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Equity Bottom-Up

Frontier Digital Ventures / Equity Bottom-Up

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<h2>Frontier Digital Ventures Ltd</h2>
<h3>Benefitting from the network effect</h3>
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<p>Frontier Digital Ventures Ltd (ASX:FDV) owns a portfolio of online marketplace companies in fast-growing, emerging economies and regions. Headquartered in Malaysia, the company owns stakes in 16 portfolio companies operating across 21 markets in Latin America, developing Asia, and the Middle East and North Africa (MENA). Frontier Digital Ventures listed on the ASX in August 2016, raising $30m at $0.50/share to give a market capitalisation at listing of $108m. At that time the company owned from 30% to 76% economic interest in 15 companies, five of which it has subsequently exited. In CY2021, the company underwent a legal restructure along geographical lines to improve operational efficiencies, increase organic and inorganic growth opportunities and enhanced management culture and accountability. The businesses are now organised as FDV LATAM, FDV Asia and FDV MENA. FDV ended the half year with $30.8m cash in hand, having last raised capital in December 2021 via a $35m institutional placement at $1.50/share, and a retail purchase plan which raised an additional $18.9m. The capital raising allowed the company to acquire the remaining 73.7% it did not own in E24, giving it control of the leading general marketplace in Central America. Of its 16 portfolio companies, all are leading online marketplaces in their category. FDV is focused on leveraging the market leadership positions of the marketplaces to help facilitate transactions through the portals to unlock their long-term earnings potential.</p>
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<h3>Business model</h3>
<p>Frontier Digital Ventures has taken a portfolio approach to investing in early-stage online marketplace opportunities in emerging economies. The company holds stakes in 16 operating companies, nine of which are focused on real estate, four on auto, and three on general classifieds which also include real estate and auto verticals. The company owns from 30% to 100% of these companies. FDV reports revenue and earnings based on its economic interest but provides a look-through on 100% basis to allow investors to see how the group is performing on a like-for-like basis. The group seeks to identify early-stage marketplace businesses and acquire economic interests in market leaders in property, auto and general classifieds, and provide patient capital, operational guidance and strategic oversight to the companies as they scale. Usually, FDV takes an initial, non-controlling interest in its portfolio companies to mitigate risk but will often increase its interest as the companies mature and FDV seeks to lock in future growth potential from its investments. In CY2021, FDV moved to 100% ownership of four of its more mature businesses and majority ownership of another.</p>
<h3>Group EBITDA profit delivered in H1 CY22</h3>
<p>In H1 FY22, nine of the operating companies were EBITDA positive compared with six the same time a year ago. As a group, FDV delivered a H1 FY22 EBITDA profit of $1.835m, a $2.23m turnaround on a year ago. Portfolio revenues, on a 100% share basis, were $75.2m in H1 FY22, up 49.5% on the previous corresponding period, with Asia making the biggest contribution with $48.3m in revenue. On an economic interest basis, portfolio revenues were $41.7m, an increase of 72% on the pcp.</p>
<h3>In a unique position in the Australian market</h3>
<p>The portfolio approach taken by Frontier Digital Ventures provides unique exposure to marketplace businesses in fast growing emerging markets positions. Initially the Company operated more as an investment company however as it has increased ownership and control over its portfolio companies, it is transitioning towards an operator of marketplaces. On the ASX, online marketplace companies such as REA Group (ASX:REA), Carsales (ASX:CAR) or Domain Group (ASX:DMG) serve as comparables. While REA is larger in market capitalisation, its earnings history provides a useful example of how these businesses scale.</p>
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Frontier Digital Ventures Ltd
Benefitting from the network effect




Frontier Digital Ventures Ltd (ASX:FDV) owns a portfolio of online marketplace companies in fast-growing, emerging economies and regions. Headquartered in Malaysia, the company owns stakes in 16 portfolio companies operating across 21 markets in Latin America, developing Asia, and the Middle East and North Africa (MENA). Frontier Digital Ventures listed on the ASX in August 2016, raising $30m at $0.50/share to give a market capitalisation at listing of $108m. At that time the company owned from 30% to 76% economic interest in 15 companies, five of which it has subsequently exited. In CY2021, the company underwent a legal restructure along geographical lines to improve operational efficiencies, increase organic and inorganic growth opportunities and enhanced management culture and accountability. The businesses are now organised as FDV LATAM, FDV Asia and FDV MENA. FDV ended the half year with $30.8m cash in hand, having last raised capital in December 2021 via a $35m institutional placement at $1.50/share, and a retail purchase plan which raised an additional $18.9m. The capital raising allowed the company to acquire the remaining 73.7% it did not own in E24, giving it control of the leading general marketplace in Central America. Of its 16 portfolio companies, all are leading online marketplaces in their category. FDV is focused on leveraging the market leadership positions of the marketplaces to help facilitate transactions through the portals to unlock their long-term earnings potential.




