Stargroup completes Indue due diligence and flags a strong December quarter

By Trevor Hoey. Published at Oct 31, 2016, in Technology

Financial technology and ATM operator company, Stargroup (ASX: STL), announced on Monday morning that it had completed its due diligence in relation to the acquisition of Indue Limited’s Automatic Teller Machine (ATM), switching, settlement, processing, telecommunications and reseller business.

Importantly, STL has executed an agreement for a debt facility of up to $15 million to fund the $6.5 million cash acquisition, leaving the company with substantial head room to consider other opportunities which it anticipates will emerge in a consolidating industry.

Of further significance is the fact that the two groups have been able to successfully negotiate ongoing services between both parties, enabling additional value to current customers and other industry participants.

Financial backing for further acquisitions

In relation to the debt raising and management’s ongoing strategy, Chief Executive Todd Zani said, “The securing of the debt instrument on commercial terms not only provides certainty of completion of this acquisition to our shareholders, but the facility provided will also provide the capacity to fund other potential earnings per share accretive acquisitions that we may consider”.

In terms of the STL’s near to medium term strategy this should see the company accelerate its EFTPOS business in 2017.

This news follows the announcement of record results at the start of October which featured a 150% increase in quarterly year-on-year revenue and a 93% increase in EFTPOS revenue compared with the previous quarter.

Investors should note that past revenue trends are not necessarily indicative of future revenues. Investors considering this stock should seek independent financial advice.

The outstanding increase in ATM revenue experienced in particular over the last two years is highlighted below.

New products to drive medium to long-term growth

This trend should continue in 2017 supported by the release of new financial technology products and management has flagged the prospects of recording its twelfth consecutive record quarter of revenue after experiencing a record month in October which far exceeded budgeted results.

Guidance provided this morning is likely to spark investor interest given that it provides enhanced earnings visibility.

STL’s shares have retraced slightly after spiking more than 10% in response to its record September quarter result announced in October. This retracement could provide a useful entry point, however investors should be aware of the unpredictable nature of share price fluctuations.

As highlighted by Zani, the company has achieved strong growth without having yet released all of its products, including those being developed in collaboration with its technology partner West International AB. This should be the source of medium to long term growth for STL.

S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of Maven Capital Pty Ltd (AFSL No. 418504). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

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