16/03/2022: Just finished my work on the Vodafone Enterprise announcement, and the market is completely missing how transformative this is. This easily adds 80% - 120% upside to the current market cap by FY24e without giving credit to other significant organic and inorganic growth opportunities for the business.
The quick maths is that CCG is expecting to spend roughly ~$1m over the next year (half opex, half capex) to make $8-10m in incremental revenue at a ~60-65% EBITDA margin (70% gross margins minus a recurring annual staff cost of ~$500k-$750k). So CCG will essentially add $5m to $6.5m in incremental EBITDA by FY24e vs. the pre-announcement FY23e run-rate of $7m today.
Yes, you read that correctly, CCG has increased it's FY24e EBITDA by 70% to 95%, with scope to re-sell even more products through Vodafone in the future. Assuming this incremental EBITDA is rated at what CCG is currently trading at (7x EBITDA), this means an incremental equity value of $28m to $38.5m vs. $34m today !!!
This goes to show the tremendous optionality at play when backing a proven & aligned management team. This partnership also paves the way to winning additional ones given becoming the quasi-exclusive GLOBAL supplier of UCaaS to Vodafone Enterprise will generate significant inbound interest for CCG.
Disclosure: I have added to my position significantly
Thank you for a very good write up - and for working through the inorganic growth numbers.
I suppose questions we will discover the answer to relate to their ability to acquire businesses when their own multiple is not much higher than the level targets will sell at and the share price is not going up. I've seen lots of small, acquisitive professional services struggle with this.
Are they an Aussie local player of a regional player. If the latter then better.
What are these deals with Vodafone and, now, KDDI? They look so good (and you seemed duly excited when the Vodafone deal announced) but they don't seem to be actually "transformative". Why not?
16/03/2022: Just finished my work on the Vodafone Enterprise announcement, and the market is completely missing how transformative this is. This easily adds 80% - 120% upside to the current market cap by FY24e without giving credit to other significant organic and inorganic growth opportunities for the business.
The quick maths is that CCG is expecting to spend roughly ~$1m over the next year (half opex, half capex) to make $8-10m in incremental revenue at a ~60-65% EBITDA margin (70% gross margins minus a recurring annual staff cost of ~$500k-$750k). So CCG will essentially add $5m to $6.5m in incremental EBITDA by FY24e vs. the pre-announcement FY23e run-rate of $7m today.
Yes, you read that correctly, CCG has increased it's FY24e EBITDA by 70% to 95%, with scope to re-sell even more products through Vodafone in the future. Assuming this incremental EBITDA is rated at what CCG is currently trading at (7x EBITDA), this means an incremental equity value of $28m to $38.5m vs. $34m today !!!
This goes to show the tremendous optionality at play when backing a proven & aligned management team. This partnership also paves the way to winning additional ones given becoming the quasi-exclusive GLOBAL supplier of UCaaS to Vodafone Enterprise will generate significant inbound interest for CCG.
Disclosure: I have added to my position significantly
Hi! Any update in your view after the business update? Now on EV: ebitda 4x
Thank you for a very good write up - and for working through the inorganic growth numbers.
I suppose questions we will discover the answer to relate to their ability to acquire businesses when their own multiple is not much higher than the level targets will sell at and the share price is not going up. I've seen lots of small, acquisitive professional services struggle with this.
Are they an Aussie local player of a regional player. If the latter then better.
What are these deals with Vodafone and, now, KDDI? They look so good (and you seemed duly excited when the Vodafone deal announced) but they don't seem to be actually "transformative". Why not?