Author: therawinformant

One of the simplest and potentially most effective ways of building your wealth is to invest with a long term view.

This is because buying and holding shares lets investors benefit fully from the power of compounding.

But which shares should you buy? I believe the three ASX shares listed below could generate strong returns for investors over the long term. Here’s why I would buy them today:

Altium Limited (ASX: ALU)

The first buy and hold option to look at is Altium. It is a printed circuit board (PCB) design software provider which I believe has significant potential. This is due to the growing demand for sophisticated electronic design automation software such as Altium Designer because of the Internet of Things boom. This year management is aiming to reach 50,000 software subscriptions. It then wants to double this to 100,000 by FY 2025. Given the quality of its product and favourable industry tailwinds, I believe Altium will achieve this.

Bubs Australia Ltd (ASX: BUB)

Another buy and hold option to consider is Bubs. It is a goat’s milk-focused infant formula and baby food company which has been growing at a strong rate over the last few years. Pleasingly, I believe this strong form can continue for some time to come. Especially given increasing demand in China and its supply agreements with Coles Group Ltd (ASX: COL) and Woolworths Group Ltd (ASX: WOW) supermarkets. Another positive is that it has recently expanded its offering into cow’s milk infant formula. Given the size of this side of the infant formula market, it could be a big contributor to its future growth.

Nearmap Ltd (ASX: NEA)

A final buy and hold option to consider is Nearmap. It is a leading aerial imagery technology and location data company that allows businesses to instantly access high resolution aerial imagery and integrated geospatial tools. Last month Nearmap revealed that it is on course to achieve annualised contract value of $103 million to $107 million in FY 2020. This is still only a fraction of the global aerial imagery market, which is estimated to be worth US$10.1 billion. I believe its quality offering, which is being boosted by the release of an AI product, puts the company in a position to capture a growing slice of this market over the next decade.

More reading

• ASX shares I’d buy if this decline is a second COVID-19 crash
• Tech shares! Should we even invest in anything else?
• Have $1,000? You should pick one of these 8 ASX shares
• How the A2 Milk and Bubs share prices have performed during the pandemic
• 2 ASX shares I’d buy if the ASX crashes again

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Altium, BUBS AUST FPO, and Nearmap Ltd. The Motley Fool Australia has recommended BUBS AUST FPO and Nearmap Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The S&P/ASX 200 Index (Index:^AXJO) is clawing its way back from the abyss, but any bounce could be an opportunity to sell shares that have just been hit by broker downgrades.

The top 200 benchmark is trading 1.7% lower in after lunch trade but that’s only around half of what it lost this morning.

The sharp sell-off was triggered by fears of a second wave of COVID-19 infections in the US and I think any pullback is an opportunity to buy as I don’t see the market returning to its March bear market low.

But not all popular stocks should be on your watchlist, not according to some leading brokers who just downgraded these two ASX shares to “sell”.

Paying more than full price

One that got its recommendation cut by Credit Suisse is JB Hi-Fi Limited (ASX: JBH). The broker lowered its rating on the electrical and white goods retailer to “underperform” from “neutral” today even after management’s positive trading update.

But Credit Suisse is urging investors to take the opportunity to take profit after JB Hi-Fi sales benefited from stay and work at home restrictions to curtail the pandemic.

While the retailer is seen as a quality stock given managements propensity to under promise and overdeliver, the broker pointed out that it’s trading on a significant premium to peers like Harvey Norman Holdings Limited (ASX: HVN) and its own historical multiples.

The broker also believes that FY21 earnings are “very likely” to be lower despite the tailwinds and it sees its sell recommendation on the stock as a relatively low risk call.

Credit Suisse’s 12-month price target on the stock is $34.52 a share.

Wings clipped

Meanwhile the Webjet Limited (ASX: WEB) share price crashed 6.8% ahead of the close to $3.90 after Morgan Stanley downgraded the stock to “underweight” from “equal weight”.

The broker made the cut as it pointed out six reasons why it preferred Corporate Travel Management Ltd (ASX: CTD) over the online travel agent.

