Venture Advisory Monthly Wrap - June 2019

Updated: Jul 15, 2019

Key takeaways from the Telecommunications & ICT, Media and Technology Sectors

June was a relatively quiet month in the Australian TMT space although there were a few significant announcements:

  • Vocus received a confidential, non-binding, indicative proposal from AGL to acquire Vocus for $4.85 per share in cash. The price offered implied a 27% premium on the closing share price of Vocus as of 7 June. However, Vocus announced the termination of discussions with AGL on 17 June.

  • Bravura Solutions announced that it had confirmed to the Board of GBST Holdings that it was prepared to provide a further revised non-binding indicative proposal to acquire GBST at $3.00 per share. Earlier Bravura made several non-binding conditional indicative proposals of $2.50 per GBST share (announced on 12 April 2019) and $2.72 per GBST share (announced on 19 June 2019). After getting confidential proposals at a higher price, GBST Board determined to not execute an exclusivity deed with Bravura.

  • Afterpay Touch announced the successful completion of its $317.2m capital raising via a fully underwritten institutional placement. The placement was priced at $23.00 per share, the top end of the placement price range. The proceeds will be used to underpin Afterpay’s mid-term target of $20.0b of merchant sales and increase investments to accelerate growth.


Telecommunications sector highlights:

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

Source: Factset, as at 30 June 2019


Arq Group (26 June) provided [an update regarding its transformation plan] and full year outlook showing the forecast of underlying EBITDA in the range of $22.0m to $25.5m for FY19. Core Operations are expected to generate between $15.5m and $18.5m of underlying EBITDA in FY19.


Macquarie Telecom Group Limited (28 June) announced that the unaudited FY19 EBITDA is expected to be in the range of $51.0m to $53.0m. This implies 10 consecutive halves of revenue and profit growth.


NEXTDC Limited (4 June) advised that it had raised $200.0m in senior unsecured debt via an additional fixed and floating tranche of its existing $300.0m Notes IV, due 9 June 2022. Following the completion of Notes IV-2, NEXTDC will have $800.0m of senior unsecured medium-term notes on issue.


Spirit Telecom (26 June) announced that it had successfully secured a new and increased debt facility with Commonwealth Bank of Australia. This increased facility provides Spirit with additional funding as well as the agility to execute on existing acquisition pipeline companies more quickly. These acquisition targets continue to move at pace through its due diligence gates.


Vita Group (7 June) announced that it expected FY19 EBITDA to be in the range of $45.0m to $46.5m, subject to year-end completion and audit, representing growth of 10% to 13% from FY18. This expected result is reflective of strong performance in Retail ICT and Sprout accessory businesses.


Vocus Group (11 June) announced that it had received a non-binding, indicative proposal from AGL Energy Limited to acquire all of the shares in Vocus at a price of $4.85 per share in cash, to be implemented by way of a scheme of arrangement. The price offered implied 27% premium on the closing share price of Vocus as of 7 June. Vocus Group (17 June) announced that AGL determined to cease undertaking due diligence on Vocus Group and to withdraw its non-binding, indicative proposal to acquire Vocus. Vocus Group was previously approached by EQT (May 2019) to acquire all of the shares of Vocus at $5.25 per share through the scheme of arrangement which was subsequently terminated after 1 week of the due diligence process.


Singtel Telecommunication Limited (14 June) announced that its wholly owned subsidiary, Singtel Optus, had priced EUR500.0m 10 year fixed-rate notes which were issued on 20 June 2019. The notes are guaranteed by Optus and certain subsidiaries.


Forward EV / EBITDA Multiples Chart

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

Source: Factset, as at 30 June 2019


Media sector highlights:

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

Source: Factset, as at 30 June 2019


Carsales (13 June) announced that it is conducting a strategic review and pursuing the sale of its 50.1% interest in Stratton Finance, the vehicle finance broking business. Timing of a potential sale of Carsales’ interest in Stratton will be determined following the completion of strategic review. Stratton is assisting its customers finance over $750.0m of assets each year.


Domain Holdings (28 June) announced that it had completed the sale of its 50% interest in utilities comparison and connection service Compare & Connect to its joint venture partner TW Australia. Details of the acquisition were set out in ASX announcement of 31 May 2019 and remained unchanged.


GTN Limited (26 June) advised that it expected Adjusted EBITDA for FY19 to be in the range of $37.0m to $38.0m, compared to $48.0m in the previous corresponding period, primarily due to the combination of a forecasted 7% decrease in Australian revenue along with an increase in expenses in Australia, GTN’s largest operating segment.


iCar Asia (13 June) announced that it had substantially strengthened its balance sheet after receiving ~$7.7m from the exercise of options issued under the terms detailed in 2017 Rights Issue Prospectus, dated 15 November 2017.


Prime Media Group (4 June) advised that despite incremental revenue associated with the Federal Election, advertiser sentiment in regional markets has remained soft over recent months. The company advised that EBITDA for FY19 was expected to be between $36.5m to $38.5m.


Sky Network (12 June) announced the appointment of Blair Woodbury as CFO. Blair joined Sky from McKinsey&Co, where he had helped New Zealand and overseas businesses improve their performance since 2016.


