IIR Initiates Coverage: 4.7c price target (DCF base case), page-194

May take some news (or a buyer with deep pockets) to push through the apparent wall at 2.1c / 2.2c. Unless this is a fake? But the turnover/churn at sub 2c levels is pleasing and it is positive to see CXZ maintaining the recently formed uptrend (see chart below). We keep seeing CXZ sold down on small volumes at the end of the trading day, which is often a sign of accumulation.

The full year results which will be released towards the end of the month will simply be a combination of the previous 4Cs, so as investors, we know what to expect. The FY21 revenue and profit figures will be down on FY20 (due to the well-documented semi-conductor chip shortage), but investors understand this already and are looking towards the FY22 results and beyond.

The TSD Hyundai contract comes up for renewal in October; if CXZ could snatch that contract from its competitor, that would be a highly significant win and diversify the revenue base. We do know that Connexion has the lowest cost solution on market (by far) and so it has a competitive advantage. Well-informed investors would have also discovered from their due diligence that TSD charges circa $21/device per month versus CXZ at circa $6/device per month.

Additionally, compared to competitors, CXZ is:

• i) A telemetry-first operator: operating “traditional telematics” products like CXZ Telematics gives them an edge in handling telemetry well,
• ii) Highly responsive: GM praised CXZ's speed of delivery as being exceptional, which is enabled by their flat management structure, and
• iii) Easy to use: as a relatively new operator, Connexion has focused on functionality that is most used by Dealer staff, without bogging them down with myriad superfluous features, as can happen with 20-year-old products, like TSD’s -- this results in minimal training requirements for dealer staff (these are typically lowly-paid staff, with high turnover).

We'll see how the next 12 months play out. I of course might be wrong (wouldn't be the first time), but I'm cautiously optimistic that the market will afford Connexion a valuation in the $30-$45M range once it diversifies its revenue base, versus a valuation of $15M today. From the fundies I have spoken to, diversifying the revenue base is now the final piece of the puzzle that instos want to see with CXZ before getting involved.

It may not happen immediately (unless they pull Hyundai out of the bag), but with GM signed for a further 5 years, the stage is now set for expansion to happen at some point over the next handful of quarters and beyond. I'm confident that this is the right management team to make it happen. We have a young, ambitious, and hungry team in place that wants to earn their stripes, and the former board issues (Caruso et. al.) are now a distant memory of the past with 2 very impressive new board directors in place.

I mistimed my entry by getting involved in Aug last year at 3c for a trade when I was caught up in the hype of the FY20 results without doing enough due diligence (a lesson in greed). But I am glad that I have since done the deep dive, followed the story, reached out to management, spoken with Lucerne Investment Partners, and reset my holding at sub 2c levels; because the fundamentals and the story here are very solid and I personally think we will see upside of 100% or more from current levels across the next year or two.

Time will tell.