3 facts you need to know about the MYOB IPO and 2 better options

Don't be fooled, the MYOB float is expensive and opportunistic.

Andrew Mudie

Andrew joined the growing team of Motley Fool freelance writers in mid-2013 following years of personal development as a passionate self-taught sharemarket investor. At the time, Andrew was an engineer by trade, writer by hobby, and an investing nerd by passion who spent far too many breaks reading, writing and learning. Andrew’s first investing lesson came with his first stock selection in 2011 when takeover rumours caused a spike and subsequent plunge in the share price of Woodside and then the 21% fall in the market through mid-2011. The next four years of investing saw Andrew dabble in a vast array of strategies until settling on his favourite investment methodology, which is closely aligned with that of the Motley Fool: Fundamentals-based long-term buy-and-hold of great companies at great prices.

Published April 7, 2015 5:38 am AEST

For investors looking for exposure to the 'cloud' or internet-based business, the upcoming MYOB float appear to be a must have, but there are traps out there for would-be investors!

Many words have been written at Fool.com.au headquarters about the upcoming float, questioning for example, whether XERO FPO NZ (ASX: XRO) is a better bet, or even questioning whether Xero has already won.

Here are three other interesting details that I've found over the last week:

MYOB has approximately 1.2 million customers, of which only 505,000 are what the company calls 'paying customers'. These customers pay recurring membership fees and are expected to provide the majority of the group's 8% revenue growth forecast for the 2015 financial year.
MYOB is being re-listed on the ASX after being taken private by Archer Capital in 2009 for $550 million. The company will be worth between $1.9bn and $2.3bn and will trade on a price-to-earnings ratio of between 20.9 and 24.9. At the high point, investors will be paying nearly 25 times earnings for revenue growth of only 9%, a high price to pay for a company with a real question over future growth and competition.
MYOB will NOT be a dividend stock. MYOB's dividend yield will be between only 2.8% and 3.3% in its first full listed year.

To put this in perspective, Australian car-classifieds market leader Carsales.Com Ltd (ASX: CAR) trades on forward price to earnings ratio of 23 with a dividend yield of 3.8% but offers earnings per share growth of 9% expected this year, followed by 14% next year. When it comes to investing in a technology disruptor with serious growth potential, Carsales would be my choice every day of the week!

Even REA Group Limited (ASX:REA), which trades on a lofty forward price to earnings ratio of 35 and tiny yield of just 1.5% offers investors 25% annual earnings per share growth over the next two financial years, an attractive proposition indeed!

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