ASX:XF1
Xref Ltd Fully Paid Ord. Shrs
Investment Summary
The fund managers believe that Xref Ltd (XF1) is facing significant challenges following the rejection of the proposed takeover by Seek, as a large percentage of shareholders voted against the deal, despite board recommendations. In their opinion, this rejection led to a rapid decline in share price, falling by approximately 40% to align with pre-bid levels. While attention shifts towards the upcoming half-year results, the operating performance shows promise with ARR increasing by 76% and a reduction in operating loss to $2m from $4.1m last year. However, concerns about the company’s financial health persist, with a balance sheet showing $5.6m in cash against $9m in debt and a recorded $500k free cash outflow. Consequently, the fund managers remain cautious, highlighting the need for ongoing scrutiny of the balance sheet going forward.
Commentary From The Managers
Mereweather Capital
28 Feb 2025
$0.13
- Mereweather Capital notes a significant event impacting Xref's performance this month.
- The preliminary votes from shareholders indicated a large percentage opposing the proposed takeover by Seek.
- Despite board and management recommendations, the takeover was voted down, leading to a ~40% decline in share price.
- Following the failed bid, attention shifted to the half year results, specifically regarding the balance sheet.
- Operating results showed an ARR increase of 76% and reduced operating loss of $2m compared to $4.1m last year.
- The balance sheet currently holds $5.6m in cash against $9m in debt, raising concerns over liquidity.
- There was also a $500k free cash outflow, contributing to ongoing uncertainty.
- In light of these developments, Mereweather Capital continues to monitor Xref closely.
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