100m market cap within 12 months, page-56

With the latest deal I now believe MKB can sustain a market capitalisation well over 100m within a year. Below is a update to a post I made on MKB a couple of months ago. I have updated the financials based on the latest deal which will now deliver access to 10m students in the US.

Why I Like MOKO.mobi
The recent rise of Facebook’s share price rise, which saw it close above its IPO price for the first time since listing this week, is pertinent for Australia’s MOKO.Mobi Limited (ASX: MKB). Why? Because through the exclusive deal signed with the ACIS (American Collegiate Intramural Sports) in March 2013, MOKO will have access to over 5 million college students across 200+ US colleges. The latest deal with IM Leagues LLC increases this to 600 colleges with 10m students.

MOKO is an Australian company based in Perth which develops and provides proprietary mobile social community platforms to select audiences who need to share their content and information with their members.

The ACIS is an organisation that provides opportunities for colleges, students and sponsors to mutually benefit through sports, recreation and fitness related promotional activities on more than 200 college campuses across the US. The ACIS has exclusive agreements with the colleges regarding on-campus marketing and already works with major brands like Nike, P & G, and Microsoft.

Although the initial agreement is for a three year term, MOKO is likely to renew the contract on a yearly basis, subject to performance hurdles being met, including minimum advertising revenues.

What is REC-IT?
REC*IT, a mobile community application which has been custom designed for US colleges, is the platform being developed by the company. It is unique in that it is not just an “APP”, but a tool for use by both faculty staff and students. The purpose built back-end will allow college staff to upload and disseminate information regarding news, scheduling, events and results to students. Clearly, it is intended that REC*IT will become an important means of communication between college staff and students. Roughly half of students enrolled in tertiary institutions in the US play intramural sports or participate in recreational or fitness activities thus creating a large captive market for MOKO’s REC*IT App. The front end will provide prospective advertisers with a unique opportunity to develop targeted marketing campaigns designed to reach students.

The development of the platform is almost complete and a beta trial will be conducted in August followed by a pilot phase with 10 colleges from September to December 2013. Following the pilot, REC*IT will be progressively rolled out to the 200 ACIS colleges.

MOKO will control and sell all advertising within REC*IT. The captive student audience will enable the creation of customised mobile advertising campaigns designed with offers that appeal. The ACIS will be entitled to a 25% share of net advertising revenue (after direct advertising costs).

Why Will Advertisers Want to Use REC*IT?
Because REC*IT is a community application specifically designed for use as a tool to manage college sport and extra-curricular activities, advertisers will be able develop targeted marketing campaigns designed specifically for students.

The potential advantages for advertisers who use MOKO’s mobile platform to market their products include:

• Provides exclusive access to market products directly to students
• The ability to run highly targeted campaigns for specific sub-groups
• Probability of higher success rates leading to more cost effective on-line advertising campaigns

Mobile Advertising Market is Growing Exponentially
As mentioned previously, Facebook’s share price (NASDAQ: FB) has risen above its IPO price for the first time since listing. Since announcing their June quarterly results on July 24th, the stock has jumped 44 percent. The major driver behind the appreciation has been an explosion in the company’s mobile advertising revenues. Approximately 41 percent of Facebook's ad revenue flowed from mobile devices in the second quarter, up from 30 percent during the prior three months. Mobile advertising revenue for the second quarter of 2013 totaled US$656 million, up an astounding 95% from the prior quarters result of US$336m. Remember that Facebook had zero revenue from mobile advertising just a year ago. By 2015 the global market for mobile advertising is expected to reach a staggering $US16.5 billion. This explosive growth bodes well for MOKO.mobi as the launch of its REC*IT platform approaches.

What Gives MOKO a Competitive Advantage?
There are two major factors which give MOKO an advantage over its potential competitors.

Offering Partners a Vertically Integrated Platform Solution
Through its Offermobi New York based mobile advertising digital marketplace / platform, MOKO offers potential clients a vertically integrated solution where one company can manage both the platform where the advertising appears and the marketing of available advertising space.

Experience in Building Social Communities
MOKO has experience in building successful on-line social communities as demonstrated by prior projects involving the television program Big Brother and the AFL.

Significant Earnings Potential
The potential earnings of MOKO from the ACIS and IM Leagues deals are very significant. Based on the parametres outlined below the company could quickly generate significant profits which would underpin a share price which is many multiples of current levels. The base case effectively shows the minimum performance levels for the ACIS and IM Leagues deals to achieve break even. The high case uses assumptions in line with current mobile advertising industry norms.



The EPS numbers include the exercise of all listed and unlisted options and a placement of 100m shares as part of the listing on the NASDAQ.

Where will Future Growth Come From?
MOKO is currently working on securing additional agreements which would generated additional revenue streams stemming from further roll outs of the company’s proprietary platform. Organisations being targeted include:

• Other colleges beyond the ACIS group
• Adventure sports & professional fitness industry & associations
• Political organisations
• Digital media partners with web assets looking to mobilise around communities
• Secondary schools

Active Newsflow
With the pilot due to get underway next month and the potential for further deals with other organisations as well as a NASDAQ listing scheduled for late this year, the news flow for MKB for the rest of 2014 should be active. This should help maintain a strong level of interest from both existing and potential new investors.