Aconex's M&A strategy has positives and negatives: Deutsche Bank
Aconex's mergers and acquisitions strategy is cited as both a driver of earnings but also as a potential risk, in new research by Deutsche Bank analysts.
Aconex's mergers and acquisitions strategy is cited as both a driver of earnings but also as a potential risk, in new research by Deutsche Bank analysts.
The broker initiated coverage on the construction industry software provider with a "buy" rating and a price target of $7.85.
Deutsche analysts said Aconex's growth strategy involved continued penetration of the global construction collaboration sector, particularly in industry segments and regions such as Asia, the Americas and Europe the Middle East and Africa.
They added that the company could leverage existing customer relationships via the 'network effect' and continue product development through "innovative research and development." Opportunistic M&A was cited as a key plank of growth, however, the analysts also cautioned on risks around overpaying for assets and integrating purchases.
"The company's growth strategy involves opportunistic assessment of acquisitions which presents pricing and integration risk," the research said.
Last month, Aconex kicked off a capital raising and partial sell down to acquire Germany-based construction collaboration software company Conject Holdings.
Deutsche forecast that Aconex's cash balance would grow to $174 million in financial year 2020, assuming no dividends were paid and no further M&A.
"We see ACX as well-placed to further leverage its leading position within a large, underpenetrated market benefiting from positive industry and technology trends. We are also attracted to the globally scalable, highly cash-generative SaaS model," the analysts said.
The company's shares have rallied strongly since their ASX debut in late 2014.
