Vista Group is a great example of what we look for in an investment. It has been a strong performer recently, hitting all-time highs.
Vista is a little known New Zealand company that develops software for cinema exhibitors - last time you went to the movies its software would have been running almost everything in the cinema right from providing your tickets to managing yourpopcorn order. Vista has had the local market sewn up for many years but it turns out Vista's solution isn't just the best product for the local market, but also globally.
The company's progress overseas stems from its entrepreneurial spirit and desire to build a genuine market-leading, highly scalable product. A great example of this was that many years ago Vista entered Argentina as only its third country of operation, and had to contend with complex local taxes and a new language. This was a brave and ultimately successful move.
Vista hasn't looked back since and is now present in almost 100 countries, including the fast-growing Chinese market. Vista has the largest cinema software development team in the world and has proactively reinvested in its product, which has increased its lead over competitors. The cumulative research and development spend and millions of lines of software code are a few of the elements that form an excellent competitive 'moat' around the business.
Vista has become the dominant player in its niche with global market share of over 40%. Even with such high share the company is still growing, with large cinema chains like Odeon in Europe and Aeon in Japan recently switching over to Vista. With weaker competitors falling by the wayside, it's conceivable that this could be a classic 'winner-takes-all' specialist software market.
But for Vista this is just the tip of the iceberg. Management realised that the high (and growing) barriers to entry around its leading position allowed it to collate industry data, and it has used this to develop a suite of 'ecosystem' products around its strong core. This ability of a “platform company” to profitably and organically grow new businesses from its strong platform core is rare and very powerful.
The jewel in the crown is Movio Media. This business performs advanced analytics for major movie studios to work out how to optimally spend their billions of advertising dollars. Movie advertising is increasingly going digital (think more targeted social media and less traditional TV) and so Movio can capture more of this growing pie moving forwards.
One of our preferred investment strategies is to back a leading business that can surf the wave of a powerful thematic trend like this. Beyond Movio, Vista has become aware of other other opportunities to add value to its key studios and exhibitors. It has used its customer-centric entrepreneurial mindset to pursue these through a number of early-stage businesses like Powster (film websites), Cinema Intelligence (predictive optimisation), and Numero (box office reporting).
Vista's recent 2018 result highlighted the power of a strong business with long runway and many early-stage growth options. It guided for what would be its sixth consecutive year of revenue growth in the region of 20% since listing.
We have confidence in the quality and depth of management, many of who are founders and have been with the business the whole way. This means they firmly have the 'owner mentality' and make decisions with a view to creating long term enduring value for the business. That is exactly what we love to see at Fisher Funds. Nice to be part of a kiwi success story.
