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Discovering the next big Aussie thing: 12 questions for investors
For anyone looking to invest in Australian companies attempting offshore expansion, there are 12 questions you should be asking to weed out non-performers.
Discovering the next big Aussie thing: 12 questions for investors
For anyone looking to invest in Australian companies attempting offshore expansion, there are 12 questions you should be asking to weed out non-performers.
nestegg has recently reported on the new generation of Australian companies who are seeing success in the offshore expansion game.
While there are seven key factors driving the success of “offshore growers”, according to the Ophir Asset Management’s report, The Offshore Growers: Why a new breed of Australian companies are taking on the world and winning, there are a further 12 key questions that the asset management group has flagged as helpful for investors in identifying potential offshore growers while they still have massive upside.
The questions will also help investors weed out companies that have some potential but lack the key ingredients for success, it said.
According to Ophir, investors need to invest in offshore growers at an early stage to maximise returns and minimise risk.
Otherwise, “you end up like most investors who are finally biting the bullet when it’s too late” and the growth prospects of the company may already be largely recognised in the share price.
But for investors who are willing to do their homework, who understand both the seven key success factors and the questions posed below, Ophir has considered the investment rewards can be significant.
Here are the questions:
1. Does the company have a world-class value proposition and how does it stack up against offshore competitors? (Is the product or service world-class?)
2. Is the company’s product or service differentiated in the mind of consumers so they’re willing to pay a higher price?
3. Does the company have any significant competitors overseas?
4. Is the product scalable? If it moves offshore and sales take off, will it be able to expand margins so that the profit increases faster than revenues?
5. Will expanding into another geography diversify earnings and make them smoother, lessening earnings risk?
6. Is the company preferring organic growth to riskier large acquisitions in its offshore movement?
7. If the company is looking to acquire offshore to aid in expansion, is it avoiding large transformational acquisitions that create significant risk?
8. Is the company hiring local talent offshore with good knowledge of local markets and customers, and strong networks across suppliers, customers and local government?
9. Is the country they’re expanding into pro foreign business?
10. Is the company appropriately managing forex risk that comes with foreign currency revenue?
11. If offshore expansion doesn’t work, can the Australian business absorb losses or will it have an effect on the company’s ongoing at-home viability?
12. Is management committing to the international expansion, i.e. are they offering not only financial resources but their own time in the country?
Read about the seven factors that impact on the success of Australian companies overseas here.
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