For one, Corporate Travel looks to be better priced than Webjet based on market cap and enterprise value.

The corporate travel group’s cash burn is also lower than Webjet and its exposure to the collapse Virgin Australia airline is smaller.

Further, CTD’s earnings are expected to recovery quicker than Webjet’s as more of its bookings are for domestic travel.

Morgan Stanley also prefers CTD for its direct relationship with its business customers while Webjet is used more as a price comparison service.

Lastly, the broker thinks CTD is better placed to acquire a bargain. The group has access to capital and a long list of potential takeover targets.

Morgan Stanley’s price target on Webjet is $3.30 a share.

More reading

• What would I rather buy today: TPG or Telstra shares?
• Brokers name 3 ASX shares to buy right now
• Tech shares! Should we even invest in anything else?
• Keep a watch on these 3 ASX trends next week
• ASX 200 down 2.2%: Westpac tumbles, TPG reveals special dividend plans

Motley Fool contributor Brendon Lau owns shares of Webjet Ltd. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited and Webjet Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The TPG Telecom Ltd (ASX: TPM) share price has been an extraordinary performer in 2020 so far. TPG shares are up more than 23% year to date, compared with the S&P/ASX 200 Index (ASX: XJO) which is still down around 13% from where it started the year.

In contrast to TPG, the Telstra Corporation Ltd (ASX: TLS) share price is having a pretty average year. Telstra shares have more or less tracked the ASX 200 and are down around 11.5% year to date.

But despite the disparity in these 2 companies’ fortunes in 2020 so far (not to mention the excitement TPG has been generating of late), I would much rather buy Telstra shares today for a long-term buy.

Why TPG shares are outperforming in 2020

TPG shares have been benefiting from a perfect storm in their favour. Firstly, the long-proposed merger between TPG and Vodafone has been green-lit by the Federal Courts. This was despite the ACCC attempting to block the marriage on competition grounds.

The two companies are set to become one over the next few months, which will also involve a hefty special dividend and another spin-off of TPG’s Singapore operations.

Investors are liking what they see here, and have subsequently pushed up TPG shares over the last few months.

Why Telstra shares are a better bet

Despite all this exciting news, I’m still betting on Telstra as an investment. TPG is a well-run company with a great CEO and a great brand. However, I still don’t think it has the firepower to really compete with Telstra. Telstra already commands a significant pricing premium on its mobile data products in the current market. It is able to do so (in my view) due to the superiority of its network coverage.

Many people go with Telstra because other providers simply can’t offer the coverage that Telstra can.

Telstra has a very well-known brand which I think is superior to all of its competitors in attracting and keeping customers.

The company also offers more dividend potential that TPG. On current prices, Telstra shares come with a trailing yield of 5.05% (taking into account Telstra’s special nbn dividend payments).

In contrast, TPG shares are only offering a 0.61% trailing yield on current prices. Even if you threw in the prospect of a post-merger special dividend, Telstra is still more attractive to me.

I also expect Telstra to be the market leader in the new 5G technology. Since the Chinese giant Huawei was banned from operating 5G networks in Australia, TPG has fallen behind in the 5G race. Thus, I would still bet on Telstra’s heavy investment and brand power to carry it over the line first against TPG, Optus or any other competitor.

Foolish takeaway

TPG is a great company and one that has been especially lucrative to own in 2020. However, going forward  I think Telstra will make a better investment overall, and that’s why I would rather buy cheap Telstra shares today than TPG shares despite them being near their 52-week highs.

More reading

• The latest ASX shares to be hit by broker downgrades to “sell” today
• Tech shares! Should we even invest in anything else?
• Keep a watch on these 3 ASX trends next week
• ASX 200 down 2.2%: Westpac tumbles, TPG reveals special dividend plans
• Estia Health share price tumbles after being cut from the ASX 200

Motley Fool contributor Sebastian Bowen owns shares of Telstra Limited. The Motley Fool Australia owns shares of and has recommended Telstra Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Holista CollTech Limited (ASX: HCT) share price is bucking the wider market sell-off today after the company announced the acquisition of an advanced skin ingredient.

