Well quite an eventful AGM with a full house listening to Drew and Chris explain the "speed bump" whilst doing a pretty good job of mapping out the future which looks very bright indeed, especially OS.
The main points worth noting were as follows;
The one-off event was something they haven't seen in 13 years where each of the 4 pillars were inadvertently hit at the same time, the perfect storm if you like, which was unprecedented. One publisher which had the majority of traffic stopped suddenly due to compliance which sent MBE's CPA's to rise sharply which caught them totally off guard.
He confirmed the commercial sensitivity around this problem where he couldn't name and shame their partner who inadvertently caused this problem. This is why the first 3 lines in his update was ambiguous and should have been made clearer which Angus, a verbose and astute shareholder, reminded everybody of amongst a stack of other home truths which management had to take on board.
The compliance issue had another adverse affect which they were expecting and they are reconfiguring the marketing to get things back on track. The metrics are now coming back on line.
7.2 billion people worldwide, 6.8 billion phone accounts compared to 2 billion c/cards.
He made the point that very few companies worldwide do what MBE does and they are No 1 in Australia for DCB and the clear market leader.
Management has substantial equity in the company and they are very much aligned with shareholder SP concerns. They too are very disappointed with the SP and focussed on getting the company growing swiftly, especially OS.
Philipines, Indonesia, Europe and more from the Middle East coming. These will be part of the 10 new countries coming I presume.
The relationship with Telenor is going from strength to strength with MBE their only "go-to" company and they want MBE live with "every single one of their telco's". Exclusivity in partnership is MBE, Google and Spotify.
100% organic growth occurring OS now and DCB OS will overtake Australian DCB "imminently". That was a very nice surprise.
Their addressable market is now 340 million and will be around 1 billion in 2019.
International revenue this FY $25 mil, up from 14.4 mil last year. International transactions have doubled this FY.
Their 2nd stage of growth is going to come from "data assets" which is looking at growing at a "massive scale".
Clipp was very interesting with MBE is final negotiations with several opportunities for brewing companies to sell them info about who is buying their products. There is currently no one who can provide them this and one of their 3 revenue drivers out of Clipp that could be lucrative, along with the product clipps and targeted advertising to customers. Watch this space with news "shortly".
98,000 registered users, 750 venues live and 250 with last minute significant discount deals.
Clipp for corporates is building with Macquarie Bank, AMP, EY and Ch 7 clients where their staff get 25% discounts to venues. 72% owned by MBE who will capitalise if it becomes successful.
MBE's subscription model is going very well and they are very good at what they do with Apple and Google in this space too.
Neil and Chris are very focussed on driving growth and ramping up the telcos significantly.
There will be $1 million coming back from R & D expenses, not because of an incorrect tax ruling. The report where I read that was incorrect, but the figure is correct and will come back into this FY to counteract the $1.7 mil EBITDA hit which is yet another reason why the SP is ridiculous IMO with a huge overreaction.
Product is a big focus with fitness, mobile security, health and education.
DCB a big focus too dealing with a global tier one content owners who are looking for a new platform in marketing instead of relying on the declining free-to-air TV revenue.
55% DCB, 45% marketing
Chris reiterated how they are accelerating their diversification globally across multiple countries, carriers and products which will make any such hiccups relatively minor to avoid a repeat of this one-off event.
They have no intention of raising funds and diluting the stock with our mate Angus giving it to management delux about the need to address shareholder value, not employee salaries and options which they got loud and clear. So much so Thorpey withdrew his 40c option resolution 6 which I think is appropriate given what's happened to the SP.
Thorpey reminded all that not only does he have a substantial shareholding, but he rescued MBE 13 years ago by opting in his other company to save the employees taking shares instead. Everyone thought he was crazy but he had a vision to turn this small company into a global smart phone success story and up until this speed hump, he's done precisely that which should be recognised. His point was he wasn't "gifted any shares".
Another shareholder asked Chris where he sees the EPS in 3 years. His answer was he "anticipated EPS growth of 100% over the next 3 years". I presume that was his conservative estimation being put on the spot, but very reassuring to hear at this time.
Performance Factory was voted no 14 out of 100 recently and MBE 35 out of 100 in some sort of rapid growth sector publication.
He reminded us that telcos all round the world are losing their traditional revenue base with MBE ticking 3 major boxes for them which provides immediate revenue. This is why we've been so successful at creating such important partnerships with the largest carriers in the world.
Chris can't determine the SP, but in 2 years he believes the business will be worth a whole lot more than it is today. Dividends will be on the table in the future.
All of my mates came away optimistic that management would turn this around swiftly with every incentive to do so. Two of them are buying lots at these levels now to average down with a 2-3 year view of the SP being way beyond 12c based on Thorpey's view that their EPS will be at least 100% higher in 3 years which I think is conservative as long as they diversify and growth the business OS. With DCB OS about to take over Australia, that is certainly a very likely outcome IMO.
Hope this helps those who could not attend the AGM.
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