Key Market Activity Takeaways
This month saw continued M&A activity with TradeMe receiving an NBIO from Apax Partners valuing it at ~NZ$2.5b, MNF Group agreeing to acquire Inabox for $34.5m in cash, subject to approval from Inabox shareholders, QMS Media entering into a Head of Agreement for a proposed merger of its NZ business with MediaWorks, and Webjet acquiring Destinations of the World for ~$240m. Lastly, Fairfax Media shareholders approved the proposal by Nine Entertainment to acquire 100% of the issue capital of Fairfax and the PEXA acquisition by the Link, CBA and Morgan Stanley consortium progressed, with 82% of PEXA shareholders having now accepted.
More broadly, Speedcast announced that the company had received multi-year contracts from Schlumberger and Spark NZ provided that the company had won a four-year deal for FIH media right in New Zealand. Also, HT&E confirmed that it had appointed Credit Suisse Equities to undertake an on-market buyback of up to 10% of shares. Furthermore, oOh!media secured a long-term agreement for the Brisbane City Council street furniture contract, following its acquisition of Adshel. In addition, Afterpay announced that it had realised $115m of sales with over 300,000 customers in the U.S. and had completed the sale of the European e-Services business for $7.5m.
The New Zealand Government announced that it would block Huawei from participating in the roll out of the countries 5G network. Following the announcement, Spark said they don’t expect this to change the 1 July 2020 launch date for their 5G network and are considering the announcement.
Telcos
Best and Worst Monthly Performers
The 5 best and worst performers for the month of November 2018 were as follows:
📷
Source: Factset as of 30 November 2018
Arq Group (28 November) announced that Brett Fenton, current CTO, will assume the leadership of SMB business for the duration of Emma Hunt’s (Managing Director SMB) parental leave
amaysim Australia Limited (27 November) announced that Ms Maria Martin will retire as a Non-executive director with effect on 30 November. Ms Martin’s position on the Board will be replaced by Mr Craig Jackson, who will chair of amaysim’s audit and risk management committee
Chorus Limited (14 November) announced that the number of ultra-fast broadband connections on its network had reached 500,000 and signaled it planned to reduce the wholesale price of its premium fibre product
Chorus Limited (23 November) announced that following strong demand for its issue on ten year fixed rate bonds, it had set the issue size at NZ$500m with NZ$200m oversubscriptions
Inabox Group Limited (15 November) announced that the company received notice from the SB&G Group consortium that a subsidiary of the consortium, SB&G (Telecoms) Pty Ltd intends to make an all-cash offer to acquire all of the shares in the company through a conditional off-market takeover bid at a price of $0.90 cash per share, which is superior to the MNF Group offer
Inabox Group Limited (23 November) announced improved price and terms of the sale to MNF Group. Indirect business to be sold for a cash price of $34.5m on a debt-free basis with the full purchase price payable at, or shortly after, completion. If the improved MNF transaction is not approved by shareholders, Inabox will require a capital raising of at least $3m before the end of December 2018 to support working capital requirements and pay transaction expenses
MNF Group Limited (23 November) agreed to pay Inabox $34.5m in cash, subject to approval by IAB shareholders. MNF had simplified its terms by making completion payment conditional on a majority of Inabox shareholders voting in favour of the MNF transaction at an EGM scheduled for 7 December 2018
NetComm Wireless Limited (21 November) confirmed that Kenneth Arnold Boundy had retired from the NetComm Board of Directors
NEXTDC Limited (2 November) had provided APDC Group with an unsecured $29m short-term bridging loan facility. NEXTDC had a relevant interest in 98.6% of AJD securities. The takeover closed on 26 November
NEXTDC Limited (12 November) advised that its new Sydney S2 Data Centre had increased its contracted commitments by approximately 9MW to more than 14MW since 30 June 2018
