Do you remember Frodo? Gollum? The Lord of the Rings Trilogy? It was the last gold mine to come out of that little island nation which sits off the coast of Australia, that's right New Zealand.
There is a new show in town and it goes by the name of Xero,www.asx.com.au/asx/research/companyInfo.do
Let me a assure you it's not Peter Jackson pulling the strings, but a man by the name of Rod Drury.
The inspiration for Xero was borne of frustration as Drury and his personal accountant found traditional desktop accounting software to be outdated and cumbersome.
And so, Drury decided to create a modern cloud based small to medium sized business accounting product.
Offering a low priced accounting software subscription using cloud computing Xero has, in Australia and New Zealand, changed the face of small and medium sized business accounting.
The key features of Xero include automatic bank and credit card feeds, invoicing, fixed asset depreciation,expense claims, purchase orders, accounts payable as well as standard business and management reporting.
It also offers a free API (application programming interface - for those less technically minded) which enables customers and third party software vendors to integrate external applications with Xero.
All applicable data is stored in the cloud on a single unified ledger, allowing users to work in the same set of books regardless of location or operating system.
The appeal of Xero's product offering has convinced the likes of Craig Winkler, MYOB founder and more recently Peter Thiel, founder of Paypal and the guy that lays claim to being the first professional investor in Facebook way back in 2004, to pour 100's of millions of dollars worth of capital into the company as it prepares to drive growth in the US market.
Thiel's latest capital injection through Valar Ventures, in conjunction with Matrix Partners, raised 180 million (NZ) at an issue price of $18.15, as we speak Xero is trading at $42 on the New Zealand exchange and $39.61 on the Australian stock exchange representing a tidy 231% gain on Thiel's and Matrix Partners investment in the space of 3 months.
As impressive as this result may be, it pales in comparison to share price growth since it's Australian listing price late in 2012. An investor lucky enough to enter the lobby at $5.50 would be sitting on an 800% return. This remarkable growth has seen Credit Suisse dubb Xero the "apple of accounting"
Is there any fuel left in the Share price growth tank you ask?
Potentially,the growth as been spectacular and rapid whether it can be sustained remains to be seen. Xero's November 13 investor update highlighted 89% rate of customer growth with country revenue growth of 84% YOY.
Significantly, US/rest of world customer growth sat handsomely at 141%. Uk customer growth 99%. Revenue growth for these two markets came in at 115% and 83% respectively.
Customer numbers currently total 211,300, Rod Drury has previously slated a Nasdaq listing upon reaching 1 million global customers and has forecast revenue growth of 80% for FY14. Already dual listed on the NZ and Australian exchanges, a US listing would open the door to a massive new market of capital and investors ready to buy into what appears to be another SaaS success story.
Xero has made no secret of it's intention to grab a larger slice of the small business accounting American pie, now armed with a war chest of capital to drive global growth and led by a management team boasting what Credit Suisse refers to as " a proven record of execution" the sky appears to the limit for this New Zealand's warrior with a market cap nudging the $5 billion market.
Xero is yet to boast a profit and appears some way off this landmark, but with every loss posted, capital pours in. The growth potential and quality of the product offering continues to drive share price appreciation.
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