Despite being relatively unheard of the IVE Group’s (ASX: IGL) activities touch virtually every household in Australia, every week of the year. This printing company has transformed itself into an integrated marketing, print and communications service provider to a large and diverse range of blue chip Australian and global companies including ANZ, Westpac, Coles, Woolworths, Tabcorp, Vodaphone and LÓreal.
Despite this impressive list of leading customers, its overall revenue base remains highly fragmented, both across individual customers and by industry exposure.
Given its origins as a print company, it is easy to consider its business as participating in a sunset industry, however that would underestimate the breadth of essential ongoing services and capabilities – in print, online, in store, and including the necessary supporting logistics behind its service portfolio.
IVE Group has led industry consolidation, which is improving the operating environment, with now fewer market participants (of which IVE Group is the dominant player) reducing previous excess capacity in the industry. Substantial new contract wins have underpinned investment in what is now an unrivalled production capability in Australia.
The company has recently undertaken two successful acquisition and integration projects including the relocation and merger of Victorian Blue Star Display with Franklin Web’s retail display business and the acquisition of direct communications business SEMA and Sydney based Dominion Print Groups. Both integrations are predicted to expand capacity and grow revenue.
We think the business is well run, and with the shares trading on a FY19 PE of c7.5x and offering a fully franked FY19 dividend yield of 9% – believe it is a solid investment opportunity for the yield investor.
We have chosen to invest in this stock for the following main reasons:
- Breadth of services: Despite initially seeming like a print business IVE Group offers a wide range of essential and growing services.
- Market leader: IVE Group is the dominant player in a market where competition is shrinking.
- Productivity: New contract wins have provided IVE Group with unrivalled production capabilities in Australia.
- Recent acquisitions: Two recent successful acquisitions have set IVE Group up for future growth and increased revenue.
This stock is currently held by our Pengana Australian Equities Income Fund.
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This report has been prepared by Pengana Investment Management Ltd (ABN 69 063 081 612), Australian Financial Services Licence No. 219462) (“Pengana”). This report does not contain any investment recommendation or investment advice and has been prepared without taking account of any person’s objectives, financial situation or needs. Therefore, before acting on the information in this report a person should consider the appropriateness of the information, having regard to their objectives, financial situation and needs. Pengana is the issuer of units in the Pengana Australian Equities Income Fund (ARSN 098 586 586) (“the Fund”). A Product Disclosure Statement for the Fund (“PDS”) is available and can be obtained by contacting Pengana on (02) 8524 9900. A person who is considering investing in the Fund should obtain the relevant PDS and should consider the PDS carefully and consult with their financial adviser to determine whether the Fund is appropriate for them before deciding whether to invest in, or to continue to hold, units in the Fund. The value of investments can go up and down. Past performance is not a reliable indicator of past performance. While care has been taken in the preparation of this report, Pengana makes no representation or warranty as to the accuracy, currency or completeness of any statement, data or value. To the maximum extent permitted by law, Pengana expressly disclaims any liability which may arise out of the provision to, or use by, any person of this report.
