We're not Amays-ed to hear of M&A interest

Press reports indicate that potential acquirers are eyeing off digital-first mobile telephone and energy retailer Amaysim (ASX code: AYS) - either to buy it all or to split mobile and energy.

The Australian says here that "private equity firm Anchorage Capital Partners is the latest group to kick the tyres on Amaysim, which has been under scrutiny from other buyout funds and even telco Optus". It goes on to add that "at least one group" is considering buying both Amaysim and the retail arm of Vocus.

Equitable Investors Dragonfly Fund owns shares in Amaysim and wrote about it as a likely M&A candidate in our last monthly update.

Here's what we wrote:

Amaysim (AYS) is deliberately investing in building out its customer base to put in the best position to negotiate supply terms but we think that at the same time it will be making itself more attractive to acquirers. AYS has just under one million mobile subscribers as well as 203,000 energy customers. 

Its market cap of $117m and $26m net debt is supported by EBITDA guided by the company to be in the range of $33m to $39m - implying that the enterprise value is 4.3x or lower and currently reflects ~ $120 per account. iSelect spent $118 per acquired customer in the 2019 financial year and in its Energy and Telco segment received revenue of $247 per sale from competitors of AYS - that tends to suggest that buying AYS would be excellent value for an industry player.

Note its market cap has nudged up to $123m at the time this post was written.

And we included this chart contrasting its Enterprise Value per subscriber and revenue per subscriber with what iSelect is paid per sale it generates for other telco and energy retailers:


We also wrote about Amaysim more generally as a positive contributor to the Dragonfly Fund in the month of October:

Mobile phone and energy provider Amaysim (AYS) was the other key positive performer for the month. It held an uneventful AGM and, having been one of the Fund’s worst performers a month earlier, appeared simply to be bouncing back on improved demand. An interview late in the month by Alan Kohler with AYS chairman Andrew Reitzer is an interesting read for those who can access this link. Mr Reitzer commented: “I think it’s a magnificent business, I think it’s greatly undervalued but people make up their own minds what the share price should be. It’s another two to three years journey until that valuation event is realised.”


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