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Stargroup gears up for more deals after completing DD for $6.5m takeout of Indue

Perth based ATM machine operator and financial payments company Stargroup, have all but completed their $6.5 million acquisition of diversified 45 year old ATM switching company Indue and they are already gearing up for more deals.

Stargroup announced this week they were on track to settle the acquisition of Indue by the end of December, after successfully completing due diligence and securing a debt facility of up to $15 million to partly fund the deal and to set the company up for possible future acquisitions.

Stargroup  CEO and executive chairman Todd Zani, commenting on the  securing of the new debt facility said; “it will not only provide certainty of completion of this acquisition to our shareholders but also provide certainty in relation to any other potential EPS-accretive acquisitions that we may consider. This will enable Stargroup to fully concentrate on the execution of this acquisition and to accelerate our blue sky EFTPOS business opportunities in 2017.”

The Indue deal is a highly strategic move that will see Stargroup take over Indue’s ATM switching, settlement and telecommunications services.  Stargroup will also take over Indue’s ATM machine wholesale business, allowing them to lever their existing part ownership of Korean ATM machine manufacturer Neo ICP.

The bold move will see Stargroup become a totally vertically integrated ATM business that can pretty much offer all services in the ATM machine business chain.

The $6.5m acquisition, which appears to be reasonably priced at a multiple of 3.8 times EBITDA, is expected to boost annual revenues by $4.1 million and EBIDTA by $1.7 million.

Even without the acquisition, Stargroup are well on their way to a 12th consecutive quarterly increase in revenue. This week’s announcement included news that the company set a new record in October for monthly revenue, far exceeding budgeted results. This increases the likelihood of maiden dividend in June 2017, as foreshadowed earlier this year.

Zani told the ASX this week that there was still much more growth in the pipeline. He said;“We have achieved all this without having released all of our products on the market as yet and in particular we believe our biggest blue sky opportunity, the EFTPOS products that we are developing with West International AB and our other technology partners, is going to deliver increased revenue growth and much greater value to Stargroup in coming years.”

With 11 consecutive quarters of revenue growth under their belt, Stargroup have established a reputation as a business that means what it says and says what it means. If they say their EFTPOS product will lead to increased revenue growth, it’s a pretty safe bet that it probably will. 

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Stargroup (STL)

Share Price

Closing price for the last 90 trading days
Source: Morningstar

Total Shareholder Return as at 31/01/18

1 year TSR5 year TSR
421stPura Vida Energy6%-40%
422ndQuestus6%-22%
662ndResource Development Group-34%-32%
727thAusnet Financial Services-46%-13%
735thStargroup-48%-25%
709 WA (and selected non WA) listed companies ranked by 1 year TSR relative to other companies with similar revenue
Source: Morningstar

Share Transactions

09/08/17
$12k Bought
27/06/17
$0 Other
27/06/17
$35k Bought
Total value as at the date of the transaction
Source: Morningstar

Revenue

85th↓Questus$10.2m
86th↑Ausnet Financial Services$9.6m
87th↑Stargroup$9.5m
88th↑Pura Vida Energy$9.4m
89th↓Resource Development Group$9.3m
234 listed industrial companies ranked by revenue.
Source: Morningstar

Remuneration from Stargroup

1500thJay Kim$29k
Ranked by total remuneration from all listed WA companies

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