Appen Strategic Valuation, page-45

I have just discovered TLS is actually trading on a higher PE multiple than APX after the bloodbath today. TLS (23x) vs APX (22x using underlying NPAT). It would have been a joke to even think about it not so long ago that a national stagnated Telco is priced more expensively than a market-leading AI service company with solid earnings and net cash.

On a more interesting note, it is not too unimaginable to think TLS might actually make a move on APX? Lionbridge AI was also acquired by Canadian national Telco Telus and I think the strategic rationale would be similar. Telco with ample cash flows but lacks growth opportunities to acquire the target with a high growth trajectory and has new stories to tell the market. In this instance, it is actually gonna be EPS accretive (again not a joke) for TLS to acquire APX esp given they can borrow essentially at less than 5% interest rate. I think a lot of the core capabilities APX developed could be helpful to Telstra ventures too which invest in high growth companies

I know if I am the CEO of Telstra I would be calling the banks today to discuss it. The bonus is I think APX has a relatively fragmented register so it would largely come down just to the price tag.