MYOB a stand out performer

Given recent history, this makes MYOB quite special. As we highlighted in our recently published special report, 'Sink or Swim? How to pick a winning float', only a small number of recently listed companies have managed to sustain post-listing prices, and many have ended up below their issue price. This is especially true of 'technology' based companies. So why has MYOB beaten the odds?

A real business

Apart from an imaginative marketing strategy (you may have seen their bus ads), the difference is that MYOB, unlike most recent floats was already a profitable, high-margin business before listing. Also, the CEO Craig Winkler and directors, Brad Shofer and Christopher Lee, still hold over 70% of issued capital. This is a real business and not one floated on the back of a bubble.

Since its establishment in 1991, MYOB has been profitable in every year since, driven by its affordable and user friendly software. And given the increasingly complex nature of the business regulatory environment, the introduction of the GST in Australia, and the company's stated growth strategy, future prospects look promising too. For MYOB, regulatory change brings revenue growth from system upgrades and this all fits in with the main purpose of the listing - to raise funds for acquisitions and accelerate product development.

During recent years its customer base has grown to over 350,000, including over 150,000 Australian users. And, as Microsoft knows only too well, these customers deliver sales when they purchase the product, and a recurring revenue stream through support plans, upgrades and add-on products further down the track.

Growth opportunities

There are also plenty of opportunities overseas, particularly in North America and Europe where it has an established presence, having been operating since 1996 and 1992 respectively. Products have been introduced in Malaysia, Singapore, Hong Kong, Sri Lanka, the Philippines and South Africa and the company's web site was launched in 1995. With $19m in net cash on the balance sheet the company is cashed up and ready to grow further afield.

Prospectus forecasts for the year to 31 December 1999 are for earnings per share of 10.5 cents, from which a final, unfranked dividend of 2.5 cents is expected. In the short-term at least, we suspect that the greatest share price gains have already been made, but further rises are likely over time as the company's growth strategy plays out. If the success of its business in Australia can be replicated elsewhere in the world, the company has a great future. HOLD but ACCUMULATE on WEAKNESS.