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.
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