Venture Advisory Monthly Wrap - April 2017

Key Takeaways

Zhaopin signed a merger agreement between SEEK, Hillhouse Capital Management and FountainVest Partner in a A$1.3bn bid to take Zhaopin private

amaysim acquired online energy retailer Click Energy, allowing the mobile operator to expand its share of Australian household spend

AT&T’s acquisition of telco provider Straight Path Communications for US$1.2bn to support its 5G network

Flipkart closing its latest funding round, raising US$1.4bn from Tencent and Microsoft

PetSmart’s acquisition of Chewy.com for US$5.5bn was one of the largest e-commerce M&A transactions to date

In April 2017, the Australian information technology sector [AXIJ] had a solid performance up 3.9% while the telco sector [AXTJ] experienced a sharp 10% decline. The All Ordinaries [AORD] was up 0.7% while the ASX 200 [AXJO] trade up 1.0%

amaysim acquired online energy retailer Click Energy for $120m in a deal which will complement amaysim’s strategy of offering an expanded breadth of services to Australian consumers

PetSmart acquired Chewy.com for US$5.5bn in one of the largest e-commerce M&A transactions to date, vastly improving the retailers e-commerce footprint

Telco and ICT Monthly WrapTelco and ICT Best and Worst Monthly performers

Speedcast had a 9% increase in this share price as the company signed several key new contacts

The 5 best and worst performers for the month of April 2017 were as follows:

Key Company Announcements

TPG Telecom (5 Apr 17) successfully completed the bid for 2 lots of 5MHz spectrum in the 2.5GHz band for SG$23.8m at the General Spectrum Auction in Singapore. The bid will complement the New Entrant Auction spectrum acquired in December 2016

amaysim (10 Apr 17) acquired Click Energy Group, an online energy retailer for consideration of A$120m. The transaction has a multiple of 8.4x EV / FY17 underlying EBITDA pre-synergies (forecasted) and 6.2x EV / FY17 underlying EBITDA (forecasted) post-synergies. The acquisitions will complement amaysim's strategy of offering a variety of services to Australian households

Megaport (11 Apr 17) launched Megaport Exchange, a marketplace hosted on the Megaport Portal. The platform helps customers search for providers who can meet their networking needs. Megaport Exchange was designed in response to the rapidly growing demand for control of connectivity within the Enterprise space

Speedcast (11 Apr 17) won two new systems integration projects with a leading fabricator for the oil and gas industry. The company was named the telcos systems integrator in both the projects and will design, integrate, test and deliver the entire communications systems solution

Chorus (12 Apr 17) reported a decrease in total fixed line connection to 1,639,000 by 39,000 and broadband connection declined to 1,199,000 by 15,000 due to increase in uptake of NZ’s wireless networks. Conversely, fibre uptake across all Chorus UFB areas is around 34% with Blenheim leading at 40% uptake. Additionally, data traffic is driven by strong online video consumption

TPG Telecom (12 Apr 17) successfully completed the bid for 2 lots of 10MHz mobile spectrum of the 700MHz band at the Australian Communication and Media Authority. This will help to build a mobile network in Australia using the A$1.9b worth advanced technology

Melbourne IT (27 Apr 17) reported FY16 revenue of A$168.4m (up 12.1% YoY) and net profit of A$12.7m (up 88.9% YoY). Also announced a FY16 cash dividend of A$ 0.06 per  share payable on April 28, 2017 to shareholders with record on April 7, 2017 and ex-date is April 6, 2017

Bulletproof Group (21 Apr 17) announced appointment of Paula Kensington as the CFO of the company. Paula most recently served as CFO and Company Secretary of Rubik Financial Services

Forward EV / EBITDA Multiples Chart

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

Telecom stocks were trading on an average forward EV / EBITDA of 9.6x and a median forward EV / EBITDA of 7.3x

Media Monthly WrapMedia Best and Worst monthly performers

In Media, Ten Network saw over 50% of its value wiped off the market as doubts emerged about the company’s ability to pay a A$200m loan facility

The 5 best and worst performers for the month of April 2017 were as follows:

Key Company Announcements

Fairfax Media (5 Apr 17) announced plans to downsize its man-power to save yearly expenses of A$30m. It has started the process of editorial staff consultation to discuss the proposed restructure changes as a part of this plan

iCar Asia (20 Apr 17) released 1Q17 cash flow report with a record-high increase in quarterly cash receipts of A$2.5m YTD (up 29% YoY). The strong position in cash is the result of improved operational performance reflecting 26% YoY increase in overall listing and 29% YoY increase in total leads in 1Q17. Strong performance was driven by strategic initiatives and investments made by the company in 2016

