) — TELCO

INDUSTRY UPDATE – TELCO

Date Company Comments (all growth figures are based on pcp)
1 Nov 17 Over the Wire Holdings
  • Completed the acquisition of VPN Solutions for A$15.6m. The upfront consideration comprises of A$14.8m in cash plus 382,721 OTW shares (A$0.8m in OTW shares at an issue price of A$2.04). The acquisition has delivered approximately 150 business customers to the company and accelerates Over the Wire’s geographic expansion in New South Wales and South Australia
6 Nov 17 Speedcast International
  • Announced it has completed the previously announced 100% acquisition of UltiSat in a cash transaction of up to US$100m
8 Nov 17 Spark New Zealand
  • Spark New Zealand Ltd announced it has signed an agreement to purchase all shares in Digital Island, a NZbased business telecommunications provider. Spark intends to run Digital Island as a standalone business with it operationally reporting into the Spark Ventures & Wholesale unit
10 Nov 17 amaysim
  • Announced resignation of Rolf Hansen as a nonexecutive director. Rolf co-founded amaysim in 2010 and served as the company’s CEO until February 2015
17 Nov 17 Superloop
  • Completed the acquisition of GX2 Holdings. The strategic acquisition accelerates Superloop’s ability to significantly expand its community broadband campus solutions to a broader customer base in Australia and overseas and delivers technology, software and systems that will add significant value to the combined group and assist in further strengthening offerings to the market
20 Nov 17 Telstra
  • Sold 85% stake in 1300 Australia Pty to a consortium led by Gavin Scholes and Aura Funds Management. The business will be rebranded under the name 1300 Australia. The management team and employees will continue in their current positions
21 Nov 17

Macquarie Telecom Group

  • Macquarie Telecom Group announced its intention to make an off-market bid through its wholly-owned subsidiary Macquarie Cloud Services to acquire all of the ordinary shares in Bulletproof Group Limited for A$0.11 cash per share
28 Nov 17 Speedcast International
  • Announced Keith Johnson, currently EVP of Speedcast’s Energy Division, will take over from David Kagan as Chief Operating Officer, while also keeping his existing Energy Division responsibilities
29 Nov 17 Megaport
  • Megaport to offer elastic interconnection services to Cyxtera Technologies. Initial Cyxtera markets include Dallas, Phoenix, Washington, D.C., and London. Customers would have access to direct cloud connectivity and rapid provisioning, enabling them to reduce infrastructure costs and realize improved performance

SOURCE: Factset, AFR, ASX Company Announcements, Company websites

Note: Data collected 30 November 2017. See Appendix One for ticker and company details

Appendix One

TECHNOLOGY MEDIA TELECO & ICT
3P Learning Ltd 3PL APN Outdoor Group Ltd APO amaysim Australia Ltd AYS
Aconex Ltd ACX Domain Holdings DHG Bulletproof Group Ltd BPF
Afterpay Touch Group APT Asia Pacific Digital Ltd DIG Chorus Ltd CNU
Altium Ltd ALU Carsales.com Ltd CAR DWS Group DWS
ASG Group Ltd ASZ Event Hospitality & Entertainment Ltd EVT Inabox Group Ltd IAB
Bravura Solutions BVS Fairfax Media Ltd FXJ Macquarie Telecom Group Ltd MAQ
Computershare Ltd CPU GTN Group GTN Megaport Ltd MP1
Crowd Mobile Ltd CM8 HT&E HT1 Melbourne IT Ltd MLB
Data#3 Ltd DTL iCar Asia Ltd ICQ MNF Group Ltd MNF
ELMO Software ELO Macquarie Media Ltd MRN NEXTDC Ltd NXT
GBST Holdings Ltd GBT Nine Entertainment Co Holdings Ltd NEC Singapore Telecommunications Ltd Z74
Hansen Technologies Ltd HSN News Corporation NWS Speedcast International Ltd SDA
Infomedia Ltd IFM oOh!media Ltd OML Spark New Zealand Ltd SPK
Integrated Research Ltd IRI Pacific Star Network Ltd PNW Superloop Ltd SLC
IRESS Ltd IRE Prime Media Group Ltd PRT Telstra Corporation Ltd TLS
iSelect Ltd ISU QMS Media QMS TPG Telecom Ltd TPM
iSentia Group Ltd ISD REA Group Ltd REA Over the Wire Holdings Ltd OTW
Kogan.com Ltd KGN SEEK Ltd SEK Vocus Group Ltd VOC
OFX Ltd OFX Southern Cross Media Group Ltd SXL
Mobile Embrace Ltd MBE Sky Network Television Ltd SKT
MYOB Group Ltd MYO Seven West Media Ltd SWM
Reckon Ltd RKN WPP AUNZ WPP
Retech Technology RTE Village Roadshow Ltd VRL
SMS Management & Technology Ltd SMX
Technology One Ltd TNE
Trade Me Group Ltd TME
Webjet Ltd WEB
Wisetech Global Ltd WTC
Xero Ltd XRO
zipMoney ZML