Originally posted by mikesz
Believe whatever you like - in fact you should assume I am a complete idiot and novice at stocks and whatever I say are the ramblings of a lunatic or a robot.
Buy, sell or hold it is all up to you. The below is all my own opinion.
Now the AGM
Quite a few people there and I think for the most part on the soph side of things. Some good questions asked and insights given, so let’s address the elephant in the room - JK answered this as well.
The elephant - will we ever get that $500k back?
JK’s answer was that if the board feels that it’s lost then there will be an Ann advising of that. The board feels currently this is recoverable as a result of recent NYC conversations. Also KNM provided the ASX with official purchase orders covering this amount and it was accepted that the company has a sound basis for recovery.
The issue is that last year the company orchestrated $8m of philanthropic donations to the NYC DOE on the agreement that $500k from that $8m would be spent on Kneoworld licences. Then Trump threw a spanner in the works and reallocated all funds to individual schools that simply ended up spending that money in other ways. So the $8m evaporated.
This year KNM is working under the auspices of the NAACP a registered NFP and all philanthropy funds will be funneled via NAACP and then the NAACP will purchase licenses and deploy to district schools. Renewals are being requested by the original schools.
So I’m 50/50 on this one. We may see the $500k or we may not.
The white paper
This is very significant for the company. It has been independently and scientifically verified and accepted by the US DOE under the WhatsWhat Clearing house rigour rules. This is material as that is the penultimate certification you need in the US and other countries that recognise same standards (eg Aus, Phil, UK and Canada).
The company will not be releasing the paper public ally as its unique intellectual property and has commercial value. Some long term significant shareholders can ask JK for a copy and may get access. This paper effectively gives scientific credibility to the software that it works and is effective in classroom environments. Dr Carr was said to have been massively enthused about the findings as was the whole panel that contributed.
One of the major shareholders shared that he had a dialogue with Dr Carr and couldn’t speak highly enough of her, the work done and how ecstatic she was with the findings.
The addressable market
Given the white paper and the mapping of the software to the WhatsWhat standard, there was commentary that the overall market for the software has substantially increased. This is mainly due to the fact that in classrooms, special needs and standard path students are intermixed and you can’t give the games to one group and not the other. Plus obviously the software can be adjusted to the path you’re on, so it applies to both.
The market is said to have grown in US to c.2m, Phil c.2m, UK c.700k, Aus c.1m and Canada would be similar to Aus. The numbers correspond to primary kids with special needs ONLY and represent the primary audience for Kneoworld. Obviously if we go more general then there is a massively bigger upside c.30-40m across the four regions.
The new head of US sales Dikran H. felt confident. Didn’t really get much from his preso via video link and he was very dry. But appears to have good credentials having worked at Apple education and other places.
Looking to 2019
JK commented that it takes 12 months of work to open new markets. New relationships, agreements, meetings, frameworks etc. while not super expensive to do, just takes time. The material work that has been done in 2018 is that this 12 effort is now complete in US, UK, Phil and Aus. So the company now stands on the cusp of being able to capitalise on that effort.
Yes 2018 was tough for all given the curve balls in US, but the software has been revamped, scientifically verified, new sales team in US has created a huge pipeline of opportunities, NAACP relationship, early sales in Philippines and new operations in UK make this a very good environment for great results in 2019. There was a mention of 50,000 seats in Davao City which was in negotiations.
There was also some informal indications that UK first 10 schools (maybe just 1 or 2) would be announced next week or two. The US sales probably early in 2019.
What risks remain?
2019 is make or break for me. If my analysis is correct I’ll be a rich man by year end, but obviously we must have revenue flowing. As all sales activities risk of delays, lower than expected conversion rate etc play a part. For now I am very comfortable with where this sits.
JK has lots of energy, but clearly he is not a spring chicken so there is probably a small risk of burn out particularly that he is doing both the chairman and ceo roles. I’d prefer if there two people in play driving this. That said the COO Dominic seemed very capable and fully engaged across the regions so maybe not such a huge risk for now.
Philippines is a JV so the dividends comments that Fingers mentioned is actually dividends to the company not to shareholders. Obviously we have nor control here so there may be delays or not as high as expected. On the flip side they are charging $100USD per seat so we still get $40-50 to us. Depending on payout ratio.
That is all. All in my opinion and not advice in any way shape or form.
Thank you for your input. Now it remains to be seen if in 2019 all if this will materialize. This has to do with sales and nothing else but sales. I have waited that long, I suppose I can wait another 6 to 12 months. But honestly if in 12 months, with the white paper , 4 countries with over half a billion in population, if you don't bring us at least 150 thousand seats then this is one of the big dogs of the asx. Remains to be seen. One year time I give. That's it.
(20min delay)