Key Takeaways
IRESS entered into an agreemnt with MainstreamBPO to divest a part of the company's superannuation administration business for A$3.5m
MYOB Group entered into an agreement to acquire the Australian and New Zealand assets of the Accountant Group from Reckon Ltd for A$180m
Fairfax Media acquired the remaining 77.5% stake in Neighbourly Ltd for an undisclosed purchase price
Fairfax Media successfully seperated its Domain Holdings business which listed on the ASX with a market cap of ~A$2.25b
Carsales.com signed a binding MOU to purchase the remaining 50.1% of South Korea’s SK ENCARSALES.COM Ltd for KRW205b (A$244m)
Pacific Star Network has entered into a non-binding Term Sheet with Crocmedia, a leading sports media content business relating to a proposed merger of the two businesses
Over the Wire completed the acquisition of VPN Solutions for A$15.6m
Superloop completed another acquisition for the year, acquiring GX2 Holdings
Telco and ICT Monthly Wrap
Telco Best and Worst Monthly performers
Following receiving an off-market bid from Macquarie Telecom, cloud services provider Bulletproof Group traded up 62% for November.
Telco reseller Inabox Group lost 58% of its market value after announcing poor performance by its Hostworks business
The 5 best and worst performers for the month of November 2017 were as follows:
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Key Company Announcements
Over the Wire Holdings (1 Nov 17) completed the acquisition of VPN Solutions for A$15.6m. The upfront consideration comprises of A$14.8m in cash plus 382,721 OTW shares (A$0.8m in OTW shares at an issue price of A$2.04). The acquisition has delivered approximately 150 business customers to the company and accelerates Over the Wire’s geographic expansion in New South Wales and South Australia
Speedcast International (6 Nov 17) announced it has completed the previously announced 100% acquisition of UltiSat in a cash transaction of up to US$100m
Spark New Zealand (8 Nov 17) announced it has signed an agreement to purchase all shares in Digital Island, a NZ-based business telecommunications provider. Spark intends to run Digital Island as a standalone business with it operationally reporting into the Spark Ventures & Wholesale unit
amaysim (10 Nov 17) announced resignation of Rolf Hansen as a non-executive director. Rolf co-founded amaysim in 2010 and served as the company’s CEO until February 2015
Superloop (17 Nov 17) completed the acquisition of GX2 Holdings. The strategic acquisition accelerates Superloop’s ability to significantly expand its community broadband campus solutions to a broader customer base in Australia and overseas and delivers technology, software and systems that will add significant value to the combined group and assist in further strengthening offerings to the market
Telstra (20 Nov 17) sold 85% stake in 1300 Australia Pty to a consortium led by Gavin Scholes and Aura Funds Management. The business will be rebranded under the name 1300 Australia. The management team and employees will continue in their current positions
Macquarie Telecom Group (21 Nov 17) announced its intention to make an off-market bid through its wholly-owned subsidiary Macquarie Cloud Services to acquire all of the ordinary shares in Bulletproof Group Limited for A$0.11 cash per share
Speedcast International (28 Nov 17) announced Keith Johnson, currently EVP of Speedcast’s Energy Division, will take over from David Kagan as Chief Operating Officer, while also keeping his existing Energy Division responsibilities
Megaport (29 Nov 17) to offer elastic interconnection services to Cyxtera Technologies. Initial Cyxtera markets include Dallas, Phoenix, Washington, D.C., and London. Customers would have access to direct cloud connectivity and rapid provisioning, enabling them to reduce infrastructure costs and realize improved performance
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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Telecom stocks were trading on an average forward EV / EBITDA of 10.7x and a median forward EV / EBITDA of 8.5x.
