MYOB GROUP LIMITED

Poised well for Growth: MYOB Group Ltd (ASX: MYO) is a leading provider of online business management solutions to Australia and New Zealand businesses. The company has three business verticals i.e., Clients & Partners, Enterprise Solutions and Payment Solutions that contributed around 82%, 16% and 2%, respectively, of revenue in total group’s revenue in 2017. The company has announced full year results for the period ending 31 December 2017 and delivered strong growth and return for its shareholders. In 2017, MYOB delivered double-digit growth across all key financial measures, driven by record online subscriber growth. Record online subscriber grew by 60% on the back of new small business customer wins and increasing online migration. The migration rate of active non-paying users to paying online subscriptions has almost doubled in three years as the customers’ preference increased towards online based services. The company is on track to reach one million online subscribers in Australia and New Zealand by 2020. ARPU (Average Revenue per Paying User) increased by 4% to $424 due to improved functionality and increased features. Top-line rose to $416 Mn, marking a growth of 12% year on year. Underlying EBITDA was at $190 Mn, up by 11% as compared to pervious year. NPATA came at about $ 102 Mn, up by 10% on a year on year basis.

Acquisition strategy for product mix growth: MYOB is in the process of evaluating target companies for the purpose of acquisitions. The objectives leading the acquisition drive relate to strengthening its online business management solutions in the Australia and New Zealand. Recently, the company acquired Paycorp Payment Solutions Pty Limited for $48 Mn which will help to increase top line growth on the back of strengthened organic business segment.  Apart from this, the company announced its intention to acquire the assets of Reckon accountant group for $180 Mn. The decision is under review by the competition regulators in Australia and New Zealand and is expected to be out in 2Q18. The objective of this acquisition is to boost advisor base and create an opportunity to accelerate online SME growth through a larger referral network. This reflects management’s confidence in the future growth and sustainability of the business.

The board of the company declared a final dividend of 5.75 cents per share, representing a 66% payout ratio of second half NPAT (net profit after tax), to bring the full year final dividend to 11.5 cents per share. The company has robust balance sheet and rich cash position with focus on to maintaining net debt below 2.0x EBITDA. As per the consensus, the revenue is expected to grow at CAGR of 13-15% while EBITDA margin is forecasted in the range 45%-46% while the group expects FY18 organic revenue to be up 8-10% and EBITDA margins of 43-45%. The stock seems to be gaining traction given the growth trajectory. With the group intending to fire on many cylinders for better prospects, we maintain our “HOLD” recommendation on the stock at the current market price of $3.21


MYO’s Financial Performance (Source: Company reports)

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