Sky Network (25 June) reaffirmed the company’s accelerated focus on streaming services. The company also stated that in the coming weeks the management will have exciting announcements that prove their commitment to delivering Sky in ways that work for all New Zealanders.


Village Roadshow (7 June) announced that the FY19 corporate overheads were expected to be significantly lower than FY18. The company also affirmed that Capex projections over short to medium term were approximately in line with depreciation and amortisation of ~$70.0m to $75.0m.


Village Roadshow (13 June) announced a streamlined board and management structure to drive shareholder value and enhance corporate governance. Under the changes, VRL will appoint an Independent Non-Executive Chair, and Mr Clark Kirby will be appointed the CEO to succeed Mr Graham Burke AO, on 1 January 2020.


Forward EV / EBITDA Multiples Chart

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

Source: Factset, as at 30 June 2019


Technology sector highlights:

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

Source: Factset, as at 30 June 2019


Afterpay Touch (6 June) provided an update in relation to key business and regulatory developments:

· Underlying sales were approximately $4.7b in the 11 months to 31 May 2019, up 143% on the prior comparable period

· There are over 4.3m active customers transacting with Afterpay as at the end of May, growing at an average of ~8,000 new customers per day since 31 December 2018

· Afterpay partnered with approximately 30,600 active merchants as at the end of May, up 7,400 or 32% from 31 December 2018

The company also provided a market update on US, UK, Australia and New Zealand reaffirming that growth remained strong with an increasing number of active customers and merchants.


Afterpay Touch (12 June) announced the successful completion of its $317.2m capital raising via a fully underwritten institutional placement. The placement was priced at $23.00 per share, the top end of the placement price range. The proceeds will be used to underpin Afterpay’s mid-term plan.


Bravura Solutions (19 June) announced that it had submitted a revised non-binding indicative proposal to acquire all of the equity in GBST Holdings by way of a scheme of arrangement. The revised indicative proposal was for a cash payment of $2.72 per GBST share comprising the following elements:

· $2.72 per share in cash less the amount of any dividend referred to below

· Up to $0.35 per share in the form, of a special dividend payable to GBST shareholders prior to completion of the transaction to the extent GBST are legally entitled to make such a dividend and elected to do so.


Bravura Solutions (27 June) announced that it had confirmed to the Board of GBST Holdings that it was prepared to provide a further revised non-binding indicative proposal to acquire GBST at $3.00 per share contemporaneously with the execution of a satisfactory process and exclusivity deed. This followed earlier non-binding conditional indicative proposals from Bravura of $2.50 per GBST share announced on 12 April 2019 and $2.72 per GBST share announced on 19 June 2019.


Catapult (5 June) provided a progress update on the limited “soft launch” of its next-generation wearable technology, Vector. The Vector soft launch commenced in May 2019 to a small number of Australian teams. Positive feedback from these clients encouraged Catapult to expand the soft launch to the first UK and US installations.


Crowd Media (7 June) commenced implementation of streamlining and cost reduction initiatives: the company is expecting to be EBITDA positive and operationally cashflow positive from 1st July 2019 with a focus on reducing debt. FY19 Group Revenue expected to be $24.6m down 36% and underlying FY19 EBITDA loss expected to be $4m including bad debt provisions of $1.6m.


GBST Holdings (4 June) announced that operating EBITDA before Strategic R&D for FY19 is expected to be around $20m, which is above the previous guidance and reflects greater certainty around client take-up and an ongoing focus on delivering our transformation.


GBST Holdings (28 June) received other non-binding confidential competing proposals to acquire 100% of the ordinary shares of GBST at a price higher than $3.00 per share. Accordingly, the Board had determined to not execute an Exclusivity and Process Deed with Bravura.


Hansen Technologies (3 June) announced the successful completion of the acquisition of Sigma Systems.


Impelus Limited (7 June) advised that it had secured $0.62m under a loan agreement with Connaught Consultants. The loan will be used to accelerate the rebuild of the Australian business through strengthening of the sales and product team.


Kogan.com Limited (24 June) had entered into a multi-year agreement with Powershop Australia, a part of the Meridian Energy Limited group. The agreement allows Kogan.com to offer competitive power and gas services to Australian households under a new brand, Kogan Energy.


Link Administration Holdings (11 June) announced that the sale of its Corporate & Private Clients business for a cash free, debt free consideration of £240m. It was expected to be completed on 28 June 2019.


Nearmap Limited (6 June) announced the launch of the latest product, Nearmap 3D, which gives customers the ability to stream and export 3D imagery on-demand at massive scale through the MapBrowser web application.


Retech Technology (27 June) announced that its wholly owned subsidiary, Retech Holdings, completed, the acquisition of 51% of the issued share capital in Aushen Group which owns the XJS Coaching School located in Victoria.


Webjet Limited (18 June) introduced Rezchain, a blockchain technology, which is expected to be a critical component in moving from 3% to 4% EBITDA / TTV structure in WebBeds business by FY22.


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 June 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)

50 views

Receive our monthly wrap

Learn what's happening in the Australasian technology sector.

Each month Venture Advisory looks at what is happening across the telco, media and technology sector, including key events such as M&A as well as movements in share prices and trading multiples.

©2019 by Venture Advisory

61dca1_b42096bf0cec44a7b135c150e960fcf1_
  • Linkedin