Morgans analysis

Getting good covereage....

https://www.livewiremarkets.com/wires/28575

So here’s the kicker. If you flat line the number of customers (growing) and if you flat line the dollar value of paying customers (growing – see AARRC above) then you get to around $3.5m revenue for FY16 compared to FY15 of $2.69m. So that’s 30% growth if the business did nothing from here (assuming all recurring revenues - most are on 12 month contracts). So basically they will lose a small amount of money next year. The company has recently invested in boosting their sales staff by 5 , so for the above to happen, in my view, would be highly unlikely particularly as these staff are based in different geographies tapping in to different markets. So let’s say they grow their revenue 50% (i.e actually customers pay a little more, or they gain a handful of customers) instead of 60% half on half or 300% for the year and the salesforce actually kicks in. This will translate to roughly $435k per month billings in June 2016. Then again 50% for FY17 - completely not unreasonable off a low base… $652k a month…$7.8m revenue for full year. At this stage, I’m going to put myself on the line and assume 60% growth in FY18 off a low base as the business starts to get some momentum and the world wakes up to mobile engagement.. (i.e still growing slower than it is now in three years time! – a fair assumption) This should see them at $1m a month revenues or $12m for FY18.
Now you can assume what you want in terms of costs - but let’s say it ticks up to $6-$7m as resources are added (staff, offices, etc) from currently around $4m. If you apply a 15x EV/EBITDA multiple (not unrealistic) to a company growing 50-60% year on year (this is conservative) then you should have a valuation of $80m v EV of roughly $18.5m currently…This is roughly 4.3x the current share price or 64.5c. So I’m buying at 15c with the view this company could possibly go to 64.5c. It’s high risk, it’s tech, it’s wild and it may not work.... but it could be a fun journey. Disclosure: My super fund owns shares in OLV at above the market price, and my clients have been actively buying at current levels or above the market price.