Cheap stock despite the great success of Zoleo

1. Beam pre-Zoleo
Beam has a bumpy past (until the beginning of 2020), as they depended too much on the sale of devices which have not been regular.
They depended too much on a niche (B2B market) and on sales of devices (one offs) and not enough on recurring business (airtime).
Despite these difficulties, Beam has been improving its EBITDA during the last 2 years.
Their EBITDA went from a loss in FY 18, to 2 m in FY 19 and 3 m in FY 20.
Based on FY 20 results (excluding jobKeeper), Beam is valued with an EV/EBITDA of 8.3 x.
However, to be perfectly honest, we have to recognize that EBITDA does not include development costs (2 m in FY 19 and FY 20), while there was a large amount of "other income" (1.9 m in FY 20).

2. What Zoleo brought to Beam
- Zoleo enlarged Beam market, thanks to the entry in the B2C market, with an attractive price (almost no margin on the device),
- more importantly, their business model has put a clear focus on airtime revenue, which is recurring and high margin.

3. Zoleo today
- less than 1 year after its launch, Zoleo is a strong success in North America.
Unfortunately, Beam gets only 15 % of the results from their North America business.
- So, Zoleo will be reflected in Beam results if it is also a success in the rest of the world, where Beam gets either 50 % of 85 % of the results, depending on the geographic areas.

I try to find out the main reasons for the success in North America, to see if we can extrapolate the same success in the rest of the world. So far, I struggle to get many details regarding their success in NA.

4. Valuation
Based on the number of Zoleo devices sold so far (34,500 units), Zoleo should generate a global recurring revenue of 13 m.
It is valued with an EV/Zoleo recurring revenue of 1.5 x.
For now, this very low valuation may be justified as around 80-85 % of Zoleo recurring revenue is expected to come from North America (where Beam is a small minority holder). If we assume that Zoleo recurring revenue comes from North America for 80 %, Australia/NZ/Japan/China for 10 % and rest of the world 10 % : Beam's share of Zoleo recurring revenue may be estimated at 3.3 m.
In that case, Beam has an EV/recurring revenue of 5.7 x.
This is still a low valuation while Zoleo sales are at the initial stage in the rest of the world and does not assume much success in the rest of the world.