Crowd Mobile Limited (ASX:CM8)

November 27, 2018 | Price: $0.037

Low Market Cap Deserves Attention

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.

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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