MWR - Getting to a valuation, page-63

I think it's time to revisit the MWR valuation thesis, which I never got to finish. Since first posting, we've had Covid-19 supply concerns given the product is manufactured in China, which evolved into global lock downs and a supply problem becoming a demand problem. That led most companies, including MWR, to withdrawing guidance.

Lock downs and learning from home was a major headwind for the business. After all, why would you want to buy your child a spacetalk watch if you either can't get to the store, parents are right next to their child or even worse, someone has lost their job? On the bright side, these are temporary factors and most importantly, impacted the business during its seasonally weak period. For those new to MWR, it's about the Nov-Jan Christmas period in addition to back to school times in Australia and the UK.

Meanwhile, the business has:

• Released the seniors watch - a huge market opportunity. The product looks great too!
• The CEO got a margin call on his shares
• MWR conducted a capital raise, which was fully subscribed and upsized - this will fund the inventory and growth and was anticipated
• New Directors came on board (which look good on paper),
• The convertible note was paid back so the business is debt free, and
• The business announced its biggest ever distribution agreement, which was with Vodafone.

Excluding the market environment, these company achievements are on balance, very very positive

It's worth noting that despite the margin call, Mark recently participated in the recent cap raise, which I always view as a positive. Management and shareholders need to be aligned.

So where does that leave us now?

Well we're approximately one month away from the full year results being released. We already know that they will be average (i.e. another net loss) but the sharemarket is forward looking and this is priced in IMO. With the new seniors watch there will also be material changes to consider on demand, margins, inventory and valuation, which we should get a better idea of. This will help us work out our valuation

Covered already

• The buy thesis
• Where we are now and what's priced in
• What to look for in the 1H20 results

Can be covered now

• Product deep dive - new verticals and new markets
• What to look for in the FY2020 results

To be covered off once full year results are announced

• Financials deep dive
• Forecasting
• Downside and key risks
• Valuation - the bull and bear case
• Key catalysts

We have lots of good contributors in the MWR forum, hopefully I've got all the main ones below. Does anyone want to have a go at the product deep dive? Many of you have covered it off in pieces in other threads and I think you'd do a better job than me in this area.

@schura @cad1llac @stormer @heitor @kickit2me @stove @Bundy_too @nihilism @timbin4