Business model
Frontier Digital Ventures has taken a portfolio approach to investing in early-stage online marketplace opportunities in emerging economies. The company holds stakes in 16 operating companies, nine of which are focused on real estate, four on auto, and three on general classifieds which also include real estate and auto verticals. The company owns from 30% to 100% of these companies. FDV reports revenue and earnings based on its economic interest but provides a look-through on 100% basis to allow investors to see how the group is performing on a like-for-like basis. The group seeks to identify early-stage marketplace businesses and acquire economic interests in market leaders in property, auto and general classifieds, and provide patient capital, operational guidance and strategic oversight to the companies as they scale. Usually, FDV takes an initial, non-controlling interest in its portfolio companies to mitigate risk but will often increase its interest as the companies mature and FDV seeks to lock in future growth potential from its investments. In CY2021, FDV moved to 100% ownership of four of its more mature businesses and majority ownership of another.
Group EBITDA profit delivered in H1 CY22
In H1 FY22, nine of the operating companies were EBITDA positive compared with six the same time a year ago. As a group, FDV delivered a H1 FY22 EBITDA profit of $1.835m, a $2.23m turnaround on a year ago. Portfolio revenues, on a 100% share basis, were $75.2m in H1 FY22, up 49.5% on the previous corresponding period, with Asia making the biggest contribution with $48.3m in revenue. On an economic interest basis, portfolio revenues were $41.7m, an increase of 72% on the pcp.
In a unique position in the Australian market
The portfolio approach taken by Frontier Digital Ventures provides unique exposure to marketplace businesses in fast growing emerging markets positions. Initially the Company operated more as an investment company however as it has increased ownership and control over its portfolio companies, it is transitioning towards an operator of marketplaces. On the ASX, online marketplace companies such as REA Group (ASX:REA), Carsales (ASX:CAR) or Domain Group (ASX:DMG) serve as comparables. While REA is larger in market capitalisation, its earnings history provides a useful example of how these businesses scale.













Frontier Digital Ventures Ltd - Benefitting from the Network Effect

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<p>Back on the 30 October 2020, <a href="https://www.smartkarma.com/entities/icar-asia-ltd" target="_blank" data-smartkarma-citation="entities:17682:1" rel="noopener">iCar Asia Ltd (ICQ AU)</a>, owner and operator of automotive portals in Malaysia, Indonesia, and Thailand, <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02301823-3A554168?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> it had received a non-binding proposal from China-based <a href="https://www.smartkarma.com/entities/autohome-inc" target="_blank" data-smartkarma-citation="entities:33492:1" rel="noopener">Autohome (2518 HK)</a>, another auto internet platform, to acquire 100% of iCar's shares for A$0.50/share by way of a Scheme of Arrangement.</p>
<p>A trading update on the <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02347131-3A562420?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">26 February</a> said discussions were still ongoing regarding Autohome's proposal, with similar wording in the <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02369968-3A566377?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">30 April</a> update, and the 2020 annual report (<a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02370430-3A566432?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">page 34</a>).</p>
<h3>The New News</h3>
<p>iCar has now <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02394670-3A570637?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> it has received a non-binding proposal from privately-held Carsome Group to acquire 100% of iCar's shares for A$0.55/share by way of a Scheme.</p>
<p>Separately Malaysian-based Carsome has entered into an agreement with Catcha Group, iCar's largest shareholder, to acquire 19.9% of shares out in iCar via the issuance of shares in Carsome. That side agreement <em>and</em> the proposal are conditional on ASIC relief.</p>
<p>Provided the agreement completes, Carsome and Catcha will jointly acquire the remaining shares not owned in iCar.</p>
<p>This agreement/proposal appears an initial step towards listing Carsome/Catcha. </p>
<p>The announcement also says discussions remain ongoing with Autohome. </p>
<p>More below the fold. </p>

Back on the 30 October 2020, iCar Asia Ltd (ICQ AU), owner and operator of automotive portals in Malaysia, Indonesia, and Thailand, announced it had received a non-binding proposal from China-based Autohome (2518 HK), another auto internet platform, to acquire 100% of iCar's shares for A$0.50/share by way of a Scheme of Arrangement.
A trading update on the 26 February said discussions were still ongoing regarding Autohome's proposal, with similar wording in the 30 April update, and the 2020 annual report (page 34).
The New News
iCar has now announced it has received a non-binding proposal from privately-held Carsome Group to acquire 100% of iCar's shares for A$0.55/share by way of a Scheme.
Separately Malaysian-based Carsome has entered into an agreement with Catcha Group, iCar's largest shareholder, to acquire 19.9% of shares out in iCar via the issuance of shares in Carsome. That side agreement and the proposal are conditional on ASIC relief.
Provided the agreement completes, Carsome and Catcha will jointly acquire the remaining shares not owned in iCar.
This agreement/proposal appears an initial step towards listing Carsome/Catcha. 
The announcement also says discussions remain ongoing with Autohome. 
More below the fold. 

Australia

Frontier Digital Ventures Ltd  is focused on investing in developing online classifieds businesses in underdeveloped, emerging countries or regions. The Company invest in companies that operate in the digital automotive, property and general classifieds. Frontier Digital Ventures is based in Australia.

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Frontier Digital Ventures (FDV AU)

Frontier Digital Ventures Ltd - Benefitting from the Network Effect

Frontier Digital Ventures Ltd Benefitting from the network effect Frontier Digital Ventures Ltd (ASX:FDV) owns a portfolio of online...

Research as a Service (RaaS)

ICar (ICQ AU): Carsome & Catcha Carpool

This looks like a knock-out bid. I suspect it is trading wide to terms - 25% gross spread - given the downside to a deal break, and the low...

David Blennerhassett

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