Leveraging Strategic Partnerships
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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 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 our last update in May 2017, the Company posted a record result in the June quarter, launched the first of its products under the strategic relationship with RACV, expanded its relationship with Subaru, and increased revenue from the collaboration with Uber. A new online marketplace for assets, Mobilise.com, is expected to launch in October 2017. We initiated coverage with a ‘spec buy’ recommendation on 6 April 2017 at a price of $0.024.
Catalysts: Collaborate has built a strong foundation to leverage its strategic partnerships and tactically deploy its cash reserves to drive further revenue growth and scale its technology. The DriveMyCar unit is tracking towards a cash flow break-even position supported by a strong balance sheet and expansion into new markets through commercially proven campaigns with high-profile channel partners. The launch of Mobilise, in collaboration with strategic partner Aon, could add a new high-growth unit to the business, while key management hires, being attracted from CommBank, Expedia, and Saatchi & Saatchi, allow the Company to pursue its growth strategy in a more targeted and effective manner.
Hurdles: Depending on how it chooses to deploy its capital, Collaborate does not require short-term funding, but its reliance on external funds may not entirely be eliminated. There is no guarantee that a self-funding position will be achieved and there is a risk that growth across its platforms may slow down, which may impact the Company’s financial performance. Whilst we see the potential for the new Mobilise business to add significant value to the business, the commercial merit of this investment remains to be validated.
Investment View: Collaborate offers speculative exposure to demand peer-to-peer sharing. We are attracted to the pipeline of opportunities, management’s ability to successfully leverage strategic partnerships, strong funding position and proven prudence, and effective use of capital. Primary hurdles include the Company’s need to deliver ongoing growth in order to reach a self-funding position. Resources have been scaled up and as partnership campaigns gather pace, Collaborate is well-positioned to accelerate business momentum across all of its platforms and attract further institutional interest. Supported by a strong balance sheet, increased operating efficiency, and lean corporate structure, management is pursuing a sustainable and scalable growth strategy, validated by a strategic investment at a premium to market by RACV and consecutive delivery of record results. We reiterate our ‘spec buy’ advice and valuation of 6 cents/share, which represents a ~71% premium to a recent trade.
THE BULLS AND THE BEARS
THE BULLS SAY
- Collaborate has built a strong foundation to leverage its strategic partnerships and tactically deploy its cash reserves.
- The DriveMyCar unit is tracking towards a cash flow break-even position supported by a strong balance sheet and expansion into new markets.
- The Company has established high-quality channel partnerships and expanded marketing campaigns following successful trials
- The launch of Mobilise, which will be launched in collaboration with strategic partner Aon, could add a new high-growth unit to the business.
- Key management hires, being attracted from CommBank, Expedia, and Saatchi & Saatchi, allow the Company to pursue its growth strategy in a more targeted and effective
- Our valuation of 6 cents/share represents a 71% premium to recent trade, thus providing investors an opportunity to add
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, which may impact its financial performance
- Depending on how it chooses to deploy its capital, Collaborate does not require short-term funding, but its reliance on external funds may not entirely be
- There is no guarantee that the investment in Mobilise will yield a return on shareholder funds as the commercial merit of this investment remains to be
- 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.
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