Venture Advisory Monthly Wrap - April 2019



Key Takeaways

We have seen an uptick in M&A activity in April on the back of a relatively quiet period in March. Strong deal activity has been distributed throughout the telecommunications, media and technology industries.

April saw an increased level of M&A activity:

MYOB’s shareholder voted in favour of KKR’s $1.6bn takeover bid. Manikay Partners reluctantly agreed to vote in favour of the takeover bid. The delisting resulted in it being replaced by Nearmap as a constituent in the S&P / ASX200

Bravura Solutions made an offer to acquire 100% of the shares of GBST Limited, through either cash consideration or cash and scrip consideration

Nine Entertainment confirmed that it signed an agreement for the sale of Australian Community Media and Printing business (ACM), to Antony Catalano and Thorney Investment Group

Seek invested in FutureLearn and Coursea, two leading global online education businesses. This investment signals their further expansion into HR technology, with a focus on Learning Management Systems

Seven West Media finalised the sale of its 50% interest in Yahoo 7 to Verizon Media

Spirit Telecom announced the acquisition of fixed wireless broadband provider LinkOne

The FIRB approved the acquisition NetComm Wireless by the NASDAQ-listed Casa Systems

The shares of IAB holdings continue to be suspended from quotation, pending an announcement regarding the disputes and claims by MNF Group. IAB has sent a formal response to MNF Group and is awaiting a response

Vocus was served with a class action in relation to misleading or deceptive conduct and continuous disclosure obligations in respect to their FY17 earnings guidance. The class action was brought against Vocus on behalf of those who acquired an interest in Vocus shares from 29 November 2016 to the 2 May 2017

Kogan has launched Kogan Energy compare which reflects its initial entry into the energy market via an energy comparison tool

Telecommunications sector highlights:

The five best and worst performers for April 2019 were as follows:

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Source: Factset, as at 30 April 2019.

5G Networks (2 Apr) announced the $5.7m acquisition of Melbourne Data Centre (MDC). The purchase price represents a 7x EBITDA multiple. The acquisition serves as a strategic expansion of the 5GN infrastructure footprint

5GN Networks (5 Apr) announces capital raising to fund the acquisition of MDC and further acquisitions

5G Networks (8 Apr) completed a $8m placement at $0.80 per share. Bell Potter Securities acted as lead manager to the placement

5G Networks (16 Apr) Managing Director Joe Demase provided an updated regarding MDC, discussed the search for additional data centre expansions in Sydney and Melbourne and the extension of new services to existing customers

5G Networks (26 Apr) announced its quarterly report stating strong performance, including cash receipts of $15.4m; up 8% on previous quarter; YTD cash receipts at $38m, an increase of 11x on pcp

Chorus (10 Apr) provided a connection update. Total fixed lines connections decline by 14k to 1.47m; total broadband connections grew by 5k to 1.19m and monthly average data usage grew to 247GB

Hutchinson Telecommunications Australia (15 Apr) announced that Ms Louise Sexton resigned as Company Secretary, and Ms Naomi Jack Dolmatoff has been appointed as Company Secretary, effective immediately

IAB Holdings (29 Mar) [suspended from quotation] The securities of IAB holdings have been suspended from quotation effective immediately under Listing Rule 17.2, at the request of IAB, pending the release of an announcement regarding the disputes with and claims by MNF Group, the acquirer of the Company’s indirect Business

IAB Holdings (1 May) [suspended from quotation] IAB provided a market update, stating that it has carefully considered each of the matters raised by MNF group and on 23rd of April 2019 the Company sent a formal response to MNF Group addressing each of these issues and providing information refuting the claims. IAB has not yet received a response from MNF group but will provide a further update to shareholders once a response is received

Macquarie Telecom (11 Apr) advises that Matthew Health has indicated his intention to resign as Company Secretary effective from 1 June 2019. Michael Gold will be appointed as Company Secretary effective 1 Jun 2019

