Frontier Digital Ventures sells stake in Propzy for profit, funds to be channelled into ‘better performing’ companies

Frontier Digital Ventures (ASX: FDV) has sells its 20% interest in Vietnam online classifieds business Propzy for US$4.7 million – representing a 300% return on its initial investment.

The company initially secured its interest in Propzy for US$1.2 million about two-and-a-half years ago.

According to Frontier, its rationale for the sale was an anticipated shareholder dilution in Propzy’s upcoming funding round.

“At the Frontier portfolio level, Propzy represented 50% of the earnings before interest tax depreciation and amortisation loss in the preliminary FY 2019 results released to the ASX on 31 January 2020,” Frontier founder and chief executive officer Shaun Di Gregoria said.

“Despite Propzy’s strong revenue growth, we believe the sale of our shareholding represented an attractive opportunity to fast-track Frontier’s pathway to achieving portfolio-wide profitability in 2020.”

“The sale of Frontier’s shareholding in Propzy is the first material monetisation event in Frontier’s history and further validates [the company’s] long-term strategy,” he added, claiming funds from the sale may be used to increase Frontier’s ownership in “better performing” companies within its portfolio.

Record FY 2019

For the 2019 full year, Frontier posted a 75% increase in revenue to $72.5 million – up from the 57% rise achieved in 2018.

Higher revenue was underpinned by four investee companies achieving positive earnings before interest tax depreciation and amortisation for the period, with a further two reaching positive EBITDA in the December quarter.

Contributing the most revenue was Frontier’s 30% owned Zameen which expanded it cash inflow by 89% to $42.3 million – up from $22.4 million in 2018.

Based in Pakistan, Zameen is a property portal and was one of the investees that achieved positive EBITDA in 2019.

Property portal in Uruguay, Paraguay, Bolivia and Peru, Infocacas exceeded Frontier’s expectations, with its $6.02 million in revenue. The high performance prompted Frontier to boost its stake in the investee from 31.9% to 51% for $5.2 million.

iMyanmar is another of Frontier’s investees to move into positive territory in 2019. The 43%-owned entity grew its revenue 39% to reach $1.9 million.

AutoDeal, which operates online classified car portals in the Philippines, boosted its revenue for the period by 73% to $1.8 million. It was also one of the four businesses to achieve positive EBITDA during 2019.

Due to its ongoing success, Frontier increased its ownership of AutoDeal from 36.8% to 55.8% in late December.