New Zealand Professional Investment Services Firm

Forsyth Barr

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<h2>Pushpay Holdings<br>Resi Media Acquisition&nbsp;— The Search for the Holy Grail continues...</h2>
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<p><strong>NEUTRAL</strong></p>
<p>Pushpay (PPH) has entered into an agreement to acquire US media and streaming provider Resi Media LLC for US$150m, part funded by a debt facility of US$90m. As with previous transactions, PPH's objective is to acquire market share in order to generate cross-sell synergies and increase the number of churches transacting on its processing platform. We believe there is a reasonable growth opportunity in the media and streaming space, with a large majority of large US churches deploying a virtual solution during lockdown, and many churches continuing to provide an online service for congregations members in addition to the return of physical church. The success (or not) of the transaction is dependent on PPH's ability to execute on cross-selling the PPH processing platform to Resi Media's customers. We believe this will be a challenge given the agressive sales approach PPH has taken in the past, with many churches having likely been approached previously. We believe the stock will be range bound going forward and with a fairly priced valuation we retain our NEUTRAL rating.&nbsp;</p>
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<h3>What's changed?&nbsp;</h3>
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<li><strong>Earnings</strong>:&nbsp;Consolidated FY22 EBITDA decreased to US$66m (includes one-off transaction costs of US$2.2m) from US$68m</li>
<li><strong>Target price</strong>:&nbsp;Increased to NZ$1.85&nbsp;from NZ$1.74 (+6%) on consolidating companies and updating 1) peer multiples and 2) FX</li>
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<h3>Acquisition of Resi Media LLC</h3>
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<p>Whilst in early years Resi Media is likely to be dilutive at an NPAT level, we give benefit of the doubt that FY21 increased staff costs incurred can lead to growth of the business. We forecast Resi Media revenue of US$22m/24m/26m at FY22/23/24, estimating that Resi Media can reach a terminal EBITDA margin of 20% and that PPH can generate modest revenue synergies in the next three years.&nbsp;</p>
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<h3>Positive takeaways</h3>
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<p>We are encouraged that the acquisition of Resi Media opens up the total addressable market (TAM) to previously inaccessible sectors and diversifies its customer base towards the corporate space which PPH has not had access to previously. We also believe that streaming and media services should experience continued demand as many churches look to continue providing online content.</p>
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<h3>Catholic ambitions under pressure</h3>
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<p>Following&nbsp;PPH's&nbsp;recent commentary around the Catholic segment we expected PPH to target an acquisition in the Catholic sector such as&nbsp;ParishSoft. We question whether the shift towards a new vertical is suggestive that&nbsp;PPH's&nbsp;advancement in the Catholic space has not materialised as planned. We estimate PPH to have a remaining funding facility of ~US$210m for further acquisitions.</p>
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Pushpay Holdings Resi Media Acquisition&nbsp;— The Search for the Holy Grail continues...

NEUTRAL
Pushpay (PPH) has entered into an agreement to acquire US media and streaming provider Resi Media LLC for US$150m, part funded by a debt facility of US$90m. As with previous transactions, PPH's objective is to acquire market share in order to generate cross-sell synergies and increase the number of churches transacting on its processing platform. We believe there is a reasonable growth opportunity in the media and streaming space, with a large majority of large US churches deploying a virtual solution during lockdown, and many churches continuing to provide an online service for congregations members in addition to the return of physical church. The success (or not) of the transaction is dependent on PPH's ability to execute on cross-selling the PPH processing platform to Resi Media's customers. We believe this will be a challenge given the agressive sales approach PPH has taken in the past, with many churches having likely been approached previously. We believe the stock will be range bound going forward and with a fairly priced valuation we retain our NEUTRAL rating.&nbsp;


What's changed?&nbsp;



Earnings:&nbsp;Consolidated FY22 EBITDA decreased to US$66m (includes one-off transaction costs of US$2.2m) from US$68m
Target price:&nbsp;Increased to NZ$1.85&nbsp;from NZ$1.74 (+6%) on consolidating companies and updating 1) peer multiples and 2) FX



Acquisition of Resi Media LLC


Whilst in early years Resi Media is likely to be dilutive at an NPAT level, we give benefit of the doubt that FY21 increased staff costs incurred can lead to growth of the business. We forecast Resi Media revenue of US$22m/24m/26m at FY22/23/24, estimating that Resi Media can reach a terminal EBITDA margin of 20% and that PPH can generate modest revenue synergies in the next three years.&nbsp;


Positive takeaways


We are encouraged that the acquisition of Resi Media opens up the total addressable market (TAM) to previously inaccessible sectors and diversifies its customer base towards the corporate space which PPH has not had access to previously. We also believe that streaming and media services should experience continued demand as many churches look to continue providing online content.


Catholic ambitions under pressure


Following&nbsp;PPH's&nbsp;recent commentary around the Catholic segment we expected PPH to target an acquisition in the Catholic sector such as&nbsp;ParishSoft. We question whether the shift towards a new vertical is suggestive that&nbsp;PPH's&nbsp;advancement in the Catholic space has not materialised as planned. We estimate PPH to have a remaining funding facility of ~US$210m for further acquisitions.


Pushpay Holdings: Resi Media Acquisition — The Search for the Holy Grail Continues...