Risks associated with a listed mobile marketing company that trades at a punchy 25x sales valuation –
Commoditised product (100+ competitors incl. Big Tech, Chinese players like Baidu, Israeli Players like Appnext, Indian Unicorns & multiple MSMEs)
90% of Rev comes from conversions (Catching a new user for your app, rerouting an existing user to complete the transaction, from ad to in-store walk-ins nearby) What if it fails to do so by not innovating enough with the changing trends/ resistance the consumer builds?
The co. has made 4 acquisitions since listing in July, last year. Makes us question what is this all about: Upgradation of capabilities (Has been happening since before IPO) or a staunch effort to continue the narrative. Rerouting of funds is common.
60% of their balance sheet is in questionable assets. Moreover, it maintains a big cash balance while taking on more debt due to ambitions being greater than cashflows. Industry personnel tells us about the viability of such intangibles & it’s doesn’t look promising.
Industry’s move towards programmable ad tech platforms. This entails real-time bidding, Faster & transparent interactions. This works on impressions only, also removing the arbitrage that they enjoy in most of their current business.
50% of the profits come from subsidiaries based out of India. Who is auditing them? Should we trust them? The answer is no for obvious reasons. – Regulatory risks (any change with the government’s view on data privacy)
LinkedIn doesn’t tell much about the employee’s pedigree & qualifications that the annual report boasts of. Good relationship/sales managers are not enough in a company that is viewed as a product company.
Last but not least, 95% of revenues is mobile apps focused. There are multiple things that can go wrong with this: on the supply side & the demand side. End of Thread.
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