Xero: Leading Cloud-Based Accounting Software Platform

Max Hu of Tyee Capital Group presented his in-depth investment thesis on Xero Limited (Australia: XRO) at Asian Investing Summit 2019.

Thesis summary:

Xero Limited is the world’s leading cloud-based accounting software platform for small and medium-sized businesses, domiciled in New Zealand. Xero’s products are based on the software-as-a-service (SaaS) model and sold by subscription.

As of September 2018, the company had 2,300 employees and 1.6 million subscribers in 180+ countries. Xero is in a global duopoly with Intuit and is the winning player in global markets outside of the United States. The shares recently traded at 12x forward sales. Revenue is expected to grow 30-40% annually over the next few years. With a USD 5 billion market capitalization and a market penetration rate of less than 2%, there is a significant room for growth. Xero is an underappreciated opportunity in the SaaS space and should be a key beneficiary of global digital transformation processes for decades to come.

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About the instructor:

“Max Hu serves as the head of asset management for JT Asset Management. JT is the Hong Kong-based overseas investing platform for the Jiangxi provincial government in China. Previously, Max was the co-founder and fund manager of Hong Kong-based Tyee Capital Group and managed its global opportunity fund, an equity-based, long-biased multi-strategy fund with a focus on extraordinary businesses. Max’s investment approach is contrarian, value-driven and concentrated. His investments have been focused on easy to understand, wide-moat businesses with solid long-term growth prospects. He has worked at Deutsche Asset Management and is a CFA Charterholder. Max graduated from Tsinghua University in China, with a degree in physics and mathematics. He has done Ph.D. research in Financial Economics at ETH Zurich and holds a Masters’ degree from University Heidelberg.”