YPB Group has completed the acquisition of privately-held proximity marketing company nTouch for A$4.5m in shares at 35c/share. The acquisition extends its anti-counterfeiting expertise in B2C and positions it as one of the only companies globally to offer end-to-end counterfeit protection solutions. We have incorporated nTouch into our forecasts and included some recent contract wins. This has resulted in both an upgrade to our CY15e and CY16e forecasts and an increase in our DCF valuation to A$0.50/share from A$0.37/share previously.
YPB has now completed its acquisition of proximity marketing company nTouch, which closes the circle on the company’s ambitions to provide an end-to-end counterfeit protection solution. nTouch delivers smartphone software that uses proximity marketing to gather and develop big data, having developed a platform that can be used with most proximity marketing technologies. The acquisition extends YPB’s reach into the B2C market and complements its Brand Reporter platform. We have incorporated nTouch into our forecasts, which show it contributing ~30% to the group’s gross profit by CY17e. It has lifted our DCF valuation by A$0.10/share.
Since our July 2015 initiation report, the company has secured several additional contracts for its tracers and scanners, including contracts from two national Chinese banks and a Chinese salt packaging company. As a consequence, we have incorporated these contracts into our forecasts, which have lifted our valuation by A$0.03/share. YPB has announced it will hold a general meeting of shareholders on 10 December to ratify the share issues it has made in acquiring nTouch and Continuous Forms Control, and in employing its new COO and CMO. YPB will also seek approval to issue up to 10m new shares to raise new capital.
Our DCF valuation has been upgraded to A$0.50/share from A$0.37/share previously after incorporating the nTouch acquisition, making some minor adjustments following the company’s interim results and incorporating two additional ink contracts into our forecasts. The nTouch acquisition has had the greatest impact on the valuation uplift. While we continue to see CY15e and CY16e as company-building years, we anticipate that the net losses will be smaller than previously forecast.