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 SAY
THE BEARS SAY
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