Infomedia delivers on acquisition strategy
Infomedia Ltd (ASX:IFM) was last week’s Stock of the Week, and on Friday Finfeed suggested that acquisitions could be on the cards in 2019, and that this was a potential share price driver.
On Monday morning prior to the market opening, Infomedia announced that it had entered into an agreement to acquire Australian based, automotive data solutions company Nidasu.
With Infomedia being a technology services developer and supplier of Electronic Parts Catalogue (EPC) and service systems to the global automotive industry, Nidasu is a perfect fit.
The company is the leading provider of critical automotive data analytics to automakers and dealerships throughout Australia and the Asia Pacific.
The monthly subscription business model is highly complementary to Infomedia’s software as a service (SaaS) recurring revenue business.
Nidasu’s data analytics and reporting solution is well established and supported by many of Infomedia’s existing customers, as well as new automakers, in the Asia Pacific region.
Assists in building Infomedia’s data strategy
The acquisition is a key step in building Infomedia’s data strategy and presents a significant opportunity to access new customers and leverage the company’s data business globally.
Infomedia’s chief executive Jonathan Rubinsztein highlighted the benefits for its clients in saying, “The acquisition complements Infomedia’s existing core business.
“By combining solutions, we offer significantly more value to our customers as we support them to sell more original parts, deliver excellent customer service and retain loyalty to the automotive manufacturer brand.”
Immediately earnings accretive
As we mentioned last week, Infomedia was in a particularly strong cash position, allowing it to make acquisitions without having to conduct earnings per share dilutive capital raisings.
Rubinsztein confirmed this morning that the acquisition is expected to be accretive to both revenue and earnings immediately.
While its contribution to the 2019 financial year result will be nominal, the addition of full-year revenues in fiscal 2020 will be material, particularly given the synergies between the two businesses that will be realised as integration occurs over the next few months.
As indicated, the transaction will be funded from Infomedia’s existing cash reserves and is expected to be completed early in 2019.
Management reaffirmed that it is confident regarding Infomedia’s outlook for the fiscal 2019 due to an increase in recurring revenue from contracts won in prior periods and disciplined cost management.
Infomedia showed signs of a share price rally last week and this morning’s news looks set to see its shares trade higher on Monday morning after opening just below $1.20 with the next reasonable size line of stock at $1.25.