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 160 telco carriers, 54 countries, and 30 languages. Founded in 2005, the Company listed on the ASX in 2015 via a reverse merger with Q Limited. We initiated coverage on Crowd Mobile in February 2015. After completing the $42million acquisition of Track Holdings BV (“Track”) in October 2015, the Company has faced operational and fiscal challenges, which is the subject of this update.
Catalysts: The driver of Crowd Mobile’s share price decline in 2016 has been multi-pronged. The Track business has substantially underperformed, with EBITDA declining by more than 50 percent versus its historical results, whilst uncertainty regarding the Company’s capital structure has further diluted investor confidence. Management has addressed these issues by jettisoning unsustainable parts of the former Track business, which we understand is now operating on a stable base and designed to help grow the Q&A business. Visibility on Crowd Mobile’s capital structure is also being resolved via aggressive principal repayments of its convertible loan facility, with net debt currently $3.4million following placement in April.
Hurdles: Whilst performance of the Track (aka “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 Q&A division, which saw EBITDA more than double in HY17. With management resources to date largely focused on overcoming operational issues within the subscriptions business, the strategic nature of Crowd Mobile’s international mobile payments network remains to be crystallised.
Investment View: Crowd Mobile provides profitable exposure to the market for mobile software and services. Whilst the Company’s performance post-acquisition of Track has been disappointing, recent initiatives to stabilise earnings and the balance sheet deserve attention. The introduction of new institutional shareholders to the register in April at a premium to market is a testament to the strategic nature of Crowd Mobile’s international mobile payments network, and cash generative abilities. With the Company showing early signs of a turnaround, our current advice is to ‘hold’ as we place our valuation ‘under review’ with a view to providing another update in the coming weeks.
THE BULLS SAY
THE BEARS SAY
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