Analyst comment: the short-term benefits of the transaction are obvious, given that Family Zone will have immediate access to 260 schools and 130,000 students throughout New Zealand, which we believe will increase revenue for the current year (TSI estimate – total FZO revenue $7 million 2018 FY). That said, the longer-term benefit of implementing Linewize’s state-of-the-art platform into Family Zone is expected to result in significant ongoing cost savings, whilst the platform will also likely simplify the company’s continued expansion into the US market.
Further, Family Zone continues to progress its telecommunication strategy, as Telkomsel – one of the world’s largest mobile carriers, with 178 million users in Indonesia – recently launched its white-label service ‘Family Protect’. Given Telkomsel’s client base, this has the potential, even with a small uptake, to significantly and positively impact Family Zone’s bottom line. We anticipate additional carrier agreements and further commercialisation launches during 2018.
The information in this email should not be the only trigger for your investment decision. We strongly recommend you seek professional financial advice whenever making financial investment decisions.
Valuation: we have increased our valuation for Family Zone to $1.33 /share (previously $0.84/share). The major drivers for this were reducing our discount rate to 13.3% (previously 18.5%) and increasing our revenue assumption (1% LT uptake – 2022) for the Asian telecommunication carriers only (the previous assumption being nil revenue for telecommunication carriers). We will reassess this again as the Telkomsel partnership matures.
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