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Should Temasek Invest $75Mn in Data Analytics Software Firm Course5?

AltG Investment Index Powered By The APEX Formula For Software Business

Overall, given the potential for scaling and rolling-up smaller software businesses onto a larger platform to generate significant returns, Temasek's interest in Course5 makes strategic sense.

What does AltG Investment Index tell us about Course5?

This is a classic Value Creation opportunity focusing mainly on Free Cash Flow growth. For the reported numbers of 2020, the EBITDA Margin at 11% was extremely low given it is a software business. As a software company, it is reasonable to aim for a higher EBITDA margin, as the industry is typically associated with high margins due to low marginal costs of production. The business must aim to increase the EBITDA margin from 11% to 25% in the next 3 years.

What should Course5 do to boost EBITDA Margins and growth?

Comparing Course5's EBITDA margin to competitors like SG Analytics and ZiMetrics Technologies, which have EBITDA margins of 25%, suggests that Course5 has significant room for improvement by:

  1. Capital Allocation will create value by Rolling Up smaller businesses with EBITDA margins of 25% and higher and integrating them into Course5's platform to boost margins via growth and cost-cutting.

  2. Analyse their product-margin mix to eliminate low-margin products: By eliminating or de-prioritizing low-margin products, Course5 can focus its efforts and resources on those that generate the highest returns.


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