Ansarada is one of the cheapest tech stocks on the ASX

Ansarada (AND) provides virtual data room software to large corporates and advisors (accountants, lawyers, investment bankers) in order to facilitate M&A/capital raising transactions. Its software solution is one of two used in Australia - the other competitor being Intralinks. As a software solution it has an incredibly high gross margin at 92% and is modestly positive at the EBITDA line.

What is the opportunity?
A virtual data room is basically an online secure portal to store sensitive documents for a transaction (eg. staff numbers & salaries). Bidders can see the documents uploaded to the room and do their necessary due diligence before committing to a deal. Currently, the M&A activity is at levels not seen for many years due to low rates and increasing investor confidence. Unsurprisingly, AND is benefiting from the current M&A cycle and has materially accelerated its customer base. At ~2x sales, AND is arguably one of the cheapest technology stocks on the ASX, particularly since operating momentum is solid (user growth is tracking at ~25% from FY20). Valuation is compelling and management incentives are in place with 10m options at a strike price of $2.15 - clearly there is an aligned interest to improve the share price.

Why has the share price done nothing?
The company listed on the ASX at $1.48 and has since run down to $1.13. I think the reasons for this are 1) stock recently came out of escrow in March creating selling pressure 2) the story has not been well communicated to investors - it is still under the radar.

What is the investment thesis?
User growth and increasing revenues per user, should facilitate revenue growth, catalysing a re-rate from ~2x sales to >4x sales.
In the below chart you can see that user growth has accelerated due to M&A activity in 2021, however unit revenues are still struggling.
In the past, unit revenues were ~$17k per user but have fallen as the business shifted towards a SAAS pricing model. This is probably true, but it is also true that the space is getting increasingly competitive. Nevertheless, the thinking is that you can get strong user growth and a stabilisation/improvement in user unit revenues to deliver strong revenue growth. If this happens there is a strong chance of the company being re-rated to typical software multiples (4-10x sales).