Venture Advisory Monthly Wrap - February 2019

Updated: Jun 26, 2019

Key Market Activity Takeaways

Contact the author Adil Moosa


February saw an increased level of market activity in comparison to January, which includes:

  • NetComm receiving an offer from Casa Systems (NASDAQ: CASA) to acquire 100% of NetComm at $1.10 per share

  • Event Hospitality & Entertainment Ltd entered into a management agreement for its newest QT hotel in Adelaide’s CBD (previously owned by Auspac Networks and Axion Properties);

  • Trade Me Group announced its scheme of arrangement with Apax Funds to be acquired for $6.45 per share, more information to be made available to its shareholders in March;

  • GetSwift announced the acquisition of Delivery Biz Pro and Scheduling to increase its competitive edge in North America; and

  • Wisetech Global’s acquisitions of Systema AS (a leading customs management solutions provider in Norway) and Containerchain (a leading container optimisation solutions provider with an international footprint)

  • There has been an increase in market demand for fibre in Australia, confirmed by Chorus’ highest number of installations during a six-month period

  • While there is still some uncertainty around the TPG-VHA merger, in the event it does not receive ACCC approval, TPG is likely to write down approximately $168m in relation to spectrum licenses and mobile network assets

  • Megaport Limited increased its data centre footprint by a further 24 newly installed data centres, which helped in driving its profit in addition to strong performance in North America that saw monthly recurring revenue increase

  • Altium has experienced double-digit revenue growth over the first half results of the previous seven years, with this year being no exception.


Telcos

Best and Worst Monthly Performers

The 5 best and worst performers for the month of February 2019 were as follows:

Source: Factset as of 28 February 2019


Over the Wire (14 Feb) released its half year results showing YoY increases in both revenue and EBITDA (43% and 53%, respectively), largely driven by an increase in Cloud/Services revenue by 111% (up from $3m from H1FY18to $7m H1FY19), while net debt decreased from $6m to $4m

Macquarie Telecom (26 Feb) per their H1FY19 results, over the past three years MAQ has achieved EBITDA CAGR of 17.8%, driven by cloud and government services (at H1FY19 accounting for 42% revenue and 60% EBITDA). The Group has started its first customer migration of Telecom customers to the nbn network

NextDC (27 Feb) has experienced growth in H1FY19 revenue (17%) and EBITDA (26%); however, made a net loss before tax of $7.4m (cf H1FY18 NPBT of $12m). NextDC has opened its S2 data centre (an 8,700sq/m facility scaling up to 30MW) to early customers, while some development is still ongoing

MNF Group (26 Feb) reported a decline in financial performance for H1FY19 (NPAT down 49% to $3m), which was impacted by large contract unwinds and TIAB acquisition costs of $800k

Chorus Limited (25 Feb) announced a NPAT of $30m and EBITDA of $318m, driven by a high demand for fibre (installed at 95,000 homes for the six months ending December 2018, compared to 79,000 pcp)

Megaport Limited (12 Feb) reported NPAT of $4.8m for H1FY19 (cf. $2.7m PCP, a 131% increase) due to a further 24 new installed data centres (new total of 245) and an increase in monthly recurring revenue of $2.7m in December 2018 (cf. $1.1m in December 2017). Monthly recurring revenue in North America increased from $0.55m to $0.98

Megaport Limited (12 Feb) appointed Peter Hase as the company’s new COO and Jay Adelson has been appointed to the Board as a Non-Executive Director, effective 1 March 2019

NetComm (22 Feb) received an offer from Casa Systems (NASDAQ: CASA) to acquire 100% of NetComm by way of Scheme of Arrangement for $1.10 per share (a 53% premium on the closing price of $0.72 per share on 20 February). While the Board supports the offer, it is contingent on approval of NetComm shareholders and Australian courts/review boards 

TPG Telecom (26 Feb) per TPG’s announcement on 29 January 2019 to cease its Australian mobile network rollout, TPG’s spectrum licenses will need to be reassessed. It is estimated if the merger with VHA does not go ahead, TPG will write down its spectrum licenses by approx. $92m. Similarly, a write-down of approx. $76m will also be required in relation to its mobile network assets

Vocus Group (27 Feb) during H1FY19 launched its Australia-Singapore cable (a high capacity 4,600km cable from Australia to Asia) and has restructured its business into three distinct units – Networks (servicing enterprise, government and wholesale), Retail (business and consumer) and New Zealand (network and retail)


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 28 February 2019


Media

Best and Worst Monthly Performers

The 5 best and worst performers for the month of February 2019 were as follows:

