4C out today. No real surprises. All businesses chugging along well, EBITDA of $2.3m which (annualised and backing out cash) puts the business on 28.5x.

All regions were EBITDA positive. Margin was 11%, which brings YTD bang on to my ‘bull case’ estimate of 5%. Another quarter like this would put it somewhat over.

Haven’t had time for a detailed valuation update, but I don’t think it would change very much. Still very keen on this business.

Held.

Interesting observation from Nathan Bell of Forager Funds on his INES offer webinar (link, comment is about 39mins in) - acknowledging Nathan is a massive FDV bull and holder of the stock in (I think) all of the II funds he manages. I have adapted it a little to deal with LATAM only, which is the attractive part of the business for US investors. A recent release has reassured the market a NASDAQ listing is very much in management's mind.

Anyway:

• FDV LATAM's CY22 revenue annualised from HY22 was AUD 44.6m.
• If FDV LATAM was a standalone business on the NASDAQ it would likely trade on a market multiple for these kinds of businesses of 10x revenue
• FDV LATAM would then be worth something like AUD 446m vs. current MC of AUD 230m after backing out 31m cash.
• In addition to this, you are currently getting the rest of the business which includes Zameen. Will it get 10x? Will it list? The current MC leaves a lot of room for less than perfect outcomes.
• The last transaction on Zameen (privately held) indicated FDV's interest was worth US 300m or AUD 470m at current FX rate. This is certainly a MUCH more risky bet given the current crisis in Pakistan, but it is at worst an option that should be valued greater than zero.
• In addition to Zameen, you get the rest of the FDV Asia business. PakWheels is the biggest - also Pakistani, so same issues. MENA businesses are tiny (< AUD 5m rev) and unprofitable on an EBITDA basis so the remainder is probably also best considered an option, certainly less valuable than the Zameen option.

I continue to gain confidence from Shaun Di Gregorio's very substantial personal holding and the longer-term obviously superior economics of classifieds businesses. The transactional aspects of the business are growing strongly (8% to 10,166 transactions in HY22), albeit from a zero base, and Shaun's ASX microcap presentation included a comment that these transactions generate 15x the revenue of non-transacted listings.

If Nathan is right about LATAM and the Zameen business is worth what it was last time its owners transacted, FDV is worth 4x more than the current SP without attributing any value to rest of Asia and all of MENA. We clearly cannot invest assuming the best, particularly with businesses in frontier markets. But the current SP seems to price in the worst outcome in each instance and I continue to think it offers compelling value.

An outrageously busy YTD at work has kept me from the more detailed valuation updates I would prefer to share, but wanted to record my (and Nathan's!) less analytical impressions.

Edit: Held IRL and on SM (if that wasn't already apparent!).

2Q 2022 Appendix 4C

The key takeaway is that the company as a whole was operating cashflow neutral (loss of $48k) for the first time (EBITDA of $1.8m).  The portfolio margin is 4% which is an improvement on last year and in line with my 'base case' estimate. If this margin improves (as I expect it will in the second half), it will move the margin towards my ‘bull case’ assumption of 5% for CY22.

Revenue of $41.7m for the half (72% increase on pcp) suggests the company will comfortably meet my CY22 estimate of $88m, being the March 2022 revenue run-rate.  Plenty of cash is still being applied towards getting the businesses up to scratch with transaction capacity (about $16m this quarter), but the company retains about $31m so there is no immediate need for more capital.

The business seems to be at an inflection point and will soon begin to enjoy the benefits of operating leverage.  From a markets perspective, the business will hopefully screen better and no longer be viewed as a loss-making tech play.

The current SP is well below my ‘bear case’ estimate of value and this remains my largest holding IRL.

CEO (Shaun Di Gregorio) has bought about $50k on market and chairman (Anthony Klok) has bought about $75k. Relatively small sums, but still nice to see managment taking advantage of SP weakness.