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AMMA Private Equity look at Tech Disruption

26/09/2016 9:39 AM AEST | Updated 27/09/2016 7:49 AM AEST

Innovators harness technology to provide new solutions to everyday problems. This is why AMMA Private Equity realised early on that focusing on the emerging tech sector was a niche market that was being largely ignored by others in Australia, and a market where real value could be created and offered through an exclusive partnership with Accountants and their clients.

Can you remember life before you had a smart phone? Who would have imagined, even 10 years ago, that we would all basically be walking around every day with what is essentially a laptop and television in our pocket!? Technology is astounding when you stop and consider about how far we have evolved. We are officially living in ‘the future’ and technology has brought us here!

The Australian public tech sector may be lagging behind others (see table) ...

http://www.ammaequity.com.au
Top 5 Tech Comapies By Market Cap (USD)

... but there is encouraging growth when compared to our previously strong mining sector (below).

ASX 200
ASX 200 Tech Vs Mining

Rio Tinto for example, used to generate 10 Billion AUD in profits per year, yet their end of year report for 2015 showed a profit of only 450 Million AUD - down by a staggering 95.5% from the previous year.

To give some tech comparisons, take Google, who are currently generating profits in excess of 10 Billion USD a quarter! Google’s initial list price at their 2004 IPO was $42.50 USD, and is today worth $771 per share.

Facebook, while free to use, shows a $371B USD valuation currently, which is more than ANZ, CBA, RIO and BHP combined. Facebook originally sourced private equity funding at only $1 a share, and listed publically at $38 a share. Shares today are trading at $130 a share - which would have delivered a 12,900% return on the ground floor price.

Apple shares were valued at $1.07 in 2001 and now top out at $135 per share. Apple is currently valued at over $611B USD. Today, Google (whose operating company is Alphabet) and Apple vie for top spot on the S&P500 Index and their current combined market cap sits at a whopping $1 TRILLION USD – which is roughly the market cap of all the top 200 Australian listed companies (ASX200).

As an Australian investor you would have been fortunate to have had any technology stocks in your portfolio in recent years, as they have all outperformed the benchmark (ASX200).

The top 2 tech companies on the ASX are currently carsales.com ($2.86B USD) and MYOB ($2.21B USD) yet when we talk such mammoth numbers for Apple, Google, Microsoft etc, these Aussie market leader valuations are significantly less impressive. Though their success is not to be undervalued! Founder of Carsales.com, Greg Roebuck says he simply started as a ‘software guy’ with a good idea and, like many entrepreneurs, he set out to "build a better mousetrap". Roebuck says he had seen the limitations of print advertisements in publications such as the Trading Post and saw the potential of digitising this information – eliminating spelling errors, standardising the information, allowing searches, and adding a lot of detail to the information the advertisers supplied. He started the business in 1997, listed in 2009 and 7 years later the company continues to evolve and dominate their market. Read more of their future plans here.

Like carsales.com was to the Trading Post, tech continues to cause disruption to traditional industries. Think taxis and hotels, just to name a couple. Uber may be currently posting losses that make your eyes water ($1.27B USD) but they continue to innovate and ignore the intense scrutiny. They have their end goal in mind, and that goal is for Uber to be so accessible, so affordable and such a flawless experience that it replaces the need to own a personal vehicle at all! Uber’s current market cap of $64B USD is already significantly larger than General Motors $50B USD, and just last week Ford and Uber partnered to launch a self-driving car that is currently being tested on the streets of Pittsburg. Tech innovation has now even disrupted the need for a human driver!

Airbnb are another extraordinary tech success story. This company do not even own one hotel, yet they boast a market cap of $25B USD – which is larger than the Hilton Group’s $23B USD.

Entrepreneurs and innovators are people who refuse to accept the way things are and aren’t afraid to turn practices we know and understand on their heads! These are the people that change how we go about our every day, and supporting these visionaries ensures you are part of ‘the future’.

AMMA Private Equity connect these people with the funds they need to grow their ideas into viable game-changing businesses, and those who belong to the AMMA network have a chance to be a part of ‘the next big thing’.

AMMA Private Equity is a boutique private equity company based in Australia. They exclusively connect tech start-up businesses with an extensive Accountant network in order to raise capital.

*Please note that nothing in this article should be construed as constituting financial advice. Professional advice (legal, financial, industry or any other relevant professional advice whatsoever) should be obtained before applying, using, adopting or relying upon the information or content contained in this article. The information or content is not intended to be nor should it be relied upon as a substitute for legal or other professional advice. Please seek professional advice before acting or relying on any of the content.

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