Media Monthly Wrap
Media Best and Worst monthly performers
After successfully implementing the ASX listing and separation of its real estate classifieds business Domain Holdings, Fairfax saw its share price fall 35% throughout the month
The 5 best and worst performers for the month of November 2017 were as follows:
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Key Company Announcements
Fairfax Media Ltd (1 Nov 17) acquired the remaining 77.5% stake in Neighbourly Ltd for an undisclosed amount
REA Group Ltd (10 Nov 17) reported 1QFY18 revenue of A$190m (up 21% YoY) and EBITDA of A$104m (up 24% YoY) driven by the Australian residential business, and the inclusion of its new financial services revenue from August
Nine Entertainment Co (13 Nov 17) expects FY18 EBITDA to be at the upper end of the range of analysts’ forecasts of A$186-207m
Seven West Media (16 Nov 17) announced a new partnership with Newzulu Limited to build a new app which will allow Seven to harness the power of their live audiences by collecting user-generated content at the largest sporting events for which they have broadcast rights
Carsales.com Ltd (20 Nov 17) Signed a binding Memorandum of Understanding for carsales to purchase the remaining 50.1% of South Korea’s SK ENCARSALES.COM Ltd for KRW205b (A$244m). This will give carsales 100% control and ownership of South Korea’s leading online auto classifieds business
Fairfax Media Ltd (22 Nov 17) implemented the Scheme of Arrangement for the separation of Domain Holdings Australia Limited from Fairfax. The company also issued 574,871,064 Domain ordinary shares. Domain commenced trading on the ASX on 23 Nov 17
Pacific Star Network (23 Nov 17) announced that it has entered into a non-binding Term Sheet with Crocmedia, a leading sports media content business relating to a proposed merger. If the proposed transaction proceeds, the merged Group would be led by CEO elect, Craig Hutchison
Asia Pacific Digital (28 Nov 17) received multiple non-binding, indicative proposals to invest in or acquire its operating business. The company further stated that the bidders were well known and directors believed there is a reasonable probability a transaction would be concluded, assuming due diligence and negotiations are concluded satisfactorily
Seek (29 Nov 17) affirmed revenue growth in the range of 20% to 25% and NPAT in the range of A$220-230m and EBITDA growth of approximately 13% for FY18
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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Media stocks were trading on an average forward EV / EBITDA of 9.6x and a median forward EV / EBITDA of 8.2x.
Technology Monthly Wrap
Technology Best and Worst monthly performers
Elmo Software was up 32% following reaffirming prospectus guidance and the acquisition of two specialised, SaaS based, HR management software solutions, PeoplePulse and LiveSalary
The 5 best and worst performers for the month of November 2017 were as follows:
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Key company announcements
ELMO Software (2 Nov 17) announced the acquisition of two specialised, SaaS based, HR management software solutions, PeoplePulse and LiveSalary, in one transaction for A$12m.Under the terms, the consideration of A$8m is payable on completion of the transaction and A$2m to be paid on the first year anniversary from completion and an additional A$2m performance payment will be made should financial stretch targets be achieved in the first 12 months from completion. The acquisitions will broaden ELMO’s integrated product suite from 7 to 9 modules
Xero (9 Nov 17) reported 1H18 revenue of NZ$187.8m (up 36.8% YoY) and net loss of NZ$21.1m (vis-à-vis loss of NZ$43.9m in 1H17). Total subscribers were 1,199,000 (up 39.1% YoY)
IRESS (9 Nov 17) entered into an agreement with MainstreamBPO to divest a part of the company's superannuation administration business that provides services to customer owned banks for A$3.5m
OFX (14 Nov 17) reported 1H18 flat revenue growth of A$58.7m, while EBITDA was A$13.4m (down 0.8% YoY) and net profit was A$8.3m (down 14% YoY)
Afterpay Touch Group (16 Nov 17) responded to an article in The Australian Financial Review which speculated that ASIC intended to examine the emerging sector in which Afterpay operates. The company stated that it welcomed any industry review by ASIC and has already engaged with key regulators and industry stakeholders to establish best practice principles and processes for the emerging industry
zipMoney (16 Nov 17) - Kogan.com, Australia's largest pure-play online retail website, joined the Zip platform. As a result, more than one million active Kogan.com customers would have access to the zipPay digital wallet at checkout, allowing shoppers a limit of up to A$1,000 and the ability to pay flexibly, over time for their purchases, interest-free
MYOB Group (16 Nov 17) entered into a purchase agreement to acquire the assets of the Accountant Group in Australia and New Zealand from Reckon Limited, for A$180m. The acquisition strengthens MYOB’s growing adviser base by deepening the relationship with these advisers, creating an opportunity to accelerate online SME growth via a larger referral network
Technology One (20 Nov 17) reported FY17 revenue of A$273.2m (up 10% YoY) and NPAT of A$58m (up 9% YoY). The strong results were underpinned by the continuing fast growth of the TechnologyOne Cloud, with Cloud Annual Contract Value (ACV) was A$27m (up 69% YoY)
Wisetech Global (22 Nov 17) reported it expects revenue to grow between 35-41% to A$207-217m while EBITDA is expected to grow between 32-39% to A$71-75m
Forward EV / EBITDA Multiples Chart
The forward EV / EBITDA multiples for leading technology stocks at the end of the month is as follows:
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Technology stocks were trading on an average forward EV / EBITDA of 13.3x and a median forward EV / EBITDA of 12.6x.
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)