EPS enhancing purchases of minority stakes
Earlier today, Blancco announced that it had lifted its stake in its Japanese JV (FY19 PAT +£1.2m) from 51% to 80% by issuing 813,253 new shares at 132.8p (or £1.08m) to its local ‘mobile reseller / ITAD’ partner Aucnet (Ticker: 3964, Tokyo Stock Exchange, £271m market cap).Here Aucnet is 44.3% owned by Flex Corporation (Singapore based contract electronics manufacturer), and will continue to act as an important route to market in Japan, Asia and other parts of the world, retaining its 20% stake in the JV.
Strategically the acquisition is important because it enables Blancco take full operational control, include the subsidiary within its transfer pricing policy, and leverage the JV’s cash (previously locked) across the wider organisation. Not only facilitating the x-fertilisation of innovative new ideas (eg mobile & enterprise) and best practice, but also simplifying the whole corporate structure and allowing new products to be scaled far more rapidly. A ‘Win-Win’ for both parties.
Elsewhere, Blancco has also mopped up the 30% stake that it did not already own in its other APAC JV (FY19 PAT -£0.5m), from both Aucnet (for $1 cash) and Alan Puah (41,686 BLTG shares at 155p, or £64.6k).
Together, we calculate the transactions will be immediately EPS enhancing – now 4.1p for FY20 vs 3.8p B4 - and deliver further strategic benefits overtime. Plus, at a combined price of £1.265m, the acquisitions represent an undemanding 5.78x FY19 PER. Our valuation ticks up from 175p to 180p/share.
Blancco Technology Group provides data erasure software. Co.'s segments are: Erasure, which enables customers to erase and repurpose IT devices with certified software; and Diagnostics, which provides diagnostics of smartphones and tablets, as well as new diagnostics tools. The erasure division focuses on development and delivery of solutions, includes: Blancco, a provider of data erasure software; SafeIT, which involved in cloud and networked data erasure; and Tabernus, which provides software erasure products. The diagnostics division consists of the Mobile Diagnostics business, comprising Xcaliber Technologies, a smartphone diagnostics software business and its SmartChk solution.
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