Source: Factset as of 28 February 2019

Carsales.com Limited (13 Feb) announced an increase in revenue (+17% to $245m), EBITDA (+8% to $98m); however, a 2% decline in NPAT to $60m largely due to recognising a $48 million impairment charge for its investment in Stratton Finance Group

Event Hospitality & Entertainment Ltd (22 Feb) announced it entered into a management agreement for its newest QT hotel in Adelaide’s CBD – a site owned by Auspac Networks Pty Ltd and Joint Ventured with Axiom Properties (ASX: AXI)

GTN Limited (25 Feb) as part of its ongoing capital strategy, announced a buy-back strategy to commence 12 March 2019 until 11 March 2020 for the lesser of $20m or 22,472,064 ordinary shares, GTN reserve the right to suspend or terminate the buy-back at any time

iCar Asia Limited (22 Feb) announced a 27% annual revenue growth during its full year of 2018 with cash receipts growth at 46% YoY from 2017

Macquarie Media Limited (15 Feb) reported its H1FY19 underlying EBITDA of $15m ($0.8m or 4.9% decrease on prior year) and an underlying NPAT of $8.1m (a $0.5m or 6% decrease)

Nine Entertainment (21 Feb) announced its H1FY19 revenue of $710m and EBITDA of $178m (a 2% decline from H1FY18). Broadcasting accounted for 54% of Nine’s revenue (down form 86% during H1FY18) due to significant increases in Digital and Publishing and Domain revenues

oOh media Ltd (25 Feb) while coming close to a complete integration, oOh media expects synergies to be between $15-18m over the next two years (integration costs of approximately $7m)

QMS Media Limited (4 Feb) appointed Ian Rowden as a Non-Executive Director to leverage Ian’s international knowledge and marketing expertise

REA Group (11 Feb) reported strong H1FY19 results with $469m revenue (+15%), EBITDA $289m (+19%) and NPAT of $177m (+20%)

Seek Limited (18 Feb) Michael Ilczynski will be stepping down from his role as CEO Asia, Pacific & Americas effective mid-July 2019

Seek Limited (26 Feb) appointed Leigh Jasper as a Non-Executive Director to the Board, effective 1 April 2019. Leigh is co-founder and CEO of Aconex

Southern Cross Media Group Ltd (21 Feb) reported underlying NPAT of $42m (up 10.6%), which was a result of increased revenue (up 0.2%) and a corresponding decrease in expenses (1.7%, excluding restructuring costs)

Trade Me Group Limited (27 Feb) announced that its scheme of arrangement with Apax Funds to be acquired for NZ$6.45 per share is progressing to plan and shareholders are to receive full information in March

Village Roadshow Limited (22 Feb) announced its CEO (Graham Burke AO) to retire at the end of calendar year 2019. Graham, who has been with the company since age 14 (as a ticket collector) who later became CEO in 1988 upon VRL’s ASX listing, will remain on the Board as a Non-Executive Director

Village Roadshow Limited (22 Feb) reported in its H1FY19 results a 31% increase in EBITDA (to $65m) and NPAT of $12m (up from $0 during H1FY18) and has reduced its net debt from $339m to $216m


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  28 February 2019


Technology

Best and Worst Monthly Performers

The 5 best and worst performers for the month of February 2019 were as follows:

Source: Factset as of 28 February 2019

Altium (18 Feb) experienced double digit growth in its first half of each year over the past seven years, with 1HFY19 revenue growth at 24% ($78m from $63m during H1FY18) and EBITDA of $28m (49% growth from $19m during 1HFY18). While all regions and business segments delivered double-digit revenue growth, Altium’s revenue in China grew 49% during the period, which resulted in the opening of a new office in Beijing (in addition to Shanghai and Shenzhen)

Arq Group Ltd (26 Feb) reported its full year FY18 revenue of $213m (up 8% from FY18 of $197m), driven by organic growth from its Enterprise services and further helped by a full year contribution from WME Group; however, reported an EBITDA of $19.5m (down from $32m) due to one-off items including investment in its new brand

Appen Ltd (8 Feb) advises the resignation of Leanne Ralph and appointment of Carl Middlehurst as Company Secretary, effective immediately

Appen Ltd (22 Feb) reported its FY18 results, which showed continued strong growth in revenue (up 119% to $364m), EBITDA (up 153% to $71m) and NPAT (up 192% to $42m). Financial performance was largely driven by new customers and increased projects as well as the addition of Leapforce