Megaport (29 Apr) announced the oversubscription of its Share Purchase Plan, receiving applications in excess of $47.6m. It has capped shares issued under the SPP to $10m (2.5m fully paid ordinary share), with applicants to be scaled back on a pro-rata basis. Shares will be issued at $4.00 each

NetComm Wireless (15 Apr) announced that Casa Systems (NASDAQ: CASA) has received confirmation from the FIRB that there was no objection to Casa acquiring 100% of the equity of

NetComm

Spark New Zealand (3 Apr) announced that Jolie Hodson will succeed Simon Moutter as Managing Director, effective 30 June 2019

Spirit Telecom (10 Apr) announced a Share Purchase Plan to issue up to $1.0m of share capital. The SPP offer is not underwritten. The purpose of the SPP is to fund the Company’s general working capital requirements and to fund growth of the Company

Spirit Telecom (30 Apr) provided a market update outlining the acquisition of LinkOne which added to 44 new POP sites for Sky Speed Products across Melbourne, Sydney and Brisbane. The $1.7m superfast network in Horsham is underway and the Company is in final legal negotiations on additional regional network build, with the value circa $1m. Spirit Telecom has also signed a trial JV with national property and retailer manager for additional POP sites nationally

Telstra Corporation (9 Apr) announced that former Group Executive, Consumer and Small Business, Vicki Brady would take over the role as Chief Financial Officer and Head of Strategy effective 1 July 2019. Acting Group Executive Michael Ackland would be permanently appointed to lead the Consumer and Small Business function

Vita Group (2 Apr) announced the acquisition of The Bradford Clinic, taking the Artisan Aesthetics Group (AAG) clinic portfolio to 13 clinics

Vocus Group (30 Apr) acknowledged that it had been served with a class action proceeding filed in the Federal Court of Australia. This includes allegations of contraventions of the Corporations Act 2001 in relation to misleading or deceptive conduct and continuous disclosure obligations in respect of Vocus FY17 earnings guidance

Forward EV / EBITDA Multiples Chart

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

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Source: Factset, as at 30 April 2019.

Technology sector highlights:

The five best and worst performers for April 2019 were as follows:

📷

Source: Factset, as at 30 April 2019.

Afterpay Touch (15 Apr) outlined its US Inc. 2018 Equity Incentive Plan, where Afterpay US (the Company’s US subsidiary) may offer options which give eligible participants a right to acquire common stock (or shares) in Afterpay US Inc

Appen Limited (3 Apr) announced the completion of the acquisition of Figure Eight Technologies

Appen Limited (8 Apr) announced the completion of the Share Purchase Plan, which was oversubscribed. The SPP will issue new shares on a pro rata basis to those who subscribed to the offer, amounting to the maximum raise of $15m

ARQ Group (15 Apr) announced the issue price of $1.8054 per share (inclusive of the 2% discount) pursuant to the Company’s Dividend Reinvestment Plan

ARQ Group (23 Apr) updated its Corporate Governance Statement

Bravura Solutions (12 Apr) announced that it submitted a non-binding indicative proposal to acquire all of the shares in GBST limited by way of a scheme of arrangement. The proposed consideration is a cash payment of $2.50 per GBST share comprising a $2.50 per share cash consideration less the amount of any dividend, and up to $0.35 per share in the form of a special dividend payable to GBST shareholders prior to the completion of the Transaction to the extent GBST is legally entitled to make such a dividend and elects to do so. Up to $0.15 per share in value attributed to franking credits are potentially available for shareholders who are able to realise the full benefit of the franking credits associated with any Special Dividend

The proposed Cash Consideration is a 36.9% premium to the trading day VWAP from the 13th Feb to 11 April, and a 30.4% premium to the 30-day trading VWAP to 11 April 2019.

