An announcement this morning of a takeover of another ASX listed stock, PYG - at a vary large premium (+174%) to yesterday's close price - immediately made me think of PPL given some of the similarities between the two companies:
Both companies:
1. are in the "technology" space
2. offer proprietary, unique and differentiated services
3. provide rather mission-critical inputs into the businesses of large enterprises, yet the cost of those inputs is very small compared to the total cost base of those large enterprise customers.
4. Are in good financial health, with Net Cash holdings
5. Had similar market values (between $45m to $50m) yesterday.
There are a few differences:
1. While both companies generate positive Operating Cash Flow, PPL generates FCF after investing in intangibles; PYG doesn't quite yet.
2. PPL has higher Revenues (PPL = $48m, PYG = $26m)
4. PPL has higher EBITDA (~$4m), while PYG is at EBITDA break-even)
So, companies similar-ish business models and market positioning, and valued similarly by the market (yesterday), but the difference is that PPL is financially more advanced than PYG.
And the other not-insignificant difference is that it has transpired that the management of some corporate entity think that PYG is worth 174% more than what equity market participants had been thinking it was worth.
Make of all that what you will.
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