The journey has just begun. Animoca valuation vis-à-vis Roblox

Animoca has come along way in an incredibly short amount of time. But viewed against thetrajectory of Roblox (a crude proxy for the valuation ascribed to a metaversecompany), it looks like the journey has only just begun.

Roblox

Valuation/Market capitalisation

Jan 2017: US$500million

July2018: $2.3 billion

Feb2020: $3.9 billion

Jan2021: $29.5 billion

Mar2021: $45.3 billion (IPO)

Dec2021: $72 billion (A$100b)

Revenue

2018: $312.8 million

2019: $488 million

2020: $923.9 million

2021: $1.5-2 billion + (estimate)

Bookings

(i.e., total purchases or robux virtualcurrency, including robux not spent that year. Roblox bookings convert to revenueover a 24-month period)

2018: $499 million

2019: $694.3 million

2020: $1.88 billion

2021: $2.5 billion (estimate)

Net losses

2018: $88.1 million

2019: $71 million

2020: $253.3 million

2021: losses expected to grow

Daily Active Users

Q4 2018: 13.7 million

Q4 2019: 19.1 million

Q4 2020: 37.1 million

Q3 2021: 47.3 million

· Roblox recorded bookings of$637.8 million in the 3rd quarter 2021.

· Average daily active userschecked in at 47.3 million in Q3, a 31% year-over-year increase.

· Roblox's revenue grew by 102%year over year to $509.3 million.

· hours engaged to 11.2 billionin Q3.

· Still, Roblox is not yetprofitable. Its net loss for the quarter came in at $74 million. However, thefast-growing company is already generating positive free cash flow, to thetune of $170.6 million.

Roblox’s IPO was valued at consensus forward FY 2021 and FY2022 Enterprise Value-to-Revenue multiples of 19.7 times and 15.0 times,respectively. The stock also trades at 82.1 times consensus forward FY 2021EV/EBITDA and 59.9 times consensus forward FY 2022 EV/EBITDA. Multiples haveexpanded much further since listing.

Animoca

Valuation/Market capitalisation

Dec 2021: $2.8 (A$3.9b) after subtracting portfolio/cashequivalents

Revenue (all in US)

2019: $17.8m

2020: $43m

2021: $107m (management forecast)

Bookings

2020: $43m (based on 10-month financialupdate)

2021: $143m

Net losses

2019-21: unknown

Daily Active Users

2021: < 2 million

Animoca’s market cap is equivalent to Roblox’s in early 2019.The latter has exhibited exponential growth over the past 3 years. Helped by anIPO, it is a recent example of a gaming company growing from $3b to $72b,whilst still making a loss (but generatingpositive free cash flow).

In terms of bookings, revenue and DAUs, Animoca is severalyears behind where Roblox was in 2019 when it was still valued below $3b. Animoca’srevenue needs to grow 5x (approx. $500m). I think that this revenue milestone,which could be achievable in the next 18-24 months or even quicker, will be highlysymbolic. It will be the signal for slightly more conservative early-stagegrowth investors to pile in, as by then Animoca will have a 2-3 year trackrecord of more sustainable revenue being generated from functioning blockchaingames.

After stripping out investments/cashequivalent holdings, Animoca has an Enterprise Value-to-Revenue multiple of circa 55-60.The share price is far from cheap, but few will be buying off the back of FY21revenues. In my mind, these revenues are just a teaser of the prize on offer ifAnimoca can carve out a niche role in the metaverse as it develops mass-market appealover future decades.

Animoca remains a high-risk speculative investment, but imhoit is on the cusp of transitioning to a high-risk growth company (which is whenrevenue multiples will be more useful). As Roblox has demonstrated, A$100b marketcapitalisation is well within the realms of possibility.