Well done, @Lukums. Congrats to everyone who had patience and backed up the truck at 1.5 cent levels. We are on the move now and still remain very much undervalued and under the radar. It is great to see very steady volume across the last few days.
Personally, I'd rather have a gradual, gentle share price climb, rather than a trading-fueled spike; I'm sure @Sigma would agree. With the share price having appeared to have broken out of the sideways trading channel, this is the beginning of the next stage of the company's share price journey. There will be some volatility but I think the window for sub 2c is now closing. I'd like to see slow, steady and stable progress forward.
Strengths:
The Company now has a track record of successfully designing, developing and maintaining proprietary enterprise-grade software for a leading automotive OEM.
Securing the CTP contract with GM in 2018 has seen strong revenue growth over the past two financial years. This, combined with the cost reduction program implemented in 2017, has seen the Company become cashflow positive and profitable with a clean balance sheet.
CXZ’s product is a B2B software solution for a sector known for its supplier stickiness for suppliers that are performing. This bodes well for ongoing growth within GM following the significant 5-year GM contract extension.
Automotive dealers are under increasing pressure to improve both the efficiency of their operations and the customer experience. Increasingly, technology is the tool used to achieve both of these objectives, which is what CXZ’s solutions are designed for.
The SaaS model is scalable and once the solution is live, vehicles can be onboarded quickly as was shown by the launch of OnTRAC which saw a monthly average of 70,000 vehicle subscriptions shortly after launch.
The company appears to have a good working relationship with one of the largest automotive manufacturers in the world, being General Motors. The Company has captured a ~22% share of the US light vehicle dealership market through this relationship. This distribution network is a good launching pad from which to secure contracts with other OEMs as well as increase revenue through further integrating its solutions into the GM ecosystem.
The use of OnTRAC is mandated by GM for Dealers seeking to participate in the CTP. This greatly reduces marketing costs with the OEM effectively selling the product on CXZ’s behalf.
Opportunities:
With the Company servicing the CTP program for one of the largest automotive OEMs in the US, the Company has a strong platform from which to grow the business with opportunities to solidify and grow the OnTRAC solution within GM as well as provide solutions to other OEMs through CXZTRAC.
The Company has the opportunity to participate in the growing fleet telematics market.CXZ also has the opportunity to take advantage of the potential increased importance of fleet management as the structural changes in the automotive sector continue to disrupt.
The Company’s historic GM pricing is reflective of both a likely volume-based discount owing to the size of GM’s CTP, and what was initially an unproven product. With respect to potential new OEM sales, the Company may have the opportunity to benefit from improved pricing power.
Deepening relationships within key Dealer Groups as a trusted supplier are showing signs of fostering prospective product sales at a direct-to-Dealer level. The Company’suser base of 4,000 Dealers across the US represents a large captive audience to which premium features and complementary products can be sold.
Once solidified in the US market, there is the opportunity to expand into other geographic markets such as Europe and Asia.
Where to from now? I have a view on this, but I will leave it up to all of you to decide. Below is a valuation table based upon i) FY20 figures (which will be slightly higher than FY21 figures), ii) SOI of 863M, and iii) a cash position of circa $2.4M AUD.
At a share price of 2.5 cents, which is Aaryn's incentive target (by September 2021), the company would trade at a valuation of circa $20 million. A $20 million valuation for a company like CXZ (no debt, profitable, SaaS model, strong market share) seems cheap to me.
Is a share price of 5 cents ($40 million valuation) possible in the next 6-18 months? That's up for everyone to individually decide. I've formed my own view and I'm quite happy with my 0.5% ownership of this company.
(20min delay)