UNSOLICITED, NON-BINDING, CONDITIONAL PROPOSAL FROM BATTERY VENTURES $1.75

Activity M and As around the share market

01-June-2021:  SimplePart Completion and FY21 Update

Infomedia Ltd (ASX:IFM), a leading SaaS* platform provider in parts, service and data insights solutions to the global automotive industry, today announced that it has completed the acquisition of US-based e-commerce platform SimplePart, initially announced on 4 May 2021.

Infomedia’s CEO, Mr Jonathan Rubinsztein said: “We are delighted to officially welcome SimplePart into the Infomedia family. Our respective teams have started to engage and identify opportunities to leverage existing relationships in the Americas and elsewhere.

SimplePart is a strategic extension of Infomedia’s core global offering and uniquely positions us to offer our customers an expanded range of market leading business-to-business and business-to-consumer parts, service and data insights solutions.”

SimplePart is not expected to contribute materially to Infomedia’s financial results for the 12 months ending 30 June 2021 (FY21).

As anticipated, organic growth in Infomedia’s core parts and service SaaS platform has picked up since December, particularly in the current quarter. Despite some currency headwinds, the company anticipates final revenue of $95-$96 million and Cash EBITDA** of $19-$20 million for FY21.

Growth in organic monthly recurring revenue, combined with the inclusion of SimplePart revenue, provides strong momentum leading into FY22. Infomedia will provide more detail when it announces its audited annual results on 24 August 2021.

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Notes:

1. (*) SaaS - software as a service
2. (**) Cash EBITDA is a key internal metric that identifies the cash impact of capitalised development costs in reported NPA

[I do not hold IFM, but I have held them previously, and do follow them occasionally.  I note that the market seems to like this update, with the IFM share price up +13.28% (or +18c) to $1.535 so far today.  However, their graph shows that their share price has been a bit of a rollercoaster of late.  Very volatile!]

What does IFM do?

IFM is a technology services developer and supplier of electronic parts catalogues and service quoting software systems (Saas), data analytics and business insights for the aftersales parts and service sector of the global automotive industry. The group operates within Asia Pacific, Europe, Middle East and Africa (EMEA), and Americas, representing the combined North, Central and South America.

Why has the share price plummeted?

IFM was trading at around $1.85 before it took a dive of nearly 10% when it announced a flat 1H21 result on 25 Feb 21:

• Revenue $47.7 million for the 6 months to 31 Dec 20
• NPAT increased 3% to $9.3 million
• Cash Balance $97.3 million at 31 Dec 20
• EPS 2.49c down from 2.86c
• Cash EBITD decreased 16% to $9.5M pcp due to significant investment in the integrated Next Gen SaaS platform.

CEO, Mr Jonathan Rubinsztein said: “The result is in line with our expectations having anticipated the impact of delayed negotiations and installations.

IFM said  travel restrictions and lockdowns continued to have an impact through to the end of the calendar year and into the first few months of 2021, particularly in the Americas and Europe, affecting the timing of sales converting to revenue.

IFM dropped further to $1.40 when it went ex dividend on 3 March and today IFM closed at $1.335. 

IFM has plumetted around 30% in just a few weeks.

A combination of a flat result, going ex div, and the tech armageddon has left Infomedia’s share price in tatters!

What is the outlook?

During 1H21 IFM won the Ford Europe parts contract. IFM says the win was a significant endorsement of the Next Gen platform.

In the medium term, IFM anticipates a return to consistent, sustained growth buoyed by recent strategic wins across all regions and remain committed to an aspirational target of doubling revenue to $200 million by 2025.

This sounds like a tall order to me, but assuming a 50% increase in revenue to $150M would be a huge win for investors.

A consensus of 5 analysts on Simply Wall St estimate over 20% annual earnings growth over the next 3 years, and a DCF value of $2.90. This assumes a revenue of $140M in 2023 - 2024.

Bell Potter has a ‘buy’ on IFM expecting double-digit earnings growth from 2021 to 2023, and has a target price of $1.75.

I value IFM at around $1.80 which means it is trading at a 30% discount to today's share price.