Class business model, page-4

Looking at the prices paid for the acquisitions


Class bought NowInfinity at the same multiple it itself was operating on, so no opportunity for multiple expansion. The other 2 have some opportunity for multiple expansion. Unlike most rollup strategies that buy business on a price of 3 or 4 times EBITDA.

Class strategy is very dependent on cross selling to the expanded client base.

Class has the problem that updating / upgrading software to remain competitive is extremely expensive and yet Class SMSF, Class Portfolio and Class Engine have very low growth but account for 92% of revenue for FY2020. That will change to 75% FY2021 with a full year of NowInfinity, 8 months for Smartcorp and 3 months for Reckon and 65% for FY2022.

Also growth in Class Trust is critical, spoke to company and while they would / could not give me a definitive ARPU indicated it would be closer to SMSF than Portfolio. How quickly account numbers will grow is a guess but it needs to get to 20,000 X $200 = $6,000,000 before it becomes meaningful.

Consensus target price from 3 analysts is $2.38.

Might wait until it approaches consensus then sell.

Cheers