Have had a look at MYOB and made some comparisons with Reckon, Intuit and Xero.
1. When comparing EBIT to Sales as a profitability measure they all make aeround 25 to 30 % EBIT to Sales margins. Great businesses. But this is where it ends.
2. Return on Assets ( EBIT to Total Assets ) is about 25 % for Intuit and Reckon as they do not have much goodwill on their balance sheets. With MYOB and its private equity history, most of the balance sheet is goodwill and hence a ROA of 8%.
3. If you have to consider market cap of these three businesses and likely returns to the new owners then expected returns will be:
MYOB 4.2 % at a $3.50 price
Intuit 4.6 %
Reckon 8.7 %
Xero no profit and a market cap of $3b. ( Amazing, Reckon has sales of about $100m and market cap of $210m, Xero has sales of $100m and market cap of $3b. Of course potential growth accounts for the difference. A high price for growth indeed. )
Summary
MYOB in the price range of $3 to $4 is totally over priced when compared with Intuit and Reckon.
MYOB at about $2.80 may be OK for a Stag.
One strong point is Bain is retaining its holding. Very similar to Healthscope private equity holding a large chunk post IPO. I read this as positive.
There are a number of other positive subjective issues that can be raised. Right sector etc etc.
In the market place Xero is much preferred and MYOB almost despised by some users.
Conclusion
This is a dangerous IPO to go into if you are looking for a stag. ( However, will not surprise me if it does stag ! )
As always, interested in everyones views on this one.
