Ann: Half Yearly Report and Accounts, page-13

@japanfresh
Not sure how they are allocating their sales and marketing expenses but it is almost as if they are staff costs. If they were costs that scaled with cash receipts- we would have been seeing a significant increase in the last few 4cs, and instead they have been remarkably static at approx 500K per quarter. Even in the accounts it is only a minor increase, so I am not really worried about sales expenses.

On a recent trip, I used my global data from my starter pack initially, then topped up with a local plan, which was to be quite honest very competitive. On the plus side- the use case for flexiroam has clearly improved dramatically with these local plans. On the negative side, I have been keeping an eye out for blow-outs in the gross margin- because of the negative working capital situation, fast growth can actually hide an unprofitable business model, and you can get heavily cashflow positive with a slightly unprofitable model that is growing very quickly. But we are not seeing that so far and GM constant in the 50-60% range which should translate to an EBITDA margin of 10-15% at scale, which is comparable with premium MVNOs.

The key quarter ends March 19- if that is cashflow positive it is all stations go and we should see rapid and significant rerating, particularly with eSim flagged for April. Based on past experience, you just cannot acquire stock at that stage at a reasonable price (particularly when you have anchored to a low range), so you need to have a somewhat speculative stake in place earlier.

In my mind a 12 month price target of 15-20c is not improbable (in fact at least 50% probable), with limited downside risk. Moreover, the upside from there is extremely asymmetric as MVNOs scale extremely well. It is not easy to have roaming agreements in place across the world and have distributors in place across all continents- it it not an easily replicable model, and not having to swap sims is an absolute timesaver for the consumer!

I am very bullish about this stock, has some of the characteristics of some of my absolute biggest winners, although the risk is not completely off the table. Anyhow with a 2-3% position size, a 5-10x can make a meaningful portfolio impact, whilst a complete wipeout barely makes a dent.