Venture Advisory Monthly Wrap - March 2019

Key Market Activity

Contact the author Ivy Daying Sheng

  • The number of announced transaction is low in march relative to February, which includes:

  • MNF Group announced it has entered into an Asset Sale Agreement with Southern Phone Company to sell its fixed line residential broadband customer base

  • Appen announced the acquisition of Figure Eight Technologies, a machine learning software platform which uses highly automated annotation tools to transform unstructured data into high quality AI training data

  • There was a number of companies raising capital during March including Megaport, Superloop, Spark New Zealand, Telstra, Pacific Star Network, Appen, Wisetech Global and Zip. The funds were used for a range of purposes including acquisition finance, organic growth initiatives, and balance sheet strengthening. Notably, the raisings were well received by the market.

  • TPG announced its 1HFY19 result. The company stated it achieved EBITDA of $424.4m and it is on track to achieve its FY19 guidance. The proposed merger with Vodafone is progressing.

  • ASX sold its $382m stake in IRESS at $11.95 per share. This block was managed by UBS.

  • MYOB continued to progress with the sale of its business to KKR for $3.40 per share.

Telcos

Best and Worst Monthly Performers

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

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Source: Factset as of 31 March 2019


5G Networks Ltd (21 Mar) announced the official launch of national high-speed Managed Data Network (MPLS) to meet demand driven by digital transformation.

amaysim Australia Ltd (27 Mar) announced the successful completion of its retail entitlement offer with a take up rate around 58%. The company raised a total of approximately $15.9m through the issue of approximately 26.5m new shares at $0.60 per share. The funds raised will be used to accelerate strategic growth initiatives.

Chorus Limited (28 Mar) released its proposed unbundled GPON fibre pricing to the industry for feedback.Chorus Limited (29 Mar) announced that the company has extended and increased syndicated bank facility to provide additional financial flexibility and funding certainty. The amended $550m facility is supported by seven banks.

Inabox Group Ltd (11 Mar) reported an update on its voluntary delisting from ASX. The company currently expects the shares to remove itself from official list on ASX on or around 5 April.

Inabox Group Ltd (29 Mar) announced that trading in securities of the entity would be temporarily paused pending a further announcement.

MNF Group Ltd (21 Mar) announced it has entered into an asset sale agreement with Southern Phone Company Ltd to sell its fixed line residential broadband customer base. The transaction is expected to be completed by end of March 2019.

Megaport Ltd (14 Mar) announced the successful completion of its $50m share placement to institutional, experienced, sophisticated and professional investors. The issue price of the new shares was $4.00 per share, representing a discount of 4.8% to closing price of $4.20 per share prior to the announcement of the raising. The proceeds will be used to accelerate expansion to new locations and new markets, undertake capital upgrades, fund innovation and internal development of new technology and fund operating costs and general working capital requirements.

Superloop Ltd (25 Mar) announced the successful completion of its retail entitlement offer, raising approximately $8.4m. The company received strong support from retail shareholders, receiving double the applications than the amount available in the raising. Approximately 6.72m new shares will be issued to successful applicants.

Spark New Zealand Ltd (19 Mar)’s subsidiary, Spark Finance, announced the issuance of NOK$1b (equivalent to NZ$169m) of 10-year fixed rate notes. These funds will be used to partially refinance an upcoming debt maturity and diversify to its funding sources.

Spark New Zealand Ltd (29 Mar) announced that the company began a formal process to select a growth partner for Lightbox entertainment streaming business.

Telstra Corporation Ltd (19 Mar) announced a EUR$600m bond issuance under its Debt Issuance Program Offering Circular. The proceeds will be used for general corporate purposes. The Notes have a coupon of 1.375% and mature March 2029.

TPG Telecom Ltd (19 Mar) released its 1HFY19 financial report showing a slight increase in underlying EBITDA to $424.4m. 1HFY19 EBITDA was adversely impacted by the loss of margin as DSL and home phone customers switch to NBN services, however this was offset by other growth in the group. The company reaffirmed its FY19 guidance of EBITDA of $800m to $820m. TPG stated that it was continuing its proposed merger with Vodafone.

Vocus Group (18 Mar) responded to media speculation stating that there was no current intention to raise additional equity.


EV / Forward EBITDA Multiples Chart

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

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Source: Factset, as at 31 March 2019


Media

Best and Worst Monthly Performers

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

📷

Source: Factset as of 31 March 2019


Domain Holdings Australia Ltd (14 Mar) advised that ~2m fully paid ordinary shares held under voluntary escrow will be released on 29 March.

Pacific Star Network Ltd (14 Mar) announced that ~40m ordinary shares issued as part of the placement on March 2018 will be released from voluntary escrow on 29 March.

