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Low Market Cap Deserves Attention


Published 27-NOV-2018 00:00 A.M.


2 minute read

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Overview: Crowd Mobile Limited ("Crowd Mobile", "the Company") is an Australian technology company focused on mobile software and mobile marketing services. The Company operates three divisions: the Questions and Answer Platform ("Q&A"), the Subscription division ("Subscription"), and the Crowd Media Division ("Crowd Media"). Built by the Company and its predecessors over the past 15 years, the Q&A and Subscription divisions operate in 64 countries supported by 30 languages. Crowd Media was launched in 2017 and Crowd Mobile has worked with over 6,000 digital influencers to date. Wise- owl’s last report was issued in September 2017.

Catalysts: Following two years of operational challenges and declining investor confidence, Crowd Mobile continues to invest heavily in growth initiatives across all three divisions. The restructure of the Subscription division is now complete following a non-cash write-down and move to a leaner operating model, ensuring it maintains profitable, while Crowd Media is showing promising early signs. With the division on track to deliver a 250% uplift in revenues to $1.25 million during H1FY19, the transition is further supported by recently appointed key personnel with a focus to revive and optimise the business. We also see an opportunity for Crowd Mobile to enhance its balance sheet by refinancing its current borrowings and providing clarity around its cash position.

Hurdles: Despite the Company’s improved operational leverage, there is no guarantee against further erosion of its earnings base amid mixed performance across its key operations. While Crowd Mobile’s balance sheet has significantly improved over the past three years, reducing its debt by circa 80% the Company remains reliant on external capital to fund its proposed growth plans including its digital marketing strategy. Competition remains a risk in this sector due to limited-entry barriers.

Investment View: Crowd Mobile provides transitional exposure to mobile software and services trends. As the Company continues to experience a number of operational challenges, there are medium-term risks including funding, financial performance, and competition. However, we see the potential for Crowd Mobile to extract value from its existing sales and marketing infrastructure, reduce costs and broaden its revenue mix through new opportunities. If the Company can demonstrate strong corporate governance and high transparency, recent management changes have the potential to restore market confidence. While investors require a long-term speculative appetite, we believe that Crowd Mobile’s market cap of <A$10 million deserves attention and we will monitor the stock for its turnaround potential.

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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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.

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