Bye for now, page-10

You raise some very good points Czarina.

Whilst I have not had time to read to much detail on the Free Trade Agreement, I personally would not expect a large impact on SMA given its type of current services in China. In saying this there may be benefits if they expand on the education channel of their business via Education123 (however I have not heard anymore on this arrangement for a while now) or potential benefits when repatriating earnings to Australia from their Hong Kong entity.

I don't feel that it has impacted their first mover advantage. The journey to get their current payments systems supported via the big players has been a very slow drawn out journey which is still going to be the case for any new company trying to enter the Chinese market for mobile phone payment systems. This I believe is largely due to the relationship based culture which always requires building the trust first which no free trade agreement will change in the short run. Chinese businesses will still like to use other Chinese businesses as they have a strong patriotism. I think most long term holders have felt every step in the long journey just to secure relationships in the Chinese market. SMA have done well in this regard but so far have not really capitalised and converted these to cash flow.

The big driver for future revenue will be securing some larger high profile app sellers to sell through their platform. The more traffic they can drive to their Mylife website the more likely they are to secure further good third parties. This is where I was worried last year as they seemed to be just trying to market their website without really having a good foundation of attractive apps for users to buy. Who would pay 30 CNY per month for what appeared to provide little new material? They are now getting some better apps on the site and with 6 third parties involved now and potential of driving more. You raise an interesting point on Alibaba and honestly if they can get in with some higher profile options then it should attract further growth. Not really knowing the full background and service offerings of Alibaba it just depends on what new value SMA could provide as I thought they would have the payments systems covered