Bravura Solutions also offered an alternative option, which was a Cash and Script option, such that they receive $0.35 per share cash payment less the amount of any Special Dividend payable to the GBST shareholders referred to above; and 0.4095 Bravura shares for every GBST share

Bravura Solutions (12 Apr) GBST Holdings notes the announcement and advised its shareholders to take no actions, and the board of GBST will evaluate the proposal and provide shareholders with a recommendation in due course

Catapult Group International (4 Apr) announced that it is now being used by over 150 international, with new European, South American and Asian clients as they continue their international roll-out

Catapult Group International (10 Apr) announced that it has signed an aggregated contract with the National Rugby League (NRL), meaning that the company now supplies technology to NRL clubs, NRLW clubs, Australian representative teams and match officials. The contract runs for the next three NRL seasons

Class Limited (3 Apr) provided their quarterly update outlining net growth of 2,029 accounts to 169,660 and total Class customers increased by 36 to 1,506

Crowd Media Holdings (15 Apr) announced that it successfully completed its Debt Refinancing with BillFront LTD. The debt-refinancing has been structured as a two year revolving credit facility, senior secured against all of the Company’s assets including receivables, with an initial annual interest rate of 11.3%, which can reduce over time to 9.0% as the company further deleverages. The current debt outstanding is EUR1.3m (circa A$2.05m). The company is also using an external investment bank to initiate a strategic review of all aspects of the business

GetSwift (2 Apr) appointed Marc Naidoo to the board as a non-executive director. Marc Naidoo is currently the GM of Technology for Global Finance Transformation at Toll Group

GetSwift (18 Apr) The High Court of Australia dismissed an application filed by Squire Patton Boggs for special leave to appeal the decision. The ASIC proceeding and the Webb proceeding will be heard by the Federal Court consecutively, commencing in June 2020. As previously advised, the Company strongly disputes the allegations made against it, including any alleged loss and is defending the proceedings

GetSwift (26 Apr) David Ryan, Belinda Gibson, and Michael Fricklas have decided to step down from the board effective 26 April. The company also reported a 52% sequential increase in revenue and other income for 3Q19

Impelus (5 Apr) announced that it had settled the legal action it undertook against the vendors (and associated parties) of C2B solutions

Impelus (11 Apr) announced the launch of premium lead generation operations in the UK, initially in the UK insurance sector. This builds on existing IMS infrastructure and client base

Integrated Research (15 Apr) announced the appointment of Mr. John Ruthven to the position of Chief Executive Officer with a commencement date in early July 2019. Most recently, John was the Operating Officer – Global Sales at Technology One

IRESS (30 Apr) announced the appointment of Phil Quin-Conroy as managing director of IRESS’ United Kingdom business

iSentia Group (24 Apr) has been granted a interim licence by the Copyright Agency Ltd until one of three pre-determined events. The decision by the Copyright Tribunal of Australia will see a modest reduction in copyright costs in FY19

Kogan (18 Apr) provided a 3QFY19 update stating it achieved 73.7% revenue growth year-on-year. Additionally, the company has launched Kogan Energy compare, which reflects its initial entry into the energy market, via the launch of an energy comparison tool

Kogan and the Eclipz Group Limited have also entered into a new partnership to launch and operate Kogan Cars. Kogan Cars will secure new cars at competitive prices from dealers across Australia while also enabling customers to trade-in cars from a wide range of makes and models. Kogan will receive fees from Eclipx Group under this model

Kogan (23 Apr) has increased its debt facility limit from $20.0m to $30.0m

MYOB (1 Apr) provided supplementary disclosure of the proposed Scheme of Arrangement by KKR

MYOB (2 Apr) received a letter from Manikay Partners stating that it intends to vote all the MYOB shares that it owns or controls in favour of the KKR bid, subject to no proposal that it considers to be superior materialising prior to the vote.

This letter was issued after Manikay Partners sent a letter to the board of directors of MYOB in March, stating that they believed that the deal significantly under values the company, and expected the board to negotiate a higher price that would be reflective of Manikay’s opinion of the true value of the company

MYOB (17 Apr) announced that 82.6% of shareholders voted in favour of the scheme of arrangement, pursuant to which MYOB will be acquired by an affiliate of KKR subject to approval of the Federal court of Australia

MYOB (24 Apr) announced that the Federal Court of Australia approved the transaction.