Speedcast International Limited (12 November) announced that the company had received multi-year contracts to enhance global services for Schlumberger
Superloop Limited (13 November) announced that it had agreed terms with NEXTDC Limited under which it was to provide optical layer connectivity to the new INDIGO subsea cable system for both the NEXTDC data centres in Perth and Sydney
Spark New Zealand Limited (7 November) announced it had won a four-year deal for FIH (International Hockey Federation) media rights in New Zealand. These rights include the Hockey World Cup, The Hockey Pro League, and Olympic Qualification, plus rights to the National Hockey League
Spirit Telecom Limited (16 November) announced the launch of its 10 Gigabit network ring upgrades, the upgrade is part of Spirit’s $1.2m network expansion
Telstra Corporation Limited (8 November) announced that Robyn Denholm would be stepping down as CFO and would become the next chair of Telsa
Vocus Group Limited (8 November) announced that the Consumer and Commander businesses will be brought under the leadership of Antony de Jong, who joined Vocus in September
EV / Forward EBITDA Multiples Chart
The EV / forward EBITDA multiples for leading telco stocks at the end of the month is as follows:
📷
Source: Factset, as at 3o November 2018
Media
Best and Worst Monthly Performers
The 5 best and worst performers for the month of November 2018 were as follows:
📷
Source: Factset as of 30 November 2018
Carsales.com Limited (27 November) announced that it had appointed Mr Pat O’Sullivan as Chair of its Board of Directors
Fairfax Media Limited (19 November) Fairfax shareholders approved the proposal by Nine Entertainment Co. Holdings Limited to acquire 100% Fairfax despite a late attempt from Antony Catalano to derail the merger
HT&E Limited (16 November) confirmed that it had appointed Credit Suisse Equities (Australia) Limited to undertake an on-market buyback of up to 10% of HT&E shares. The on-market buyback to commence after 30 November 2018
News Corporation (8 November) provided key financial highlights for the first quarter of FY19. Revenue of $2.52b, 23% increase compared to $2.06b in the prior year with total segment EBITDA of $358m as compared to $248m in the prior year. Net income was $128m compared to $87m in the prior year
oOh!media Limited (29 November) announced that it had secured a long-term agreement for the Brisbane City Council street furniture contract, following its acquisition of street furniture and transport out-of-home company Adshel
QMS Media Limited (29 November) announced that it had entered into a Head of Agreement for a proposed merger of its New Zealand out-of-home, digital media and production business (QMS NZ) with MediaWorks, New Zealand’s independent radio, TV and digital business. The transaction is expected to complete in the second quarter of CY19
REA Group Limited (8 November) highlighted revenue growth of 17% to $221.9m and an increase in core EBITDA of 23% to $130.9m for the three months ended 30 September 2018
REA Group Limited (15 November) announced that Tracey Fellows is stepping down from her role as CEO in January 2019 to become President, Global Digital Real Estate, News Corp, based in New York
Sky Network Television Limited (26 November) announced that Martin Stewart was appointed as CEO of the company. Mr Martin Stewart has been CEO of OSN, the TV network in the Middle East and CFO of Sky in the United Kingdom
Seven West Media Limited (14 November) reiterated their guidance for underlying EBIT in FY19 to grow by 5-10% on the prior period. The company also upgraded the net costs savings for the 2019 financial year from $10-20m to $20-30m
Trade Me Group Limited (21 November) announced that it had received a preliminary, non-binding, indicative proposal from Apax Partners to acquire 100% of the shares in Trade Me at a cash price of NZ$6.4 per share. Trade Me had provided Apax with due diligence access on an exclusive basis up to 12 December 2018
Village Roadshow Limited (22 November) announced that Mr David Evans had retired as a director of the Company
EV / forward EBITDA Multiples Chart
The EV / forward EBITDA multiples for leading media stocks at the end of the month is as follows:
📷
Source: Factset, as at 30 November 2018
