Foster's Commentary

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    Talking Point
    19th February 2016
    Updater Inc. (UPD.ASX, $0.23, Mkt Cap $100M) – On track to become the dominant player in the home relocation industry – SPECULATIVE BUY


    Recent entrant to the ASX, specializing in home relocations
    • Updater (UPD) listed on the ASX in late 2015, following a successful $22m IPO at $0.20/CDI. The Company also completed a A$6m pre-IPO in September 2015.
    • In the 5 years prior to listing, the Company successfully developed proprietary technology and formed relationships to secure a leading position in the 'new mover' market in the US. The mover market is massive, with 17m households relocating p.a. in the US alone. The average American moves a staggering 10-15 times throughout their lifetime.
    • UPD's online platform provides movers with a seamless process to enable transferring of utilities, forwarding of mail, updating of accounts and the many other tedious tasks associated with relocation. The typical mover wastes around 10 hours reaching out inefficiently to individual businesses currently to update their records etc.
    • UPD has successfully partnered and integrated with hundreds of real estate companies in the US (from agencies to property management companies), who are the key contact point with new movers. The real estate companies offer the Updater platform (branded for the real estate agency, for example) to their clients as a value-added tool, in turn paying UPD an annual subscription fee. Movers pay nothing for the use of the service, however they must be invited by their real estate company to use the platform. Engagement is typically very high from the mover, given the platform is provided by a trusted source (i.e. their real estate agent).
    Growing market share, foundation built and time to scale
    • In our view, one of the key attractions to UPD is the 5 years spent building the tech and developing hundreds of relationships with real estate companies (and integrating with their back-end software systems, not an insignificant task). As a result, UPD has a highly defensible position. Since launching its integration platform in February 2015, the Company has impressively increased their market share of processed moves in the US from 0% to almost 3% in 11 months.
    • UPD's ambition is to reach a market share of 5% by end of CY2016, then unlock a massive revenue opportunity. That is, big corporates are currently spending an estimated US$50BN annually on archaic methods (e.g. store coupons via mail, TV advertising and internet) to target new movers, who typically make lucrative long-term spending decisions at the time of relocation. The biggest issue with existing practices is that they are not targeted and are received after the mover has already made these long-term spending decisions.
    • UPD's planned 'Business Product' will provide businesses with the opportunity to communicate with movers at the right time, in turn increasing ROI significantly. The Business Product is expected to further enhance the 'Mover Product' given the communication will be contextual and relevant to the specific mover. Our understanding is that many corporates have already expressed interest in paying to access the Updater platform.
    Big prize awaits for a market leader in a massive market
    • In our view, UPD is extremely well placed to become the dominant player in the new mover market, given the established technology and relationships in place, and growing market share. Following the recent IPO, UPD is very well funded with almost AUD$24m in cash.
    • We start our coverage of UPD with a Speculative Buy recommendation. As more detail is released in respect of the 'Business Product' and commercialization in 2017, we expect to conduct more detailed valuation analysis. We do however highlight that if the Company becomes the dominant player within the industry, the prize is a multi-billion dollar valuation (as has been seen historically with stories such as Carsales.com, REA Group, Seek.com.au, etc).
 
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