S&P Dow Jones removed MYO from the S&P/ASX200 at end of trading and has been replaced by Nearmap (NEA).

The securities of MYO have been subsequently suspended from official quotation

Nearmap (15 Apr) Subsequent to the delisting of MYOB securities, Nearmap is now included in the S&P/ASX 200 effective from the 24 April

Netwealth (11 Apr) provided a quarterly update stating that their funds under administration increased by $2.1bn to $21.1bn as at 31 April 2019. Net inflow was $0.9bn and market movement accounted for a further $1.2bn increase

Pro Medicus (2 Apr) announced the implementation of an on-market share buy-back for a period of 12 months. The company is permitted to acquire up to 10% of the ordinary shares on issue during the last 12 months

Pro Medicus (24 Apr) signed $14m 7-year contract with leading U.S. academic medical centre Duke Health. Visage 7 is to be implemented across all of Duke’s radiology departments

Webjet (9 Apr) outlined its new business venture Umrah Holidays at the UBS Emerging Companies conference. Umrah Holidays focuses on providing the ultimate Umrah and Hajj experience, where Webjet is the first B2B provider of religious travel services with a sophisticated, integrated online VISA application tool

Wisetech (15 Apr) completed its share purchase plan which raised approximately $35.9m, above the expected $30.0m. Wisetech intends to accept all valid subscriptions from eligible shareholders in full, with no scale back

Wisetech (30 Apr) announced the acquisition of Xware, a leading messaging integration solutions provider in Sweden. The purchase cost comprises ~$12.0m upfront, with a further expected multi-year earnout potential of ~$11.2m in relation to business integration, strategic objectives and revenue performance. Xware achieved FY18 annual revenue and EBITDA of ~$3.5m and ~$1.4m respectively. Wisetech outlined that the transaction was of strategic value. Xware is expected to be consolidated into the WiseTech Global Accounts from May 2019

Zip Co (1 Apr) announced that Westpac Banking Corporation has exercised its top-up right in full and has subscribed for an additional 5,812,448 shares in Zip at an issue price of $1.53 per share, raising approximately $8.9m

Zip Co (15 Apr) completed its share purchase plan. Zip Co received applications in excess of $35.8m

Zip Co (29 Apr) provided its quarterly update for the period to 31 March. Zip Co outlined top line growth in excess of 20% pcp, bringing revenue to $23.0m for the quarter

Forward EV / EBITDA Multiples Chart

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

📷

Source: Factset, as at 30 April 2019.

Media sector highlights:

The five best and worst performers for April 2019 were as follows:

📷

Source: Factset, as at 30 April 2019.

Domain Group Holdings (30 Apr) announced at the Macquarie Australia Conference its trading update, stating total revenue was down 6% for the FY19 March quarter. This was due to total new market listings that were down nationally, highlighted by auction volumes down 30% in Sydney and 36% in Melbourne

iCar Asia (8 Apr) provided its 3rd quarter report stating revenue grew 30% yoy to $2.6m. Net operating cash flows improve 20% quarter on quarter, with a decrease of $0.5m. Cash receipts grew 25% to A$3.8m, up $0.8m versus Q4 2018

News Corp (5 Apr) announced its dividend exchange rate, where the company will pay the semi-annual dividend on its CDIs in A$ and the exchange rate to be used will be A$1 = US$0.7112. The conversation calculation of the net US of the dividend will be on the basis of US$1 = A$1.4061

Nine Entertainment (30 Apr) confirmed that it signed an agreement for the sale of Australian Community Media and Printing business (ACM), which is expected to complete by 30 June 2019. ACM will be acquired by a company controlled by interests associated with Antony Catalano and Thorney Investment Group, subject to customary terms for such a sale.

The cash proceeds of the transaction are expected to be around $115m, subject to post-completion adjustments. These funds will be used to reduce Group debt levels. Additionally, Nine will receive up to $10m of advertising on ACM properties over the three years of completion.