Holista CollTech is a natural wellness company that operates across 3 main divisions: dietary supplements and personal care, food ingredients, and ovine (sheep) collagen.

In the recent COVID-19 environment, the company’s personal care division has been in the spotlight.

Holista has a global collaboration with Path-Away, a plant-based solution that has been proven to kill a broad spectrum of microbes. The solution is an active ingredient in Holista’s proprietary sanitiser, NatShield, which is also being developed as a nasal balm.

Back in April, Holista announced that Path-Away had been tested in the UK and was found to be more than 99.99% effective against the feline coronavirus, a surrogate of COVID-19. 

Why is the Holista CollTech share price climbing today?

This morning, Holista announced it has fully acquired the technology of Protectene from Global Infection Control Consultants (GICC), the same company that develops Path-Away.

Protectene is a skin stabiliser for cosmetic applications that maintains all the basic features of Path-Away. However, it is a special formulation that reportedly lasts longer and is more gentle on the skin.

Additionally, Protectene has been developed to sanitise the human skin, including nasal membranes. This makes it relevant for Holista’s nasal balm which is currently under development.

As such, Protectene will be included in all future formulations of NatShield for personal use, including the nasal sanitising balm.

Under the agreement, Holista will now own the trademark Protectene and all the rights to use it, including the domains. In terms of production, however, Protectene will still be manufactured by GICC at its exclusive facility in South Carolina.

As part of the deal, Holista intends to grant GICC two million options with an exercise price of 20 cents each, expiring 31 December 2020. However, this is subject to shareholder approval at Holista’s upcoming AGM which is likely to be held in the last week of July.

Management commentary

Speaking to the differences between Path-Away and Protectene, Dr Arthur Martin, president of GICC, said:

“While Path-Away has applications for a myriad of uses – human, veterinary, agricultural and environmental – and spans many industries, Protectene is designed specifically for human skin, making it ideal for those with sensitive skin or part of the human body such as nasal membranes.”

And as for Holista’s plans for Protectene, CEO Dr Rajen Manicka said:

“We intend to offer ProtecteneTM as a more specialised ingredient that uses it exclusively for the NatShieldTM brand . We are confident that Protectene will be a unique differentiator.” 

At the time of writing, the Holista CollTech share price has jumped 3.70% to 14 cents per share. This rise takes the company’s current market capitalisation to around $38 million, while year-to-date gains are sitting at 77.22%.

More reading

• 2 outstanding ASX shares to buy after the market crash
• Brokers name 3 ASX shares to buy right now
• Orcoda share price rockets 40% on long-term contract win
• Should you buy CSL shares before it’s too late?
• Westpac share price lower on AUSTRAC update

Motley Fool contributor Cathryn Goh has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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While the market weakness we have experienced this week is disappointing, I believe it is an opportunity for investors to buy shares at more attractive prices.

Two ASX shares which have pulled back notably this week are listed below. Here’s why I would buy them:

Bravura Solutions Ltd (ASX: BVS)

The Bravura Solutions share price has fallen over 8% this week. This means its shares are now trading almost 27% below their 52-week high. I think this is a buying opportunity for long-term focused investors. Especially given Bravura’s strong growth potential and attractive valuation.

Bravura is provider of software products and services to financial institutions. These include major institutions such as BNP Paribas, Fidelity, and Mercer. Arguably the key product in its portfolio is the Sonata wealth management platform. This high quality platform allows its users to connect and engage with their clients anytime, anywhere, through computers, tablets, or smartphones. It also simplifies legacy client systems into one unified customer-centric solution.

Combined with recent acquisitions, which have opened it up to new and lucrative markets, I believe the future is very bright for this growing company.

Nanosonics Ltd (ASX: NAN)

The Nanosonics share price is down over 11% since this time last week. I think this is an opportunity for investors to buy the shares of one of the most promising healthcare companies at a fairer price.

I’m a big fan of the infection prevention company due to the strong growth potential of its trophon EPR product and the upcoming launch of new products targeting unmet needs. In respect to the former, the trophon EPR disinfection system for ultrasound probes is regarded as the best in its class. At the end of the first half its installed base stood at 22,500. This represents just under 19% of its global market opportunity. I believe this footprint can grow materially in the future and drive strong unit sales and recurring revenues from the consumables it requires.

