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Why shares in this ASX small cap are surging 16%

Phil Harpur
Rocket soaring through the sky

The Frontier Digital Ventures Ltd (ASX: FDV) share price surged by as much as 16% this morning on the back of a market-sensitive announcement.

In the release, the company detailed the completed sale of its full 20% shareholding in Propzy, an online classifieds business in Vietnam that focuses on property transactions.

In the past month, the Frontier Digital share price has rocketed 48%. Over the past 12 months, shares in this high-flying ASX small cap have risen by a tremendous 146%.

What does Frontier Digital Ventures do?

Frontier Digital Ventures focuses on developing online classifieds businesses in underdeveloped, emerging countries or regions.

The company has a particular focus on property and automotive verticals and general classifieds websites. Frontier Digital has a portfolio of investments in 11 operating businesses across 13 markets.

Details of the Propzy sale

The Propzy sale is for a cash consideration of US$4.7 million (A$7.0 million). This represents an approximate 300% return to Frontier Digital shareholders on its US$1.2 million investment in approximately 2.5 years.

US$0.8 million of the payment will be provided upfront in June 2017 and US$0.4 million will be provided in milestone payments in December 2017.

Frontier Digital noted that the rationale for the sale was driven by Propzy’s intended growth and funding strategy, which was likely to increase losses at the EBITDA level and dilute Frontier Digital’s ownership to less than 10%.

This sale is the first material monetisation event in Frontier Digital’s history. The company believes this will accelerate its pathway to achieving portfolio-wide profitability in 2020.

Frontier Digital Ventures continues to be focused on its operating companies pursuing sustainable revenue growth with a clear path to profitability.

Frontier Digital Ventures’ Founder and CEO, Shaun Di Gregorio said: “At the Frontier Digital Ventures portfolio level, Propzy represented >50% of the EBITDA loss in the preliminary FY19 results released to the ASX on 31 January 2020. Despite Propzy’s strong revenue growth, we believe the sale of our shareholding represented an attractive opportunity to fast-track Frontier Digital Ventures’ pathway to achieving portfolio-wide profitability in 2020.”

“Consistent with Frontier Digital Ventures’ stated strategy, we continue to assess a range of opportunities to optimise our portfolio mix and increase shareholder value,” he added.

The post Why shares in this ASX small cap are surging 16% appeared first on Motley Fool Australia.

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The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2020