IVE Group Ltd (ASX:IGL)
IGL is Australia’s largest integrated marketing communications business with leading market positions across every sector in which the company operates. Over the past 20 years, IVE has been able to diversify operations, enabling cross-selling opportunities, which has resulted in more than 75% of customers purchasing products and services from multiple divisions.
Their flagship segment, print, has been in decline over the past two decades, and the resulting industry consolidation has allowed IVE to become the ONLY large-scale print producer in Australia. IVE’s unique market position gives them multiple advantages, including economies of scale, purchasing power, and pricing power.
Recently, the group provided revised underlying NPAT guidance for FY23 of $41m. When considering the non-operating items that form the underlying figure, there is a $3.9m anticipated after-tax loss from IVE’s e-Commerce platform, Lasoo. While this business currently consumes cash, management believes the business will ultimately be profitable, and as such should have some residual value. Separating this business from core operations, you’re essentially paying ~10x earnings for a business with a dominant market position, strong counter-cyclical features, multiple avenues for growth, and potential for margin expansion through synergies over the next few years.
Finally, if the market believes economic conditions will deteriorate and consumers cut back on spending, retailers will likely increase printed catalogue spend.