Furthermore, the company has revealed that the secretive new products it has under development have similar market opportunities. In light of this, I think Nanosonics is in a fantastic position to deliver strong sales and earnings growth over the next decade.

More reading

• 2 red hot ASX growth shares
• Where to invest $500 into ASX shares right now
• 3 ASX 200 shares to protect your portfolio from recession
• Why I’d buy Appen and these ASX growth shares for the 2020s
• Could these ASX shares be the future dividend stars that make you rich?

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Bravura Solutions Ltd and Nanosonics Limited. The Motley Fool Australia has recommended Bravura Solutions Ltd and Nanosonics Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Australia’s top brokers have been busy adjusting their estimates and recommendations again, leading to the release of a large number of broker notes this week.

Three broker buy ratings that have caught my eye are summarised below. Here’s why brokers think these ASX shares are in the buy zone:

Harvey Norman Holdings Limited (ASX: HVN)

According to a note out of Citi, its analysts have retained their buy rating and lifted the price target on this retailer’s shares to $4.50. The broker was pleasantly surprised with Harvey Norman’s sales growth during April and May. And while it isn’t clear whether its bottom line is growing as strongly, Citi appears confident that the company will deliver a solid full year result in August. I agree with Citi and feel Harvey Norman could be a decent option.

Newcrest Mining Limited (ASX: NCM)

Analysts at UBS have retained their buy rating and $35.00 price target on this gold miner’s shares. This follows the release of drilling results from Red Chris and Havieron this week. UBS was pleased with the results from Havieron and believes they are strong enough for management to seriously consider mining the orebody. It doesn’t feel this potential has been priced into its shares. I think UBS makes some good points and Newcrest could be worth considering if you’re looking for exposure to gold.

Opthea Ltd (ASX: OPT)

A note out of Goldman Sachs reveals that its analysts have retained their conviction buy rating and $5.20 price target on this biotech company’s shares. This follows the release of data from its study evaluating OPT-302 in the treatment of Diabetic Macular Edema. Goldman notes that the data was unconvincing and has raised more questions than answers. Nevertheless, the broker believes the near-term story remains broadly unchanged. This is because OPT-302 has already demonstrated a statistically significant benefit in a larger trial for Wet Age-Related Macular Degeneration. This has a significant market opportunity. I agree with Goldman Sachs and think Opthea could be a top long term option.

More reading

• Keep a watch on these 3 ASX trends next week
• 3 gold mining shares that may be a buy today
• 5 things to watch on the ASX 200 on Friday
• Top brokers name 3 ASX 200 shares to buy today
• Why the Newcrest share price is up today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Orcoda Ltd (ASX: ODA) share price is one of the few shining lights on the market today. Despite the ASX in a sea of red, Orcado shares are up 40.91% at the time of writing on the back of a contract win.

Despite this rise, however, Orcoda shares are still very much at the smaller end of the ASX spectrum. With shares last changing hands at 15.5 cents, the company’s market capitalisation currently stands at around $18 million.

Orcoda is a logistics solution provider that specialises in business efficiency and optimisation of processes. The company focuses on three key business sectors: healthcare, transportation and resources.

Why is the Orcoda share price defying gravity?

Shortly after the market closed yesterday, Orcoda announced that its subsidiary, Resource Connect Logistics, has signed a nine-year contract with the Mt Buller Ski Resort in Victoria.

The contract comprises a five-year term plus two additional two-year options. Under the arrangement, Resource Connect Logistics will provide guest transit services and rideshare services to Mt Buller Ski Resort customers during the annual ski seasons.

With this, Orcoda will be tasked with ensuring all customers are efficiently moved around the mountain during its seven days a week, two shifts per day operations.

The contract is expected to generate around $2 million to $3 million revenue per annum. And if it runs the full 9-year term, contract revenue value is estimated to be between $20 million and $30 million.

To put these figures into perspective, Orcoda generated $2.4 million revenue in FY19.

