Collaborate Corporation Limited (ASX:CL8)

Leveraging Strategic Partnerships

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

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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
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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
Disclaimer

S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this report is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

Conflict of Interest Notice

S3 Consortium Pty Ltd does and seeks to do business with companies featured in its reports. As a result, investors should be aware that the S3 Consortium may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making any investment decision. The publishers of this report also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this report.

Publishers Notice

The information contained in this report is current at the finalised date. The information contained in this report is based on sources reasonably considered to be reliable by S3 Consortium Pty Ltd, and available in the public domain. No “insider information” is ever sourced, disclosed or used by S3 Consortium.

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