Village Roadshow (24 Apr 17) announced a trading update stating the performance of the theme park division was significantly impacted after the tragic incident that occurred in Dreamworld in October 2016 as well as cyclonic weather conditions in March/April 2017. The total attendance in Gold Coast parks declined by 9.4% in the 9 month period ending 31 March 2017 and number of membership renewal  was also under pressure. As a result, the company expects FY17 EBITDA to be between A$55-65m

Prime Media Group (26 Apr 17) reported a 4.2% increase in advertising revenue of three markets, Northern NSW, South NSW and Victoria, over a 9 month period ending 31 March 2017. The growth in revenue was driven by the August 2016 Rio Olympic Games coverage. However, according to a KPMG report the most recent results were subdued as the advertising revenue for these three markets declined 3.4% in the 3 months ending 31 March 2017 (vis-a-vis 5.6% decline the previous year). Nonetheless, the company occupies the leading revenue share of 44.1% and expects its net profit after tax to be between A$29.5-31m in FY17

Seven West Media (27 Apr 17) reported 1H17 television revenue of A$341.4m (up 2.1% YoY) and increase in revenue market share of 25.2% vis-à-vis 23.4%. The company reported EBITDA loss of A$2.4m vis-à-vis EBITDA profit A$10.1m a year before, in-line with the guidance provided. The company stated that absence of any relief in television licence fees will result in an underlying EBITDA loss between A$25-30m for FY17

News Corp (2 Apr 17) announced appointment of Kelly Ayotte to the company's board of directors. Kelly most recently served as the United States Senator for the State of New Hampshire

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 9.1x and a median forward EV / EBITDA of 7.6x

Technology Monthly Wrap

Chinese ride sharing platform Didi Chuxing announced it had raised an additional US$5.5bn, valuing the company at US$50bn

Technology Best and Worst monthly performers

App developer, Cloud Mobile share price rose 20% following a share buyback used to pay down debt

The 5 best and worst performers for the month of April 2017 were as follows:

Key company announcements

MYOB Group (3 Apr 17) completed the acquisition of Paycorp, a payments services provider. The merger will help MYOB provide integrated payment and accounting solutions to its customers in Australia and New Zealand

SEEK (7 Apr 17) - Zhaopin signed a merger agreement between SEEK, Hillhouse Capital Management and FountainVest Partner to acquire Zhaopin agreeing to pay US$18.20 per American Depositary Share following the announcement of the A$1.3bn privatisation

Afterpay (13 Apr 17) - Touchcorp received a non-binding expression of interest to acquire the company's operating assets from a third-party. The proposal excludes Touchcorp's surplus cash and its shareholding in Afterpay

Xero (18 Apr 17) - Technology Crossover Ventures IX signed a share purchase agreement to acquire 1% stake in Xero for NZ$28.6m; 1.43 million shares were acquired at NZ$20 per share

Crowd Mobile (20 Apr 17) successfully completed a A$5.4m share placement of 41.5m ordinary shares at A$0.13 per share. The funds raised will be used to reduce debt and strengthen the balance sheet

Kogan.com (21 Apr 17) released its cash flow statement reporting Pro-forma EBITDA of A$10m for 9 months ending March 31, 2017. Kogan also revised its FY17 full year Pro-forma EBITDA guidance to more than A$11.5m vis-à-vis previous guidance of A$10.5-11.5m. The company also reported strong cash position of A$23.2m for the period

Mobile Embrace (24 Apr 17) reaffirmed it is on track to meet its FY17, full-year revenue guidance of A$52m and EBITDA between A$5-6m. The results will be driven by cost efficiencies in the Carrier Billing business and strong top-line growth of Performance Marketing division

Technology One (13 Apr 17) announced appointment of Edward Chung, the long-standing COO as the CEO of the company. Adrian Di Marco, the former CEO of the company will continue to serve the board as an Executive Chairman

OFX (18 Apr 17) announced resignation of CFO Mark Ledsham. In the meantime, Grant Murdoch, Non-Executive Director and Chair of the Audit, Risk and Compliance Committee, will supervise the group's finance function

Forward EV / EBITDA Multiples Chart

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

Technology stocks were trading on an average forward EV / EBITDA of 12.0x and a median forward EV / EBITDA of 11.5x

Reference stocks

Our reference portfolio is as follows:

Telecom Stocks:

amaysim Australia Ltd. (AYS-AU), Bulletproof Group Limited (BPF-AU), Chorus Limited (CNU-NZ), Inabox Group Ltd. (IAB-AU), Macquarie Telecom Group Limited (MAQ-AU), MNF Group Limited (MNF-AU), Nextdc Limited (NXT-AU), SpeedCast International Ltd (SDA-AU), Superloop Ltd. (SLC-AU), Spark New Zealand Limited (SPK-NZ), Telstra Corporation Limited (TLS-AU), TPG Telecom Limited (TPM-AU), Vocus Group Limited (VOC-AU), Singapore Telecommunications Limited (Z74-SG)

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)

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