The company stated it will be using the technology it has developed for its resource projects and healthcare projects to deliver the Mt Buller project, along with specifically developed platforms for the ski resort.

The company will also work closely with its key supplier Busfleet who supplies Orcoda will all of its buses and drivers.

Management commentary

Commenting on the contract win, Orcoda managing director Geoff Jamieson said:

“Orcoda was awarded this long term contract to provide transport services by the Mt Buller Resort because Orcoda management have a proven history of effectively managing high volume transport requirements, with long term customers, across multiple industries, whilst utilising best in class efficiency and optimization software.”

“COVID-19 restrictions may have an effect on our achievements this ski season but the nature of this agreement should provide long term benefits to the customers of Mt Buller Resort and Orcoda stakeholders,” he added.

More reading

• Should you buy CSL shares before it’s too late?
• Westpac share price lower on AUSTRAC update
• Mach7 share price charges 7% higher on acquisition news
• Tech shares! Should we even invest in anything else?
• Keep a watch on these 3 ASX trends next week

Motley Fool contributor Cathryn Goh has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The CSL share price is currently trading 16.7% below its all-time high of $342.75. As we have seen recently, many quality shares that have been sold-off can surge in an unstoppable rally on the turn of a dime.

With the CSL share price consolidating, is now the time to buy shares in the biotech giant before its too late?

Why is the CSL share price not at all-time highs?

The fact that CSL is trading below its all-time highs could reflect portfolio rotation among many investors. With the broader market performing stronger than expected, many investors will be opting to take their profits and sell blue-chips like CSL. By freeing up capital, investors can then load their portfolio with more beaten-down laggards and other cyclical shares.

In addition to portfolio rotation, some investors might be selling their CSL shares as the company faces rising collection costs during the coronavirus pandemic.

How has CSL performed during the pandemic?

Although CSL is not actively participating in the race to develop a vaccine for COVID-19, the biotech giant is working to develop potential therapies by collecting plasma from recovered patients. In conjunction with other global biotech companies, CSL has launched a campaign in the US encouraging recovered COVID-19 patients to donate plasma. CSL is also collecting recovered donor plasma in Australia, with the company partnering with the Australian Red Cross Lifeblood Service.

There have been some concerns that the global shutdowns as a result of the pandemic may result in a supply shortage in plasma collection. In addition, CSL has the obligation to ensure the safety of its donors by undertaking various disinfecting and screening protocols, which could impact margins.  

Bullish broker note

Earlier this month, analysts from broker UBS released a bullish note on CSL and slapped a $342 12-month price target on the company. Analysts flagged a 15% decline in plasma collection volume for the April–June period, however volumes are expected to recover as US states move to ease regulations. Researchers from the broker continue to see CSL as the preferred option in the health sector based on the company’s robust product pipeline and low level of gearing.

Should you buy?

In my experience, the fear of missing out, especially in unprecedented times such as this, can cloud the decision making of the most experienced investor. However, in the case of a quality company such as CSL, the decision should be straightforward. This market darling has a strong capital position with more than $1 billion in available liquidity and has also reaffirmed its profit guidance for FY20.

If portfolio rotation is the cause for a drop in CSL’s share price, I think that it won’t be sustained for too long and buyers should flood in again. For more cautious investors it may be prudent to wait until August when CSL reports its full-year results to get a better picture of where the company stands.

More reading

• Top brokers name 3 ASX 200 shares to buy today
• Where to invest $5,000 into ASX 200 shares immediately
• Is the CSL share price in the buy zone?
• 3 companies with great intangible asset moats
• Why CSL, Harvey Norman, IPH, & Saracen shares are charging higher

Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The big four banks have all tumbled lower today after they followed the lead of their U.S. counterparts.

The worst performer in the group has been the Westpac Banking Corp (ASX: WBC) share price.

The shares of Australia’s oldest bank were down as much as 6% at one stage. They have since recovered somewhat, but are still down almost 4% to $17.80 at the time of writing.

Why is the Westpac share price sinking lower?

As well as getting caught up in a selloff which has been triggered by concerns over a potential second wave of COVID-19 in the United States, an update by Westpac could be adding to the selling pressure.

