Investment Highlights:
$25m equity issue supported by domestic and international institutions. NNW
recently completed an $25m capital raising, which was oversubscribed and
resulted in the addition of quality domestic and international institutions on the
register. Foster Stockbroking was Joint Lead Manager to the raise. The use of
funds will primarily be used for joint marketing initiatives, which has been the
key driver for organic growth to date, infrastructure/IT system upgrades for
growth and working capital.
NNW enters a seasonally strong growth period. Management are expecting the
growth trajectory will replicate that of last year where Gross Transactional Value
increased ~4 fold from June to December 2013. GTV as of 30 June 2014 was
$579m, if it follows a similar growth trajectory to last year FY14 GTV could reach
$2.3b (FSBe $2.1b), representing an exceptional 110% YoY growth rate. We
forecast CY14 revenue of $41m.
Growth initiatives could result in material step change in performance. Aside
from the steep forecasted organic growth there are growth initiatives requiring
funding which could have a material step change in registered user and revenue
growth. Two key initiatives include a direct marketing campaign focussed on the
300m+ mobile banking user base that are not registered on the platform, and
utilising the online reward redemption facility across their partners. We believe
both these growth opportunities justify investment and are a key driver of
initiating the strategic review process.
Strategic review underway with high profile global investment banks engaged.
A strategic review process is underway with strong engagement with a number
of high profile global investment banks to ensure that NNW’s current listing
structure and capital structure, supports the optimum outcome for the
shareholders. Numerous tier one global investment banks are engaged. We view
the appointment of a tier 1 investment bank or syndicate of banks to run an
alternate market listing and capitalize the business for growth will be a positive
development.
Alternate market listing the catalyst to bridge peer valuation gap. NNW trades
at $20 per registered user vs. peer group average of $111. In our view, the
market discount can quickly unwind given the registered user growth prospects,
purchasing intent of the registered user together with marketing it to a wider
investment audience that has a strong appetite for Chinese m-commerce
companies
NNW Price at posting:
54.0¢ Sentiment: Buy Disclosure: Held