QMS Media Ltd (7 Mar) announced the appointment of Mark Fairhurst as General Manager Sydney for QMS, having previously served as General Manger Sales at APN Outdoor.

Sky Network Television Ltd (15 Mar) advised the resignation of Jason Hollingworth, CFO and Company Secretary, and the appointment of Sophie Moloney as Company Secretary.

Sky Network Television Ltd (22 Mar) advised the appointment of Andrew Dick as the Interim CFO.

Sky Network Television Ltd (28 Mar) advised the resignation of John Fellet as Director.

EV / forward EBITDA Multiples Chart

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

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Source: Factset, as at 31 March 2019


Technology

Best and Worst Monthly Performers

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

📷

Source: Factset as of 31 March 2019


Appen Ltd (11 Mar) announced the acquisition of Figure Eight Technologies, a machine learning software platform which uses highly automated annotation tools to transform unstructured data into high quality AI training data. Appen will pay upfront cash consideration of US$175m (5.7x FY18 revenue) plus an earn-out component capped US$125m payable in March 2020. Appen is expecting revenue synergies from annual platform subscription and cost synergies from the acquisition.

Appen Ltd (12 Mar) announced the successful completion of a $285m institutional placement at an offer price of $21.50 per share. The placement was undertaken to fund the upfront consideration for the acquisition of Figure Eight Technologies

Catapult Group International Ltd (19 Mar) announced the appointment of Jim Orlando as Interim CFO. Mr Orlando is currently a Director of CAT, having held CFO roles with ASX listed companies including PowerTel and Veda Group.

Citadel Group Ltd (20 Mar) reported recently it has won numerous recent contracts including: the technology services contract to the new Royal Adelaide Hospital ($33m contract over 10 years) and the digital service contract with University of Melbourne.

Citadel Group Ltd (27 Mar) advised the resignation of Vanessa Chidrawi and the appointment of Spencer Chipperfield as Company Secretary.

Class Ltd (5 Mar) announced $4m investment via convertible notes in Philo Capital Advisers, which provides services to the growing managed discretionary account sector.

Crowd Mobile Ltd (1 Mar) released its half year results showing EBITDA loss of $3.27m and NPAT loss of $2.8m (including a $1.7m bad debt provision). The Crowd Media divisional revenue was up 160% to $1.3m, with recent new clients being a global airline, two large European FinTech firms and a global travel website.

IRESS Ltd (1 Mar) announced the company ceased to be a substantial holder from ASX. UBS managed the block trade of ~32m of securities which were traded at a price of $11.95 per share, a slight discount to the market price for the securities at the time of execution.

IRESS Ltd (14 Mar) advised Simon Badley, IRESS UK MD, will step down from his role and leave the company at the end of June 2019.

iSelect Ltd (28 Mar) reported remaining two strategic review initiatives that were outlined at the 1HFY19 result: consolidation of customer contact centres to a single Melbourne site and establishment of home loan joint operation with AFG.

Kogan.com Ltd (14 Mar) announced the launch of Kogan Marketplace, a platform to connect leading retailers and the Australian consumer. The platform has over 100,000 products available for purchase.

Kogan.com Ltd (29 Mar) appointed Michael Hirschowitz as an independent non-executive director. Mr Hirschowitz previously served as a senior executive and director of Accent Group for over 20 years.

Link Administration Holdings Ltd (1 Mar) announced the resignation of Cassandra Hamlin as Company Secretary, effective on the day. The company advised that Janine Rolfe would continue as General Counsel & Company Secretary of Link Group.

MYOB Group Ltd (14 Mar) announced that the Federal Court of Australia has approved the convening of a meeting MYOB Shareholders to vote on the Scheme for the proposed acquisition by KKR of all the remaining shares in MYOB. The Scheme meeting is scheduled to be held on 17 April.

OFX Group Ltd (6 Mar) advised the appointment of Ms Connie Carnabuci as a Non-Executive Director to the Board of OFX, effective on and from 1 April. Connie would also be appointed to the Remuneration and Nomination Committee.

Wisetech Global Ltd (20 Mar) announced successful completion of its $300m institutional placement at a price of $20.90 per share to provide balance sheet flexibility and accelerate long-term organic growth. To partially accommodate the significant demand, the size of placement was increased from $250m (announced on 19 March) to $300m.

Zip Co Ltd (14 Mar) announced the successful completion of its $42.8m placement to institutional, sophisticated and professional investors. The oversubscribed placement was completed at a price of $1.53 per share, representing a 7.8% discount to the closing share price on 12 March. The proceeds will be used to accelerate growth initiatives and strengthen the company’s balance sheet.


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 31 March 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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