Shares of Hansen Technologies Limited (ASX: HSN) are up more than 20% after announcing an exciting development.
Hansen Technologies is a global provider of billing software, customer information systems and data management systems to four industries: energy, water, telecommunications and pay TV. Hansen has more than 500 clients across the world and has been helping optimise their billing for more than 40 years.
Why Hansen Shares Are Going Crazy
Hansen has announced that it is acquiring Sigma Systems, a global provider of catalog-driven software products for telecommunications, media and high-tech companies. The software is used for creating, selling and delivering new digital products and services.
The acquisition price is CAD$157 million, or $166.2 million in Australian dollar terms. According to Hansen, this equates to a enterprise value/EBITDA acquisition multiple of 8.3x 2018’s ‘normalised EBITDA’.
In 2018 Sigma Systems generating CAD$73.1 million of revenue and CAD$18.8 million of EBITDA. The revenue split was 56% from the Americas, 29% from Europe, the Middle East and Africa (EMEA) and 15% from the Asia Pacific region.
Hansen is going to fund this acquisition entirely with new debt debt of $225 million.
In terms of Sigma System’s customer base it has some impressive clients. It has over 70 customers in over 40 countries including Telstra Corporation Ltd (ASX: TLS), Vodafone and Inmarsat. To service these customers Sigma has offices in Canada, the UK and India.
Hansen explained the reasoning for the acquisition for three different reasons.
First, the business is very high quality and it’s a global leader in its field with high profile clients.
Second, it expands Hansen’s scale and scope in the telco sector which Hansen views as important.
Third, it creates cross-selling opportunities for Hansen’s existing large utilities customer base to integrate the Catalog product into the energy product offerings and PayTV.
The deal is expected to add to profit per share (EPS) in FY20, excluding the effect of the amortisation of acquired intangibles.
Time to buy Hansen shares?
I feel that today’s excitement has already priced in quite a bit of the short term upside for Hansen, so there is no quick gain to be had.
The combined business sounds compelling, but I haven’t been impressed by Hansen’s organic growth in recent years (and today’s news is acquired growth) so I think there are better ASX shares to think about for growth, such as the rapid growth shares mentioned in the free report below.
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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).
At the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.