Earlier today, Westpac provided an update on its dealings with AUSTRAC. This is in relation to the civil proceedings the agency launched against the bank in November. This was for the alleged contraventions of its obligations under the Anti-Money Laundering and Counter-Terrorism Financing Act.

According to the release, Westpac has continued to review its processes and as part of that has disclosed to AUSTRAC issues regarding its obligation to file threshold transaction reports.

In addition to this, a month after the civil proceedings were launched, as part of Westpac’s lookback announced in its response to AUSTRAC’s claim, Westpac reported additional suspicious matter reports (SMRs) in relation to potential child exploitation.

This morning the bank revealed that AUSTRAC is further investigating these matters and has advised that it may amend its statement of claim to include allegations arising from these investigations.

AUSTRAC has requested further information from the bank on these matters. This includes the details of 272 of its customers, many of whom were subject to SMRs previously.

A further case management hearing is scheduled for next week. Management intends to provide further updates on the matter when appropriate.

More reading

• ASX 200 down 2.2%: Westpac tumbles, TPG reveals special dividend plans
• Why Jumbo, Santos, Westpac, & Zip Co shares are crashing lower
• ASX 200: improved consumer sentiment to near pre COVID-19 levels
• ASX 200 drops 3%, Webjet share price sinks
• What today’s ASX 200 selloff tells me

Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Mach7 Technologies Ltd (ASX: M7T) share price is one of the few shining lights on the market today as investors react to an acquisition.

Mach7 is a global provider of enterprise image management systems for the healthcare sector. The company’s solutions are designed to accelerate diagnosis and care delivery, reduce costs, and significantly improve patient outcomes.

Mach7 shares have been stuck in a trading halt since Wednesday while the company completed a capital raising to fund a new acquisition.

And it appears investors are viewing these moves favourably seeing as though Mach7 is one of the only ASX growth shares not being heavily punished today. In fact, at the time of writing, Mach7 shares are actually charging 7.60% higher.

Why has the Mach7 share price avoided today’s sell-off?

This morning, Mach7 announced it has completed the institutional component of its capital raising. This comprised a $3.7 million placement and $19.7 million entitlement offer, raising a total of $23.4 million. These funds were raised at an offer price of 68 cents per share, which was a 13.9% discount to Mach7’s last trading price of 79 cents.

Funds raised from the capital raising, together with the company’s existing cash reserves, will be used to fund the acquisition of Client Outlook.

Client Outlook is a leading provider of an enterprise image viewing technology called eUnity. It has around 100 customers across North America and Asia and generated $8.8 million of revenue in FY20.

Following the completion of the acquisition, Mach7 will be a complete front and back-end enterprise imaging solution provider. The acquisition also provides the company with a departmental clinical diagnostics PACS (picture archive communication system) solution offering – expanding Mach7’s addressable market from US$0.75 billion to US$2.75 billion.

Highlighting further benefits, Mach7 stated that the acquisition will increase the company’s sales pipeline by around 50%, with $40 million of contracted revenue opportunities in the near term. 

What’s more, Mach7’s customer install base will increase by around 200% from 51 to approximately 150 customers. Contracted annual recurring revenue also stands to benefit, increasing by 70% to $14.75 million.

Mach7 believes this is a low-risk acquisition since the two companies have an established partnership, reselling each other’s product. As such, Client Outlook is a well-known entity, team and product to Mach7 and deep technology integration has already been completed.

The purchase price has been set at CA$38.5 million (~A$40.8 million). Mach7 will have approximately $15 million cash reserves post acquisition, which is expected to be completed by 10 July 2020.

“This deal is truly transformational for Mach7 and its shareholders,” said Mike Lampron, CEO of Mach7. 

“This offering is extremely compelling, but the enterprise-first philosophy of Mach7 and Client Outlook is truly what I believe is going to set us apart as we move forward together,” Mr Lampron added.

More reading

• Why Mach7, Meridian, Spark, & TPG Telecom are pushing higher

Cathryn Goh has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of MACH7 FPO. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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