Technology
Best and Worst Monthly Performers
The 5 best and worst performers for the month of November 2018 were as follows:
📷
Source: Factset as of 3o November 2018
Afterpay Touch Group Limited (1 November) completed the sale of the European e-Services business- the company received $4.0m in cash and will receive the remaining $3.5m within six months of completion
Afterpay Touch Group Limited (8 November) announced business developments in the US and Australia / New Zealand markets. The company has realised $115m of sales with over 300,000 customers and over 900 retailers transacting through the platform in the U.S. The total addressable GMV of retailers in the U.S. is estimated at $4.2b- the results show a more rapid pace of growth than was experienced in Australia. Afterpay now has more than 2.5m active customers (excluding US customers) with repeat transaction activities accounting for over 90% of monthly sales
Appen Limited (15 November) announced thatfull-year underlying EBITDA for FY18, ending 31 December 2018, estimated to be in the range of $62-65m. Previous guidance was $54-59m. Improved FY18 earnings forecast is driven by a sharp increase in monthly revenues, although they are still susceptible to the timing of work from major customers and Australian dollar fluctuations
Catapult Group International Limited (21 November) announced two partnerships with world football and a video coaching solutions deal with a new American Football League. a) The company will provide wearable tracking systems to various events. b) 54 countries’ teams will be supplied with Catapult’s product c) Catapult’s US business, XOS Digital, will provide eight teams with a coaching video solution
Crowd Mobile Limited (7 November) forecast significant FY19 Revenue Growth for Crowd Media Division, projecting first-half revenues of $1.25m, up from FY18 full-year revenue of $0.5m (up 250%). Also, Crowd Mobile is continuing to shift its focus towards the growing social media marketing industry, while Crowd Media attracts blue-chip partners including Nestle and Snap Inc
Crowd Mobile Limited (8 November) announced a Share Purchase Plan- the participation is limited to $15,000 per eligible shareholder. The issue price under the SPP was 0.038 per share, representing a 5% discount to the 30-trading day VWAP, closing on 5 December 2018
Crowd Mobile Limited (19 November) announced restructuring of the company’s two mobile divisions, Subscription and Q&A. The Subscription Division continued to generate stable revenues and positive EBITDA, although the company expects provisions for bad debts in FY19. The Q&A Division reported softer than expected revenues and profits in the first four months of FY19. As a result, the Company projects a small loss for the H1FY19
Computershare Limited (14 November) reaffirmed FY19 Management EPS guidance, to increase by around 10% on FY18 in constant currency. This is driven by growth in US Mortgage Services and Employee Share Plans, profitability in Registry and improving margin income. It also includes a contribution from Equatex and the sale of Karvy
Data#3 Limited (14 November) indicated preliminary first half FY19 outlook for pre-tax profit to be in the range of $7.0-8.5m, up from $4.0m in the first half of FY17
Elmo Software (22 November) reaffirmed continued strong growth in SaaS revenue, expecting $39.5m in revenues in FY19 as opposed to $31.9m in FY18 with FY19 EBITDA of $1.1m. This will be driven by organic growth, acquisitions, focus on SaaS revenue growth, increased investment in product and capacity
Gentrack Group Limited (29 November) announced the financial results for the year to 30 September 2018. Highlights include: Revenue NZ$104.5m, up 39% on FY17; EBITDA NZ$31.0m, up 30% on FY17
Infomedia Limited (12 November) announced that it had agreed to acquire Australian based, automotive data solutions company Nidasu. Nidasu is the provider of data analytics to automakers and dealerships and is complementary to Infomedia’s SaaS business
Impelus (30 November) anticipates a small loss in the first half of FY19, returning to profitability in the second half
Integrated Research Limited (20 November) announced the resignation of Mr. John Merakovsky as both CEO and Managing Director
