Ansarada: Securing business critical communications

About the author:

Nick Harris
Author name:
By Nick Harris
Job title:
Senior Analyst
Date posted:
17 February 2021, 12:30 PM
Sectors Covered:
Telecommunications, Technology

  • Ansarada (ASX:AND) merged with thedocyard (TDY) in late 2020 to bring TDY’s document/ workflow management software into the fold and create a holistic solution. The merged entity (AND) is a SaaS based information governance platform.
  • Its rebranded portfolio consists of: Deals (virtual data rooms for M&A, capital raisings etc); Governance (compliance and audits); Board (secure digital board management); and Tenders (governance and probity for high value events).
  • Ansarada was founded in 2005 and has an impressive win rate/customer advocacy in a large and rapidly growing market. The global governance, risk and compliance software market relevant to AND is estimated at ~A$10bn and growing at ~14% CAGR (MarketsandMarkets). Despite being highly rated, AND’s market share is <1% which leaves ample runway for long-term growth.
  • We initiate coverage with an Add rating (login to view target price).

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Company overview 

AND helps facilitate access to business-critical information in a safe manner, using proprietary technology, processes and workflow developed from years of real-world experience. Its security measures and Artificial Intelligence (AI) (using years of big data) deliver safe and efficient communication which helps customers maximise the value of their own data.

Three key benefits for AND’s customers are:

  1. Risk management (internal and external data life cycles and protection)
  2. Efficiency and productivity (workflows facilitating collaboration)
  3. Accurate decision making (using AI and audit trails to help improve corporate and government decision making)

Examples of the AND platform include:

  1. Major banks running M&A (e.g. NAB acquiring 86 400)
  2. Board communication (secure digital Board management)
  3. Multi-billion-dollar tender processes

In these examples the safe and efficient flow of data is one of the main reasons AND was selected to assist with the flow of business-critical information.

Highlights

AND has a reputation for quality (>50% win rate). Significant risk of data leakage means reputation matters and AND’s customer advocacy is critical. The many AND customers we independently surveyed all had positive things to say.

AND has ~85% transitioned from one-off/ transactional to a SaaS/ repeatable revenue basis. This means, pandemics aside, greater predictability of revenue and earnings. Directors, founders, and senior management own ~20% so have meaningful skin in the game for shareholder alignment.

Risks

AND is close to but not yet a self-funding business. Its immediate target is to reduce monthly costs to less than $3m(1). We think monthly revenue needs to exceed $4m for it to generate positive free cash flow. All things being equal, this is likely within ~36 months and the $20m of net cash (at December 2020) should be sufficient to reach this.

As a SaaS/Tech company AND trades on a revenue multiple that is highly subjective (peers range from 2-8x) and this valuation methodology requires interest rates to remain low.

Investment view – Initiate with an Add rating

We initiate coverage on AND with an Add rating and target price based on a blended DCF and EV/Revenue basis (login to view target price).

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Disclaimer: The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.

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