Investment Matters

Company news: Threat Protect

Revenue from Threat Protect’s monitoring services increased from $3.9m in H1 FY-18 to $6.3m in H1 FY-19.  This was driven by the acquisition of Security Alarm Monitoring Service (SAMS) in Mar-18, along with organic growth in the number of lines being monitoring.  Revenue for other parts of the business (guarding and security) was fairly flat half-on-half, as the company focuses on growing its monitoring operations.

EBITDA (earnings before interest, tax, depreciation and amortisation) was $660k, as compared to a $253k loss in the pcp.  This is while the company is absorbing integration costs associated with SAMS and the small acquisition of WA-based MSS in Aug-18.  This result clearly illustrates the scale benefits that the company is starting to achieve.

Threat Protect has also announced a major acquisition, for ~$35m.  It will acquire Onwatch, adding ~28,500 monitored accounts and improving the company’s geographic diversification (increasing exposure especially in Victoria and NSW).  It will be immediately earnings per share accretive, and will positively contribute to Threat Protect’s revenue and earnings from H2 FY-19.

In conjunction with the acquisition, Threat Protect has put in place a new funding package.  Its existing facility with Macquarie Bank will be repaid, along with a convertible note that First Samuel clients hold (will be converted to equity at 21cps).  Soliton Capital (a Hong-Kong based specialist investment firm) will provide a $36m note, with First Samuel providing another $8m of debt – to be used for working capital.  Finally, Threat Protect is conducting a capital raising – a 1 for 6 share offer at $0.25, to raise ~$5.4m.  Your Investment Team plans to take up these rights on your behalf.

The acquisition (and associated funding package) represents a significant step up in the size of Threat Protect.   Your Investment Team forecasts meaningful increases in earnings over coming years as this and previous acquisitions are bedded in (and the associated integration costs dissipate), and as scale benefits flow through to the profit line (margin increases).

IM threat Protect

- Fleur Graves