Shares in Xero soared through the $20 barrier yesterday as
investor interest in the software accounting firm was piqued
further following a successful capital raising.
Xero is valued at $2.38 billion, more than casino and hotel
operator SkyCity Entertainment Group and dominant pay-TV firm
Sky Network Television.
The shares rose 5.5% to $20.58, an intra-day record, after
the Wellington-based company announced on Monday it raised
$180 million in new capital, mainly from United States
That left it flush with $230 million in the bank to fund its
global growth plans.
The shares have surged this year, and are more than 20 times
the $1 they were sold at in the company's 2007 initial public
It is now the eighth-biggest domestic company on the NZX.
Craigs Investment Partners broker Chris Timms is retaining
his neutral hold recommendation on the stock.
''We are maintaining our `niche neutral' recommendation on
Xero. Xero is continuing to show very strong growth.
"The announcement of a capital raising is a clear indication
of the company's success in the United States and the company
wanting to make the most of this strong momentum.
''Based on its early success and the overall size of the
market, we believe Xero has a good chance of capturing a
share of the US market.''
However, it was also important to remember the strong cloud
accounting competition in the US, particularly from Inuit, Mr
In the future, there would continue to be strong global
competitive risks as the cloud accounting market heated up,
with software developers rolling out their own cloud-based
In a research note, Craigs said first-half operating revenue
was expected to exceed $30.3 million, up 84% on the previous
corresponding period, with strong growth seen across all
Xero noted the figure had been adjusted to account for the
discontinuation of its Xero personal product.
Annualised committed monthly revenue increased 82.4% to $70.6
million, from $38.7 million.
The geographic breakdown for the committed revenue saw New
Zealand with $23.9 million, Australia $30.2 million, the
United Kingdom $10.2 million and the United States and the
rest of the world $6.3 million.
Offshore revenue now accounted for 66% of monthly committed
revenue, up from 62% in the year ended June, and 82.4% in the
first half of 2013.
Mr Timms said Xero provided no guidance on its operating
performance for the first half but earlier in the year the
company provided guidance for a larger loss as it continued
to increase staff, software development and marketing.
Customer numbers increased 89% to 211,300 - driven by strong
growth in all regions.
Australia continued to show the strongest growth, making it
an even more important driver of revenue and operating
Xero's workforce increased by 110% to 584, up 53% since March
The company increased staff in all areas and regions of its
business in order to boost product development, sales and
marketing, he said.
Its workforce was expected to continue to expand based on
management commentary from the company's latest Xerocon
Management noted seeing higher-than-anticipated growth in the
adoption of its products and the continued expansion of a
world-class team in the US and support for global growth
would be necessary, Mr Timms said.