Pureprofile Ltd: Data Analytics on a Pure Scale
Pureprofile Ltd
Data analytics on a pure scale
Pureprofile Ltd is a data analytics, consumer insights and media company underpinned by proprietary technology, servicing business decision makers in brands and media companies as well as market researchers. The company has an established position with its 500+ clients and has captured through its panel fully declared, deep consumer profiles, first- party data and insights. Pureprofile has been through a substantial restructure over the past two years, culminating in the recently announced recapitalisation plan and debt to equity conversion for all but $3m of its outstanding borrowings. This positions the company to both leverage its data and insights business into higher margin opportunities as well as explore small acquisitions to expand its panel. Our base case DCF valuation of $0.046/share, (based on a Weighted Average Cost of Capital or WACC of 14.5% and terminal growth rate of 2.2%), implies a compound growth of 25.3% in 10-year free cashflows, in line with a sector that is forecast to generate from 20%-30% CAGR over the same period.
Business model
Pureprofile generates its revenue from providing data analytics and consumer insights derived from its actively managed panels of digital members accessed through its proprietary technology platform. Pureprofile also has a media arm which executes advertising campaigns for clients. In a world where privacy is increasingly valued, consumer insights and profiles generated through online panels allow businesses to gain the ability to segment, target and engage with their audiences without consumer privacy issues. In exchange, consumers are directly financially rewarded for their information and responses and indirectly through more relevant content and personalised experiences.
Return to operating profitability, balance sheet restructure
The company returned to operating profitability in FY20, having been through a substantial restructure of the business over the course of the last two financial years, divestment of non-performing assets and a refocus on its core data and insights business in Australia, the UK and US. Pureprofile reported EBITDA from continuing operations and excluding one- time items of $1.6m in FY20, a turnaround from the adjusted loss of $1.3m in FY19. The company has subsequently turned its attention to the elephant in the room, its debt burden, and has announced an 8-for-one non-renounceable entitlements offer a $0.02/share to raise $3.5m in new equity together with conversion of a large part of the $25.6m debt owed to Lucerne Composite Fund into equity. This will leave Pureprofile with a debt facility of $3m ongoing and sufficient working capital to execute its growth plans.
Base case valuation is $0.046/share post entitlements offer
We have used the discounted cashflow methodology to value Pureprofile using a WACC of 14.5% (beta 2.0, terminal growth rate of 2.2%) and this derives an equity value, post entitlements offer and debt restructure of $48.9m or $0.046/share. Our terminal value is $0.022/share within this valuation. As a sense check, this implies an FY21 EV/Sales multiple of 1.7x and FY21 EV/EBITDA multiple of 16.2x (based on our forecasts) which is still below the group of comparable domestic and international peers that we have identified.
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