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Overview: Collaborate Corporation Limited ("Collaborate", "the Company") is an Australian technology company operating in the sharing economy enabling the peer-to-peer rental of assets. The Company’s primary asset is Intellectual Property ("IP") surrounding a peer-to-peer sharing and identity verification platform, which can be utilised for multiple industry verticals. Collaborate’s most advanced asset is DriveMyCar, a peer-to-peer marketplace that allows car owners to rent vehicles to third parties. Since we initiated coverage in April 2017, the Company received a $1m strategic investment from the Royal Automobile Club of Victoria (‘RACV’), raised $3.5m via the exercise of 100% of CL8O Options, and posted record results in April. Our last advice was a ‘spec buy’ recommendation on 6 April 2017 at a price of $0.024.
Catalysts: Collaborate’s funding position has significantly improved following the exercise of its April 2017 options tranche and a $1m strategic investment from RACV. The strategic investment at a premium to market is a validation of management’s strategy and provides a new channel partner to leverage Collaborate’s IP into a new market. Continuation of the company’s organic growth trajectory whilst further capitalising on the growing number of strategic partnerships is a value driver. The launch of Mobilise in Q3CY17 offers an additional driver for growth.
Hurdles: Collaborate and its subsidiaries are not currently cash flow positive and there is no guarantee they will become self-funding despite its significantly improved funding position. We believe the company has a competitive edge, however, Collaborate may be subject to increasing competition from new entrants to the marketplace. There is a risk that growth across its platforms may slow down which may impact the company’s financial performance.
Investment View: Collaborate offers speculative exposure to demand peer-to-peer sharing. We are attracted to the Company’s improved funding position and growing pipeline of strategic partnerships. The investment from RACV is a validation of Collaborate’s business strategy and it opens the door to a new market of significant size. Primary hurdles include competition and the company’s need to deliver ongoing growth in order to reach a self-funding position. We believe that Collaborate’s improved funding position will enable management to drive demand for all of its platforms whilst leveraging new and existing channel partnerships. Seeking to monitor organic growth and the upcoming launch of the Mobilise business, we maintain coverage and reiterate our valuation of 6 cents/share, which represents a ~40% premium to a recent trade.
THE BULLS AND THE BEARS
THE BULLS SAY
- Collaborate is experiencing strong organic growth and a growing number of strategic partnerships should further support the company’s growth trajectory
- The $1m strategic investment from the Royal Automobile Club of Victoria (‘RACV’) at a premium to market is a validation of management’s strategy and provides a new channel partner to leverage Collaborate’s IP
- 100% of CL8O Options with expiry 30 April 2017 were exercised which is a sign of confidence and it provides the company with sufficient capital for the foreseeable future
- The upcoming launch of Mobilise could be a driver for growth if successfully executed
- Our valuation represents a substantial premium to recent
THE BEARS SAY
- The company is contingent on further growth in order to reach a self-funding position and there is a risk that growth may slow down
- We believe the company has a competitive edge, however, Collaborate may be subject to increasing competition from new entrants to the
- Even though the company’s funding position has been significantly improved there is no guarantee that Collaborate’s reliance on external capital has been entirely eliminated
- There is no guarantee that the investment in Mobilise will yield a return on shareholder funds
- The valuation is contingent on a significant degree of inventory and transaction growth, which is not assured
General Information Only
S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.
Conflicts of Interest Notice
S3 and its associated entities may hold investments in companies featured in its articles, including through being paid in the securities of the companies we provide commentary on. We disclose the securities held in relation to a particular company that we provide commentary on. Refer to our Disclosure Policy for information on our self-imposed trading blackouts, hold conditions and de-risking (sell conditions) which seek to mitigate against any potential conflicts of interest.
Publication Notice and Disclaimer
The information contained in this article is current as at the publication date. At the time of publishing, the information contained in this article is based on sources which are available in the public domain that we consider to be reliable, and our own analysis of those sources. The views of the author may not reflect the views of the AFSL holder. Any decision by you to purchase securities in the companies featured in this article should be done so after you have sought your own independent professional advice regarding this information and made your own inquiries as to the validity of any information in this article.
Any forward-looking statements contained in this article are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results or performance of companies featured to differ materially from those expressed in the statements contained in this article. S3 cannot and does not give any assurance that the results or performance expressed or implied by any forward-looking statements contained in this article will actually occur and readers are cautioned not to put undue reliance on forward-looking statements.
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