Catapult Group International Limited (7 Feb) announced the resignation of Joe Powell as CEO. Catapult has appointed a sub-committee to undertake a global executive search for Joe’s replacement, while Joe will continue to work for Catapult for six months per his contractual obligations

Citadel Group Limited (18 Feb) announced the resignation of Dr Miles Jakesman (who was the co-founder of Citadel along with his wife Le-Anne) as director. Dr Miles advised he is now focusing on other opportunities

Class Limited (18 Feb) announced the appointment of Andrew Russell as Managing Director and CEO. Andrew previously held senior roles at Mortgage Choice and Virgin Group

ELMO Software Limited (28 Feb) reported H1FY19 revenue of $18m (an increase from $11m during H1FY18), of which $3m is be attributed to its two major acquisitions during the year (HROnboard and BoxSuite)

GetSwift Limited (20 Feb) announced two strategic acquisitions in North America (Delivery BIZ Pro and Scheduling)

GetSwift Limited (25 Feb) was served with a class action proceeding on 22 February brought by ASIC alleging GetSwift failed to meet its continuous disclosure obligations and engaged in misleading deceptive conduct. These claims were specifically brought against two of GetSwift’s directors (Mr Macdonald and Mr Hunter)

Impelus Limited (14 Feb) announced the launch of its next generation Quality Lead Generation (QLG) that makes searching for childcare centres seamless and simple for parents/carers

Infomedia Limited (25 Feb) released its H1FY19 results, which reported revenue of $40m (14% increase on pcp) and EBITDA of $17m (36% increase). Infomedia’s strong financial performance was partially due to its acquisition of Nidasu in late 2018, which was acquired to build Infomedia’s third area of business: data and insights

Integrated Research Limited (14 Feb) announced a record half year result with NPAT of $12m (26% above pcp), the company stated this was due to significant growth in the Payments product line and a return to growth in Europe

Kogan.com Limited (22 Feb) announced its H1FY19’s revenue increased 10.6% to $232m driven by record trading in the peak Christmas period; however, its EBITDA decreased from $14.1m to $13.3m due to Kogan’s investment in marketing and expanding its warehousing foot-print, which involved some up-front costs   

Link Administration Holdings Limited (15 Feb) reported increases in revenue and operating EBITDA during H1FY19 by 42% (to $714m) and 25% ($185m), respectively

Nearmap Limited (20 Feb) reported H1FY19 revenue of $35.5m (up 45% on pcp) largely due to product enhancement and launching of new products including offline 3B subscriptions, roof measurement tools and enhance integration and scalability for enterprise customers. As a consequence, its EBITDA for H1FY19 increased from $1.2m in H1FY18 to $8.1m

Netwealth Group Limited (18 Feb) released its H1FY19 results achieving an underlying EBITDA of $24.8m (an increase of $4.3m or 21%) and an increase in Funds Under Administration by 23% to $3.6b

Pro Medicus Limited (21 Feb) reported H1FY19 revenue of $25.3m (up 59%) and NPAT of $9.1m (up 184.3%), largely driven by an increase of revenue from Europe of 204% and a higher number of contracts in North America

Technology One Litd (27 Feb) appointed Clifford Rosenberg as independent, Non-Executive Director. Clifford has experience holding directorial roles in other ASX companies and was the former Managing Director of LinkedIn for Australia, NZ and South-East Asia

Webjet Limited (21 Feb) announced record H1FY19 EBITDA of $58m (up 42%) and revenue of $175m (up 33%). This was driven by Webjet’s WebBeds business that more than doubled its EBITDA from $12.8m during H1FY18 to $30.1m in H1FY19 from strong growth in its key European and Middle Eastern markets

Wisetech Global Ltd (1 Feb) announced the acquisition of Systema AS, a leading customs management solutions provider in Norway. Wisetech’s CEO commented Systema’s customs and cross-border expertise will deepen Wisetech’s footprint in the Nordic region’s largest markets, Norway, Denmark and Sweden allowing for enhanced integrated cross-border logistics solutions and global innovation and development capabilities

Wisetech Global Ltd (26 Feb) announced the acquisition of Containerchain, a leading container optimisation solutions provider to the container shipping and landside container logistics communities in Asia Pacific, Europe and the United States. Containerchain is HQ’d in Singapore, but has a global footprint

Zip Co Limited (21 Feb) reported its H1FY19 transaction value of $495m (up 110%), which resulted in a record revenue of $34m (up 114%). These results were driven by further major Australian retailers joining the platform including Bunnings Warehouse, Target and Officeworks


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 28 February 2019


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)

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