iSelect Limited (13 November) announced the appointment of Geoff Stalley as a non-executive director, effective 1 December 2018
Kogan.com Limited (7 November) and Mercer announced a partnership to launch Kogan Super- No Frills Super. Kogan Super will be a low fee super fund and will be aiming for a share of the $2.6t in super accounts
Kogan.com Limited (26 November) and Citi have entered into a multi-year agreement to launch a Kogan Credit Card. The card is expected to be available to customers in 2019
Link Administration Holdings Limited (12 November) together with Commonwealth Bank of Australia and Morgan Stanley Infrastructure Inc. made an offer to acquire PEXA on 8 October 2018. The offer was accepted by shareholdings representing 82% of PEXA’s issued capital. The consortium of three companies will pay an enterprise value of up to $1.604b. Link Group’s interest in PEXA will increase to between 35.1% and 44.2% depending on remaining shareholders’ cash/scrip elections
MYOB Group Limited (2 November) advised that further to the announcement dated 8 October 2018, it had determined to grant information access to KKR. KKR had increased its offer price to $3.77 per share
OFX Group Limited (20 November) announced its half-year results for the period ending 30 September 2018. The result reflects strong revenue growth with NOI of $59.9m, EBITDA of $14.5m and NPAT of $4.9m
Pro Medicus (20 November) announced its wholly-owned US subsidiary, Visage Imaging, Inc., had signed a $27m, seven-year contract with Partners Healthcare, the largest health system in Massachusetts
Pushpay Holdings Limited (7 November) provided annual revenue guidance for the year ending 31 March 2019 of between US$97.5m and US$100.5m. Pushpay expected gross margins to increase to over 60% for the six months ending 31 March 2019, up from 54% for the six months ending 31 March 2018
Technology One Limited (20 November) announced its financial results for the year ended 30 September 2018, showing continuing strong growth with a profit of $66.5m, up 15%, with revenue of $299m and annual recurring revenue of $169m, up 22%
Webjet Limited (5 November) announced the acquisition of Destinations of the World for a headline acquisition price of $240m, representing 10.5x FY18 EBITDA pre-synergies multiple. The acquisition was completed on 22 November 2018
Webjet Limited (12 November) announced retail entitlement offer of a fully underwritten 1 for nine accelerated non-renounceable pro-rata entitlement offer of a new ordinary share in Webjet Limited at an offer price of $11.50 per new share
Wisetech Global Limited (21 November) reconfirmed FY19 guidance of $320-333m in revenues, up 44-50%, and $102-107m in EBITDA, up 31-37%
Zip Co Limited (20 November) announced a partnership with Bunnings Group Limited to offer Zip interest-free payments to its customers
EV / forward EBITDA Multiples Chart
The EV / forward EBITDA multiples for leading technology stocks at the end of the month is as follows:
📷
Source: Factset, as at 30 November 2018
Reference stocks
Our reference portfolio is as follows:
Telecom Stocks:
5G Networks (5GN-AU), Arq Group (ARQ-AU), amaysim Australia Ltd. (AYS-AU), Chorus Limited (CNU-NZ), DWS Group (DWS-AU), Hutchison Australia (HTA-AU), Inabox Group Ltd. (IAB-AU), Macquarie Telecom Group Limited (MAQ-AU), Megaport (MP1-AU), MNF Group Limited (MNF-AU), Netcomm 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:
Carsales.Com Limited (CAR-AU), Domain Holdings Australia Ltd. (DHG-AU), Asia Pacific Digital Limited (AJD-AU), Event Hospitality & Entertainment Ltd. (EVT-AU), Fairfax Media Limited (FXJ-AU), GTN Group (GTN-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), QMS Media (QMS-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), Altium (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), ELMO Software Ltd. (ELO-AU), GBST Holdings (GBT-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), MYOB Group Ltd. (MYO-AU), Nearmap Ltd. (NEA-AU), OFX Group Ltd. (OFX-AU), Pro Medicus Limited (PME-AU), Pushpay Holdings Ltd (PPH-NZ), Reckon Limited (RKN-AU), Retech Technology (Technology One Limited (TNE-AU), Webjet Limited (WEB-AU), Wisetech Global Ltd. (WTC-AU), Xero Limited (XRO-NZ), Zip Co Ltd. (ZML-AU)