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DollarDan

1,485 Posts.

08/03/17

19:38

Post #: 23196557
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Originally posted by alpha100 ↑

New thread title as I hate the 4c reference!
There’s been a lot of pretty useless comments on here recently, particularly about Clipp. The first thing to point out is that it is designed to work in venues that are very busy (its main advantages are convenience and saving time particularly in sorting out the bill) and by implication this means cities with large populations. So if you don’t live in Sydney or Melbourne and you’ve never heard of it, there’s a pretty obvious reason for that – you are not their target market!
The last announcement includes an outside equity interest of $(50,466) for the period 1 November 2016 to 31 December 2016 attributable to Clipp. If you multiply this by 6 to get an annual figure and divide by 0.31 as at that time MBE’s interest in Clipp was 31% you get a figure of $(976, 761), ie Clipp is losing about $1m a year currently. The gross revenue for the last half year was 4.3m which should annualise at about $10m for the full year as it’s obviously growing rapidly. On these numbers it’s not hard to imagine it turning profitable in the not too distant future, and when you compare this to for example RAP which had revenue of $66k and a loss of $7.5m for the last half year, yet is capped at $191m, it’s not hard to imagine a value for Clipp of at least say $10-30m which compares extremely well to the current total market cap of MBE of $25m! And remember MBE now owns 97% of Clipp and is in operational control of it as of recently.
Management have clearly spent too much too quickly trying to expand overseas direct carrier billing but appear to have learned their lessons and gone back to basics in particular growing the cash at bank. I’d be surprised if we see these mistakes repeated and think it’s likely that for direct carrier billing they will ditch a lot of these far flung destinations in favour of a focus on markets that are more similar to Australia like the UK and Europe where direct carrier billing probably actually works profitably for them.
Performance marketing is obviously going well and even if all they do is end up limiting the direct carrier billing business as described above and continuing to grow Clipp towards profitability, I don’t know how the stock is worth less than $0.30 or so per share. It’s been a brutal and quite ridiculous series of market reactions over the last few months, although obviously the management have not covered themselves in glory. If you back out the $6.3m spent in the last half on expanding overseas direct carrier billing the numbers look significantly different, and we should see this reflected in the next half yearly with cash levels hopefully building to $12m and beyond. I think this is likely to occur and also think they’ll give us an update on the cash position at the end of the March quarter some time in April. The stock can easily triple from here I reckon on not much news which is pretty good on a risk/reward basis!

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Some good points.

That overseas DCB spend is to establish new markets. That's the main growth driver. The market has seen the initial spend and spat the dummy because it's not profitable in its first real reporting period. The bottom line investors have left the building and fair enough. Now back to the high risk/high reward end of the market.

Some major value drivers going forward but clipp has been in the market how many years now? OS DCB is a baby comparatively.

From memory PM and Aus DCB still produced +$3.5m in cash over the six months. So you need to look where it's going, which is to try and replicate this model in much bigger demographics. Massive potential.

Must be getting close to inflection point soon.

MBE Price at posting: 5.6¢ Sentiment: None Disclosure: Held
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0 Great analysis

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