ASX:UBN
Urbanise com Ltd
Investment Summary
The fund managers believe that Urbanise com Ltd (UBN) is on the brink of demonstrating progress towards revenue growth and profitability in FY24. Despite a 3% decline in total revenue in Q1, the increase in recurring license revenue by 3.1% and recent $0.43 million of Annualised Recurring Revenue (ARR) wins highlight potential recovery. UBN's focus on efficiency programs is poised to generate $2.4 million cash flow improvement. The ongoing negotiations with their largest customer and a stable ARR significantly contribute to their prospects. Furthermore, the recent board renewal with experienced appointments is expected to enhance governance. Looking ahead, the fund managers express optimism regarding UBN's Horizon 3 strategy, which targets $30-$45 million in market opportunities by leveraging existing infrastructure. If successful, capturing a 10% market share could boost ARR by $4 million and set UBN on a path to sustainability and potential valuation multiples of 4-7 times ARR.
Commentary From The Managers
Naos Asset Management
30 June 2024
$0.38
- Entry into Expanded Strata Market Opportunity: In Q4 FY24, UBN detailed its Horizon 3 strategy to drive long-term, sustainable growth.
- Integration and Automation: Urbanise is enhancing connections between strata management and service providers, targeting a proven market with low risk.
- Existing User Base: UBN connects with thousands of individual strata managers, managing hundreds of strata lots that require various services.
- Proven Solutions: The strategy is an add-on that leverages UBN’s current infrastructure, without significant capital expenditure or increased fixed costs.
- Market Opportunity: Valued between $30-$45 million with an estimated $20 billion of strata-related transactions annually, applying a 0.14%-0.30% fee.
- Competitive Advantage: UBN’s technological solution is considered superior to peers' outdated, non-cloud-based offerings.
- Potential Revenue Growth: Capturing 10% market share with a 0.20% fee could add $4 million ARR, positioning UBN towards profitability.
- Sustainable Growth: Successful execution may lead to a valuation of 4-7 times ARR for UBN.
Naos Asset Management
31 Dec 2023
Unknown
- Quarterly Activities Report highlights challenges with a -3% overall revenue decline, affected by decreased professional service fees.
- License revenue shows an increase of +3.1%, indicating growth potential in recurring revenue streams.
- UBN secured an additional $0.43 million in Annual Recurring Revenue (ARR) wins in October post-quarter.
- Contract renewal negotiations with the largest strata customer are ongoing, maintaining flat ARR despite a revenue decrease.
- Net loss of $0.72 million recorded in the first 3 months of FY24, signaling a need for financial performance improvement.
- Efficiency programs initiated to target $2.4 million cash flow improvement, with $1.1m from headcount savings and $1.3m from overheads and working capital.
- Potential return to positive cash flow anticipated over the next 6-12 months with successful renegotiations and ARR growth.
- Completion of board renewal process with the appointment of Darc Rasmussen as Independent Chair and James Hourn as Independent Director.
- New board members bring strong software industry experience, crucial for UBN’s future development and sales strategies.
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.