Xero sets to delist from New Zealand to join ASX200 for next leg of growth

Xero Ltd (ASX: XRO)

XRO Details

Xero’s stock slipped by 1.2% on November 09, 2017 while the cloud accounting software provider indicated that the group is setting itself to become the newest member of the ASX200 index (transitioning from the current sitting in ASX300) post the delisting from the New Zealand Stock Exchange. The shares have been earmarked for consolidation on the Australian Stock Exchange from January 31, 2018.

Meanwhile, XRO released its positive earnings result but failed to gain traction as the news related to delisting led the Xero NZ stock plunge in the early trade owing to a backlash from the kiwi investors while Xero has been said to be accounting for 3.6% of the NZX capitalisation. The group has pointed out that liquidity spread across two markets deterred the group from accessing all the new investors that have gained traction because of the exponential growth offered in the stock. XRO also highlighted that the group is at a stage where consolidation has become critical to emerge as the leading global small business platform serving millions of customers. Overall, the announcement has not gone down well with many investors.
 

Performance for six months ended September 2017 (Source: Company Reports)
 
On the other hand, Xero posted its first ever positive earnings before interest tax depreciation and amortisation (EBITDA) of $NZ5.4 million against an EBITDA loss of $NZ25.9 million in the first half of FY17 with positive operating cash flow of $6.1 million. Group’s net loss after tax has also been lowered to $21 million against $44 million of prior corresponding period. The subscription revenue has been up 38% to $183 million with growth in subscribers’ base to 1,199,000.

Although there was some impact from lower subscribers and revenue in North America, the result still augurs well with the on-going performance and growth momentum. In an effort to improve liquidity, XRO had also established a $NZ100 million debt facility with the Bank of New Zealand and ANZ, with no current plans to draw down on the facility. Meanwhile, the group has invested well in product design and development and the significant launches including Xero HQ App Suite and Xero Projects, are expected to add value. With the set of developments and group’s efforts on reaching cash flow break-even under its outlook, we see it to be in a good position for a “Hold” at the current price of $30.59
 

Total Operating Revenue by Geography (Source: Company Reports)

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.