The emergence of a new generation

Andrew Mitchell

Ophir Asset Management

Most investors have clear memories of Australian companies expanding offshore. The big acquisition. The hype. The hope of escaping a small domestic market.

But time and time again, international expansion became a graveyard of ambition. When companies like NAB, AMP and Wesfarmers moved offshore, mostly through major acquisitions, they destroyed billions of dollars of shareholder value. They went overseas and lost.

Investors may be forgiven for thinking that staying in the small Australian market was the only way to go.

From 25 million to nearly 8 billion 

But in recent years something has changed. A new generation of companies – 12 companies we’ve dubbed Offshore Growers in our latest report – have expanded offshore, and are winning. 

The Offshore Growers include

These Australian companies have seized the opportunity to massively expand their potential by moving from Australia, with a market of just 25 million potential consumers, to a global market of nearly 8 billion people.

The success of Offshore Growers has delivered significant value to shareholders. If you had invested in an equally weighted portfolio of the 12 Offshore Growers in January 2016, you would be up over 340%, compared to around 50% for the S&P/ASX Small Ordinaries Accumulation Index (to 27 September 2019). 

Generating growth in a constrained environment

Offshore Growers are a vital component of an investor’s portfolio because they deliver growth and returns at a time when both the global and domestic economies are slowing. 

The Australian economy is now tracking below its long-term potential and faces a number of headwinds including the effect from weak wages, consumer spending and productivity growth. Global growth is also sluggish. The IMF is forecasting global growth to slow from 3.6% in 2018 to 3.2% in 2019 (1).

That anaemic growth threatens the profits, dividends and returns of many Australian companies, including the large banks. It has forced the Reserve Bank of Australia (RBA) to cut official interest rates to record lows, and even raised the spectre of Quantitative Easing (QE) coming to Australia. 

How to spot Offshore Growers early

To gain a deeper insight into the key factors of success, we conducted a series of exclusive interviews with the CEOs, chairpersons, directors and founders of leading Offshore Growers.

In this paper, we outline: 

  • The 7 key factors that underpin the success of the Offshore Growers 
  • The process they followed in their successful international expansion 
  • 12 questions investors can use to identify Offshore Growers

If investors can develop a deep understanding of these factors and steps, they will not only be able to identify Offshore Growers, but they will be able to identify Offshore Growers at an early stage while they are still operating only in Australia, or on the cusp of their global expansion. They will know which companies have the value proposition and business model that will best allow them to take on the world and win.

By identifying these Offshore Growers early in their journey, investors will get in on the ground floor of their remarkable growth and maximise the returns they can earn from this new generation of companies, returns which are becoming vital in this low-growth environment. 

More from this series

This is the first wire of a three part series where we discuss a new breed of Australian companies taking on the world and winning.

Hit the 'follow' button below to be notified when we publish the second and third part in this series.

Understand how to predict a company's offshore growth potential

Ophir specialises in identifying and investing in Offshore Growers. For more information on Ophir and to get a copy of the report please click the ‘contact’ button bellow.

(1) World Economic Outlook July 2019, International Monetary Fund, published July 2019.

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Andrew Mitchell
Director and Portfolio Manager
Ophir Asset Management

Andrew has over 15 years’ experience in portfolio management of listed companies, stockbroking and economic analysis. Prior to co-founding Ophir, Andrew worked from 2007 to 2011 as a portfolio manager at Paradice Investment Management.

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