Webcentral WCG

[aperitif]

Craaaazy stuff on the ASX at the moment

just announced the sale of the majority of its domains and hosting business. On close, it will have 25c per share of net cash (vs current share price of 25.5c). It will also retain a $20m equity stake in the domains and hosting business (valued at 6c per share)

https://x.com/therealdavey2/status/1717708399339856074?s=61&t=QMjOswjQ5R0IJMpn8JZ3ow

https://x.com/puppyeh1/status/1717728720306548818?s=61&t=QMjOswjQ5R0IJMpn8JZ3ow

[Jaa]

Guess the cash is being discounted for poor management over the years?

[aperitif]

Management purchased the domains business in 2020 and turned a circa $100mm profit from it over 3 years. So if they can replicate that ROI then $45mm (25c p/s) is quite exciting. They have mentioned dividends and buybacks…currently earning $4-5mm p.a sitting in the bank. So poor management??? No

Also to note, pro froma they expect the 5GN business to turn a $5mm profit so no value is being assigned to this. 5-10x multiple is fair value on my numbers.

[nztx]

Domainz in Nz was purchased & is part of the WebCentral group

Remember this site over 20 years ago & Domains were highly priced for .NZ Domains back then

It still appears to be the case even today:

https://www.domainz.net.nz/domain-names/

Almost $53 pa for most NZ extensions V $30 or so pa with 1st Domains

plus a reactivation fee for renewal after expiry with Domainz in there now too :)

Fortunately ran away elsewhere before it became Australianised ;)

[aperitif]

Oakley Capital are an impressive outfit (33%)along with hosting entrepreneurs Jochen Berger & Tom Strohe (33%).

https://www.oakleycapital.com/our-companies/intergenia - 36% IRR…

https://www.oakleycapital.com/news-and-insights/oakley-capital-invests-in-domains-hosting-provider-webcentral

Anyway, AGM tomorrow. Expecting news on the sale

https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02724228-2A1480364?access_token=83ff96335c2d45a094df02a206a 39ff4

[aperitif]

“We are pleased to advise that completion of the transaction is expected to occur on the 20th of December with long-form debt facility agreements executed earlier this week. Our equity partners have commenced the equity drawdown process which takes approximately 4 weeks after signing the debt facility documents. We are pleased to advise that all other completion requirements are progressing well, including the pre-sale restructure steps required before completion.
Now, let’s address some common questions from shareholders regarding the transaction.

1. What will be done with the net cash proceeds from the sale?
We can consider expanding our business on our terms, thanks to this highly advantageous deal. This is enhanced by the fact that potential acquisitions are becoming more affordable in our sector due to various macro-environment factors. A strong cash position enables us to negotiate better pricing for services and provides flexibility
in acquiring complementary businesses. In the short term, we’re interested in utilising spare infrastructure capacity for a potential uplift in EBITDA.
Other considerations include capital management options like share buybacks and dividends in the coming months, acknowledging the market’s desire for a clear narrative in what can be a complex space.

2. What types of businesses is the Company looking to purchase?
We are interested in hosting and cloud providers, including bare metal providers, as well as AI compute suppliers and managed service providers. We believe the Tech sector in Australia is undervalued and look forward to its growth in the years to come.
In conclusion, on behalf of the Board, I express gratitude for the support of our shareholders, customers, suppliers, and business partners. I also thank our Managing Director, staff, and executives for their outstanding achievements in FY23”

[aperitif]

https://www.livewiremarkets.com/wires/webcentral-a-fantastic-deal

[Rawz]

do these guys have a history of giving management generous options or something? just had 2min read on HC and got the sense this is a rinse and repeat sort of thing where shareholders dont really win?

[aperitif]

There are a few activists in this who have a keen eye on what they are going to do with the cash. Management will be very mindful of this.

I note the circa 23% of shareholders voted against the remuneration report. JD & team will have to be very selective with cash.