What is Linius worth?

What is Linius worth?

Linius has provided information in its most recent investor presentation dated 13 September 2019 on page 13 "SaaS revenue model" that can help us answer that question. Its example, which it characterises as "a mid-sized broadcaster", and for the assumptions given, results in revenues to Linius of A$1m per month or A$12m per annum. If one uses a revenue multiple of 20x [I choose this because it would go from zero revenues now to fast growing revenues, and for that early rapid revenue growth off a negligible base, arguably 20x is low]. On this example alone, the investment return potential is 6x using the share price of 3.3 cents per share in the current raising [according to sources on this thread].

That is not a bad return, but what if we scale up these numbers for its commercial agreement already in place with SportsHero and PSSI in Indonesia? I summarise some numbers in the following table.

			1	2	3	4	5
1			Linius SaaS	"PSSI"	"PSSI"	"PSSI"	"PSSI"
2			Revenue Model	Indonesia	Indonesia	Indonesia	Indonesia
3	Fans/subscribers	Millions	10	80 *	120 **	80 *	80 *
4	Weekly matches		50	46 ***	46 ***	46 ***	46 ***
5	Avg. length	Minutes	90	90	90	90	90
6	Monthly subscriber viewing time	Hours	6	6	6	6	6
7	Number of subscribers using Linius	%	25%	25%	25%	5%	10%
8	Number of subscribers using Linius	Millions	2.5	20	30	4	8
9	Cost of channel per month	A$	5	5	5	5	5
10	Monthly revenues to client	A$m	12.5	100	150	20	40
11	Yearly revenues to client	A$m	150	1,200	1,800	240	480
12	Monthly revenues to Linius	A$m	1	8	12	1.6	3.2
13	Yearly revenues to Linius	A$m	12	96	144	19	38
14	Linius revenues as % of client revenues	%	8.0%	8.0%	8.0%	8.0%	8.0%
15	Revenue multiple applicable to Linius	x	20	20	20	20	20
16	Implied Linius valuation	A$m	240	1,920	2,880	384	768
17	Linius capitalisation at A$0.033 cps	A$m	39	39	39	39	39
18	Potential return as multiple	x	6	50	74	10	20

Table notes:
* SHO Investor Presentation 14 May 2019, page 7: "Over 80 Million PSSI fans targeted for connection".Also page 8: "An engaged fan base of 80 million fans over 4 leagues and 128 teams."
** SHO release 1 July 2019, page 3: "… an estimated average game attendance of between 20,000 to 30,000 fans from an estimated total supporter base of over 120 million Indonesians.
*** SHO release 1 July 2019 page 3: "Throughout the 2019/20 Piala Cup season, PSSI will host up to 1,200 matches."

My approach is simple, which is to scale up the numbers that Linius has provided in its general example [Column 1] for the size of the PSSI opportunity in Indonesia, using data provided by SportsHero [Columns 2 to 5 using different assumptions, which are all shown in the table].

Column 2 takes the numbers provided by Linius in Column 1 and extrapolates them to PSSI with its 80 million fans. Changing one variable only, being 80 million people instead of 10 million used in the Linius example, yearly revenue to Linius would be A$96m [being 8 times the yearly revenue Linius gives in its example]. Put that on a revenue multiple of 20x and Linius could be worth A$1.92 billion or 50x the current share price [yes, billion, not million, because we are talking large numbers in Indonesia]. Too aggressive? A revenue multiple of 10x implies a Linius valuation of A$960 million or 25x the current share price.

SportsHero in its earlier releases has identified the size of the Indonesian fan base as 80 million. But, in its release of 1 July its states that the estimated supporter base in Indonesia is 120 million people.

In working through the numbers, the important assumption that results in these large numbers is that Linius assumes the number of subscribers that use its product is 25%. That may well be right, but what are the numbers if we use more conservatively 5% and 10% instead? I apply these to a subscriber base of 80 million people rather than 120 million.

Assuming 5% subscriber use rate [Column 4], yearly revenues to Linius are A$19m and the implied valuation of A$384m gives an investment return multiple of 10x to the Linius shareholder.

Assuming 10% subscriber use rate [Column 5], yearly revenues to Linius are A$38m and the implied valuation of A$768m gives an investment return multiple of 20x to the Linius shareholder.

There are a number of conclusions:

. The present commercial agreement between Linius and SportsHero in and of itself, if successfully implemented and popular amongst the Indonesian fans, alone has the potential to see material growth in the valuation and share price of Linius. Pick your own assumptions. I personally think a subscriber use rate of 5-10% up to 25% is perfectly plausible.
. SportsHero has not yet gone live with the Linius application on its App. It has its own technical people working alongside presumably Linius and Hemisphere technical people to implement this to the highest standard. This is the first time a personalised sport channel service has been provided anywhere, so the correct execution of this is vital.
. If these are the potential returns to Linius, the potential money in this for PSSI is quite extraordinary, which I imagine they [i.e., the "well-placed" people in Indonesia] are perfectly aware of. They have a massive incentive for this to work and I therefore infer that the marketing both for the App and the Linius service on the App will be well resourced. This is why they have structured it as a monopoly.
. Because the Linius service is not yet part of the App I personally do not envisage meaningful revenues from this to Linius this calendar year. However, revenues should progressively accrue in calendar 2020 and, from what I can tell at this stage, should be meaningful in calendar 2021.
. The Linius technology has been validated by a number of independent sources, most recently being IBM.
. All this begs the question of what the value of a cricket deal in India and/or a soccer deal in the UK could be worth. Even if one uses extremely conservative assumptions, the revenues that Linius could accrue would be, shall we say, substantial.
. But, the value of this commercial agreement alone presently imputed into the Linius share price is zero or close to zero. In a sense that is fair because revenues today are zero. However, Indonesia is a massive market [4th largest country population in the world] and its population is young and tech savvy. This is fertile ground for the Linius technology to be successful. At the very least one can say this is a low cost option for Linius and its shareholders because next to no value is being given to it for this. Linius is very, very inexpensive.