Official stat results released today, most of the information was released in the 4C at the end of January, but we get more details and the statutory numbers – which are an accounting nightmare that reflects the consolidation of so many international businesses (par for the FDV course).

Result Summary:

·        A$14.8m cash, +A$3.7m Operating Cash Flows Vs -A$2.5m FY22, positive in all 4 quarters.

·        $A67.9m Statutory Revenue +15% YoY driven by 15% growth in 360 LATAM, but $80.6m Operating Revenue (with associate share) -5% due to -55% fall in Zameen.

·        $A4.8m EBITDA (inc Associates), up from A$37k in FY22

·        -$A8.9m NPAT (Attributable) inline with -A$8.9m in FY22, note H2 was a profit of A$1.3m but a favorable A$4.1m Associates FX compared to unfavorable -A$5.8m in H1 was key swing factor HoH.

·        EPS loss reduced to -A$2.06 from -A$2.70 due to share count increase from 378.6m to 433.2m shares following a 23.2m institutional placements (5/4/23) and 9m for SPP (11/5/23) during the year to fund contingent consideration for the prior year increase ownership in 360 LATAM businesses to 100% (InfoCasas and Encuentra24) also 21.3m shares issued as part of the payment for the earnout (2/6/23).

·        $A64.3m Operating costs (ex-dep) up slightly from A$63.9m driven by higher Offline production costs (4.5m) offsetting headcount savings (3.2m).

·        $A7.8m A&D down from A$10.8m mostly due to A$2.3m of Customer lists being amortised in FY22 and none in FY23. Not sure what’s happed here, page 2 has the only comment that I don’t follow as a reason for a drop in FY23.

·        -A$1.5m FX loss Vs -A$0.3m LY, normally I would ignore FX but it’s a core part of FDV.

·        CEO Shaun Di Gregorio share count up 51k to 37.260m but ownership down 9.8% to 8.6%

·        10 page remuneration report Vs 9 pages last year. Director and KMP remuneration up from A$1.375m to A$1.415m (2.9%) without personnel changes.

Other observations:

·        Last year the focus of the presentation was the Operating Revenue +37% driven by Zameen, this year it focuses on the Statutory Revenue +15% which excludes Zameen. The directors report in the accounts does the same thing, changing focus from last year… No Like!

·        FDV Asia entities are not fully owned like the 360 LATAM and MENA groups, which complicates results as they are consolidated if over 50% held and equity accounted if under. Zameen is currently the only material part of this group which is equity accounted for so relatively clean, but this leaves FDV’s value linked mostly to 360 LATAM, which is currently doing very well – something to keep note of… Look like they have picked winners.

·        Note 7 on Income taxes implies A$19.7m in unrecognised Deferred Tax Asset on the basis that it is not probable that sufficient taxable income will be generated to utilise the future deductions. The complex entity structure for tax purposes leaves me concerned that prior losses will not be fully utilised against future profits which has a material value impact.

·        I need to understand more how the Offline Production Costs scale and how this may differentiate the model from REA in Australia if at all. Current EBITDA% assumptions for valuation are well below REA so the margin of safety more than covers this issue.

The only additional information that may change my valuation of a few days ago is the tax situation, but not enough to change my decision to commit to FDV.

Disc: Own IRL, adding to SM