Both ACM and Nine have entered into arrangements which preserve the commercial relationships that have existed during Nine’s ownership of the business. This includes printing of Nine’s metropolitan publications (The Age, The Sydney Morning Herald and The Australian Financial Review) and, for a short transitional period

Prime Media Group (8 Apr) announced the appointment of Ms Robbie Sefton as a non-executive director of the Company, effective 8 April 2019. It is intended that Ms Sefton will stand for election as a director at Prime’s 2019 General Meeting

REA Group (15 Apr) announced the appointment of Janelle Hopkins as Chief Financial Officer. Ms Hopkins joins REA group from Australia Post where she has been Group Chief Financial Officer since 2013. In her capacity as CFO, Ms Hopkins has been responsible for finance, risk and assurance, group real estate, treasury, superannuation and corporate development. Ms Hopkins will commence in the role on 3 June 2019

Seek (2 Apr) announced that Ian Narev has been appointed to the newly created dual role of Group Chief Operating Officer and Australia Pacific & Americas (“AP&A”) CEO. In this role, Ian will have executive responsibility for the AP&A business and will work closely in partnership with Seek Group CEO and Co-founder Andrew Bassat on strategy development and operating priorities for Seek Group overall

Seek (29 Apr) announced the investment in FutureLearn and Coursea, two leading global online education businesses. Seek acquired 50% of FutureLearn for a purchase price of ~$92m and acquired a minority interest in Coursera for a purchase price of ~$50m. Both transactions are primary raisings with proceeds used to accelerate growth

Seek (30 Apr) provided a guidance update. Seek affirmed revenue growth in the range of 16% to 20% and EBITDA Group in the range of 5% to 8% for FY19 vs FY18. Seek updated that investments in Early Stage Ventures (ESVs) to be approximately A$45m to A$50m and reported NPAT (including losses from investments in ESVs) to be moderately below FY18 reported NPAT, primarily due to the increase level of investment in ESVs and associated transaction funding costs

Seven West Media (10 Apr) announced that it has finalised the sale of its 50% interest in Yahoo 7 to Verizon Media. Seven will receive $20.75m cash for its shares this financial year. The company now fully owns and operates all of its ‘direct to consumer’ digital products

SKY Network Television (18 Apr) has appointed Mr Martin Steward as a director to the company, to fill a casual vacancy on the Board. The Board of Sky Network Television has determined that Mr Martin Steward is not an independent director as defined by the NZX Listing Rules, because he is also the company’s Chief Executive Officer

Trade Me (16 Apr) The High Court has made orders approving the proposed Scheme of Arrangement with Titan Acquisition CO New Zealand Limited (Titan) following Trade Me’s application. Titan is a New Zealand company owned by Apax IX fund, a fund advised by Apax partners.

Titan will acquire 100% of Trade Me shares of NZ$6.45 per share, with investors to be paid on the Scheme implementation date (8 May 2019).

Trading in Trade Me shares will be suspended at the close of trading on NZX and ASX on 2 May 2019

Trade Me (23 Apr) Anders Skoe has been appointed as the new CEO of Trade Me Group Limited. He is currently the CEO of Finn.no and executive vice-president of Nordic Marketplaces at Schibsted in Norway. Finn.no is a similar business to Trade Me, operating across automotive, real estate and employment classifieds, as well as general items marketplace. Finn is part of the large, diverse, Norway based global marketplace and media company Schibsted

WPP AUNZ (15 Apr) announced that Ms. Linda Gough, General Counsel of WPP AUNZ has been appointed Company Secretary, effective 15 Apr 2019. Ms. Gough is a lawyer with 17 years’ experience in the digital media technology and telecommunications industries and has worked for globally recognised brands throughout North America, Australia, New Zealand and the Asia Pacific Region

Forward EV / EBITDA Multiples Chart

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

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Source: Factset, as at 30 April 2019.

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