Overview: Crowd Mobile Limited (“Crowd Mobile”, “the Company”) is an Australian technology company focused on mobile software and mobile marketing services. Its principal asset is a Question and Answer platform (‘Q&A’) and a mobile payments network spanning 212 telco carriers, 64 countries, and 30 languages. This distribution network was built by the Company and its predecessors over 15 years. In addition, the Company launched a new division, Crowd Media, to take advantage of the $3.5bn markets for digital influencer advertising. Our last advice was a ‘spec buy’ recommendation in June 2017.
Catalysts: Supported by a new institutional investor and strengthened balance sheet, Crowd Mobile has met our FY17 forecasts (Revenue up 16%, EBITDA up 49%). With June its strongest quarter, the Company has the momentum to deliver further growth in FY18. With the cost of acquisition in its Q&A unit 20% lower YoY, early benefits of the Crowd Media initiative are beginning to show. The rhetoric surrounding the recently sluggish Subscription unit was positive, although initiatives in this unit are yet to flow through to the financials.
Hurdles: Despite the Company’s improved liquidity, its reliance on external capital may not be entirely eliminated. Whilst the performance of the Subscriptions business unit has stabilised, there is no guarantee against further erosion of its earnings base. A lack of growth within the Subscriptions division may challenge Crowd Mobile’s ability to attract an appropriate valuation for its growing Q&A division. Crowd Mobile does not own any patents to its technology and may be subject to increasing competition.
Investment View: Crowd Mobile provides profitable exposure to mobile software and services trends. After meeting our FY17 forecasts and restoring balance sheet health, the Company is in a sound position to invest in its digital influencer strategy. With recent growth fuelled by the smaller (Q&A) of its two divisions, we are carefully monitoring the performance of the sluggish Subscriptions unit and recently launched Crowd Media initiative. After updating our forecasts with the full-year result, our valuation of $0.30 per share (up 3%) represents a 66% premium to recent trade, and we maintain our ‘speculative buy’ recommendation.
THE BULLS SAY
THE BEARS SAY
Summary of revisions vs 8-Jun-2017 update
EV/EBITDA and PE ratios are based on a diluted share count of 242.3million, net debt of $2.9million, and option proceeds totalling $4.4million.
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