market cap $9m revenue $16m has reached break even new strategy will add multiple products and services
Can you see the new company within the old company? Look closely for this Phoenix from the ashes that is gonna rise in FY21.
1) background. Let’s start with the history of CM8. - started with a mobile Q&A business which made decent money from carrier direct billing, this made millions in revenue. - then added a mobile content business in 2017 which whilst it made millions. - unfortunately not only did the new business underperform they took on $20m of debt to do so and have been working it off ever since (now like $1m euro debt) - shareprice has reflected this hangover ever since
2) building a new company - step 1 - first attempt to reorientate over 2018/2019 was to leverage their social media advertising skills to become a specialist campaign agency. Given this is how they sold mobile content - they have established a network of 10,000 social media influencers, a multi language billing platform, and as a result have run multiple campaigns on a pay for service basis. This is 2019 was generating revenue of $1.6m just for running campaigns for others
3) building a new company - step 2 - what changed fundamentally which is critical to understand is the investment consortium entry in Nov 19 and completely new strategy - the new Chair and investment partners saw value in the crowd platform but are redirecting it to only selling brands they get a direct 70-75% margin on themselves as opposed to previous big name clients (like Nescafé / L’Oréal / coty / Braun/ etc) - they have over the last 6 months done 4 brand exclusive digital distribution deals, and have confirmed the expect to do 6 more brand deals within the next 6-12 months - so now they are selling products ( or as they call it ‘shifting boxes’)
4) what are the new products? - the 4 deals they have signed so far are for very high end products, best of breed in a certain vertical - remember there are 6 more coming this year - Kinn Living is award winning and sold through high end UK supermarket Waitrose - MD complete was developed by a specialist US dermatologist to replicate outcomes from perscription remedies using cruelty free vegan ingredients - Teadora is leading Brazilian ingredient based skincare range including Kaolin Clay face masks. - vital group products have a range of baby and family products
- the whole basis of the model replicates exactly what the new investment consortium have done with their own business invincible brands. over the last 3 years they have taken it from $10m Euro annual revenue to $100m annual revenue by adding new brands and selling through social media. THEY ARE NOW DOING EXACTLY THE SAME THING with CM8. You can see the invincible brands here
- The aim is for each product to generate 7-10m in revenue in its own niche (my estimated target from invincible brands) - let’s look at a one product example. This little Aussie company has built a $10m revenue business just focused on Kaolin Clay masks. On there own. CM8 have a MASSIVE existing social media campaign platform to bolt ANY product onto. You will note one of the Teadora CM8 products is a a Kaolin clay mask.
6) current financials - the financials of $16m revenue reflect the ‘old’ business. So really just a stable base to build from. - what’s great though is they have striped $8m of coats out of the business the last year so are now pretty much breaking even on a runrate basis (you need to strip out restructuring and finance one offs) - hence no more capital dilution - revenue from selling product to end June in finalist was only $325k, however it’s impossible to predict revenue from the new brands as Kinn Living has only been signed two months prior and MD and Teodora After the annual report cutoff.
7) so is there any evidence they are successfully growing these brands? - well given Kinn Living was signed in May it’s worth looking at their page which has now 19k followers and has averaged 100 new followers a day for the last couple of months since CM8 started working with them
8) NEXT UP - multiple fintech businesses! - wait there is more! - in FY21 CM8 are going to use the same model a) partnership deal b) they do selling c) they get massive share of profit ... to start a number of fintech and insurance tech service model verticals - they are already progressing Regulatry approvals within Europe to be an insurance broker (car / house / travel etc... anything but life) AND to effectively be a neobank or digital bank brand. - these will be partnership brands so for example if you look at UP bank accounts and app in Australia they are actually banked by bank of Bendigo behind the scenes - all products in the EU are transferable to any country (except UK cause of Brexit) so if they establish a Netherlands based NeoBank brand they can sell immediately multi country using their 5 language social media platforms - part of the value offering into these partnerships is that the AI driven Q&A platform they have used for apps in the past can run a large part of the service component of customer interaction.
9) and there’s more... - I won’t dwell on this too much as it’s the three year vision and there is plenty of deep value in the above. But the strategy is cemented in extending automated Q&A in writing (current) to automated Q&A with a virtual talking 3D person and monetising the conversation - they example they use is speaking to a virtual Lewis Hamilton about the grandprix. You can see live example here of how their technology works - note this company forever holdings they have just taken an 8% stake in
10) how do you value CM8? - CM8 is transforming into essentially multiple businesses in one each with one of the best multi country social media marketing platforms emdedded full time to generating sales. - if I break it into the sum of its new parts each of the new product brands if back doored into an ASX she’ll might be worth $4m- $5m market cap on their own as an opportunity... there will be at least 10 of them - a new fintech or Insurtech business back doored into an asx shell could very easily run at $10m market cap pre any revenue - so I get to anywhere from $60 - $80m market cap aggregate NEW speculative potential value - AND remember they already have $16m revenue from their existing mobile business
11) summary - $9m market cap (hmmmm maybe some value upside here ..., lol) - stonking chart now clearly in basing pattern kids 2’s and will break 3c soonish for start of a rerate towards 20c
DYOR
CM8 Price at posting:
2.4¢ Sentiment: Buy Disclosure: Held
(20min delay)
