Infomedia Limited (ASX: IFM) rallied 4% shortly after it’s open on the ASX, following the release of positive full-year results. The company generated 16% revenue growth and continued to expand margins, resulting in a 25% lift in EPS. This fulfils a target for improving margins that management set at the start of the year, which pleased investors. 80% of the company’s revenue is outside of Australia, meaning that the stock’s earnings will get a boost from a falling Aussie dollar. An additional positive out of the result is that 95% of sales came from recurring revenue, highlighting the quality of the firm’s offering.
Infomedia operates in the software component of the automotive aftersales market and targets global market leadership in this space. These components make up 19% of the revenue mix of the automotive market and are a stable part of the sector. The relative attractiveness of the far larger new and used cars segment has led to market saturation of the space, along with the creation of higher barriers to entry. Infomedia capitalised on the relative unattractiveness of the sector in which it operates to develop a strong product network with an emerging competitive moat that is yet to fully develop.
The business operates across three main products, the Microcat suite, Superservice suite and Data insights suite. The Microcat suite is designed for component parts selling and can identify precise parts from the car’s VIN. This almost eliminates the chance of incorrect ordering of parts, a major advantage in the market. Superservice uses the same VIN based systems in the vehicle servicing market, which provides mechanics more clarity on the vehicle before the service, thus increasing pricing clarity.
The data insights suite helps carmakers and dealers enhance customer retention by combining data which they get form the global aftersales market, thus helping them reduce operational costs and enhance customer satisfaction. Nevertheless, with the company trading at 47 times earnings, it remains to be seen whether strong results can continue to support the valuation.
This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978) (“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).
This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.
ASR has no position in any of the stocks mentioned.