When new listings fail to hit their prospectus forecast, it’s understandable that market punishment is swift and brutal.

But digital media micro cap Pureprofile beat EBITDA forecasts in its July 2015 IPO prospectus; met its 2016 financial year revenue; went on to make a strategically and financially valuable acquisition — and still saw its market capitalisation fall almost all the way back to its float price.

The market cap at Pureprofile’s (ASX:PPL) 50c listing price was $29 million against a forecast FY2016 EBITDA of $2.5 million.

The capitalisation at the latest market price of 26c is $31 million and the company has recently announced it expects pro forma FY2017 EBITDA (after normalised costs) to come in at just under $7 million.

Adjusted for cash reserves, the company’s earnings multiple has halved in the two years since it listed.


The answer clearly doesn’t lie in financial performance as the data above shows.

Instead it seems to lie in broader market trends.

Tim Knapton of TechVoyage is one of Australia's top tech investment experts.
Tim Knapton of TechVoyage is one of Australia’s top tech investment experts.

Pureprofile is a tech micro cap. That end of the market has come under pressure in the last couple of years, partly because of a profusion of floats and backdoor listings that, unlike Pureprofile, failed to hit earnings expectations.

More to the point, to understand Pure Profile investors need to get their minds around three quite complex business offerings.

Those three offerings are the original Pureprofile digital research and insights solution, programmatic media buying platform Sparc Media (acquired as part of the IPO) and digital advertising lead-generation business Cohort, acquired in September 2016.

The research offering begins with a research panel to capture data from consumers.

Pureprofile’s points of difference are that it focuses on respondent experience both in terms of the engaging nature of the survey and the reliability with which it distributes incentives and shopper knowledge to its user base, which now totals more than 1 million people around the world.

Sparc Media is an automated media-buying solution that embraces display, mobile, social, native and rich media.  The core aims are to optimise brand marketing, provide targeted customer prospects and better leverage web and traditional campaign audiences.

With the advent of social media and continuing audience fragmentation, demand for more targeted marketing necessitates the need for empirical evidence aboutconsumer behaviour and hence Pureprofile’s survey data and insights.

As for programmatic media, it offers a faster, real-time and more measurable solution than the traditional agency-based alternative. Globally, the segment is currently worth about $30 billion, which means it has captured about 20 per cent of digital ad spend and only 5 per cent of the overall advertising market.

Estimates are that it is growing at more than 20 per cent per year.

Digital advertising lead generation business Cohort was acquired for an initial payment of $18 million and deferred payments of what have worked out to another $8.6 million.

Cohort brought a database of another 2.5 million users. There are bilateral synergies as Cohort can use Pureprofile’s profiling research and media trading while Pureprofile can tap into Cohort’s huge and growing database.

The Cohort transaction more than doubled the group’s earnings and the integrated offering it delivers means Pureprofile is highly differentiated and likely to continue to grow.

Revenue growth in FY2017 was only 13 per cent and that may also partly explain the share price collapse but, more importantly, EBITDA was up by 25 per cent.

What all that means is that a company with a well-established business model, underpinned with decent layers of technology, is trading on barely four times historic EBITDA.


Tim Knapton is the founder and CEO of online tech research and finance marketplace TechVoyage.   Its video/financial database and digital broadcast platform provide a more efficient way for investors to appraise listed and unlisted tech companies and for entrepreneurs to finance, acquire and exit them.   

Previously Tim was Head of Corporate Broking at Deutsche Australia and before that ran a research department for a leading broking house.  Tim has also been a freelance tech/finance journalist for more than 20 years and a columnist with The Australian Financial Review, The Bulletin, BRW, Shares and Australian Business.


This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.