Yahoo Finance
Filing
2. Management
7.Links
Filing
Feb. 20, 2021
Sept. 30, 2020 Data, in USD$
Price: CA$1.25. Shares :73m, Cap: CA$91m
Sept. 30, 2020 Data, in USD$
Price: CA$1.25. Shares :73m, Cap: CA$91m
1.Business
(1) History
(1) History
The company was founded in 2015 by Chris Locke as a mobile game development company. Previously, he was working on mobile games for years.
In 2016, it signed a contract with Metro Trains Melbourne to develop a mobile game called Dumb Ways to Die. The game was released in 2016. The game is still available today.
In 2017, it signed a contract with Studio71 to develop a game called Guava Juice: Tub Tapper. The game was released in 2018. It seems didn't go well.
In Feb. 2018, Jon Walsh joined the company as the new CEO. Previously, he is working in the video game industry as well, but more in management roles. Since then, the company tries to change its strategy to acquire existing FTP(Free to Play) games instead of developing new ones.
In 2018, it did an acquisition of a Halifax company and didn't go well. Later in 2019, it returned all assets back to the company.
At the end of 2018, it acquired 22 games, mainly the War of Nations, from RockYou for around $8m+ $1m in contingency payment. RockYou filed for bankruptcy in 2019. The company wrote down $1m in intangible assets caused by that. The transfer of the game assets from RockYou was postponed a little bit but went well after. The company was able to stabilize the revenue of War of Nations and cut the expense by 1/3.
In Sept. 2019, the company acquired 4 games related to Smurfs for $1.8m + $300k optional payment. The transfer of the game assets seems much simpler. In 2019, the company generated $3m in adjusted EBITDA mainly from the 2018 game acquisition.
In June 2020, it IPOed through a reverse merger. Around 3.75m shares were issued to the shell company that has CA$2m cash. The shell company was traded around CA$0.09/share on a pre 8 for 1 reverse split basis. The shell company was valued as CA$3m which is CA$0.40/share. For each of PopReach's 5m shares, there are 7.62 new shares in replacement. PopReach was valued at CA$31m. Totally around 51m shares were outstanding after the IPO.
For the first 3 quarters of 2020, it generated 3.2m in adjusted EBITDA which is higher than the full year 2019.
In Nov. 2020, the company received CA$5m(7m shares) from an Alibaba-backed VC called New Insight at CA$0.72/shares. It also completed an offering of CA$17.25m(13.8m shares) at CA$1.25m/shares. As a result, around 20m more shares were added.
(2) Major business
Currently, it owns 24 games, it generates 95% of revenue from the in-app purchase made by game players, 5% from ads. It has around 1m monthly player which generates around $19m annual revenue.
Currently, it has 110 employees from India mainly from the RockYou acquisition. It also has 20 employees in Canada.
(3) Industry
It seems quite unique by acquiring end-of-life games. There seems very limited player doing the same thing.
It seems quite unique by acquiring end-of-life games. There seems very limited player doing the same thing.
2. Management
Chris Locke: Founder and current COO. He is a very experienced mobile game developer and is the original owner of the Smurfs game which he sold and now the company bought back.
Jon Walsh: Current CEO. He was the CEO of Fuse Powered from 2009 to 2016, a mobile games supporting technology company. It was sold to Upsight in 2016. From 2001 to 2009, he was the CEO of Groove Games that created over 20 games for PC, Xbox and PS2.
Notes: Share information
Right after the IPO,
Chris Locke holds 10m shares+1/4 of Push Capital(7.2m)=11.8m shares.
Jon Walsh holds 4.1m shares + 1/4 of Push Capital(7.2m)=5.9m shares.
Trevor Fencott, another director, holds 4.0m shares+1/4 of Push Capital(7.2m)=5.8m shares.
Michael Haines, 4.2m through Push Corp + 1/4 of Push Capital(7.2m)=6.0m shares.
Totally insiders might own around 40%-50% of total shares.
Currently, it has around 3.4m options outstanding at CA$0.28/share.
3. Financial data
Notes: Debt and cash
By Sept. 2020, it has around $1.9m in $6.1m in debt. After Q3, it received CA$5.0 + CA$17.5m from 20m new shares offering. It should have $8m in net cash by the year-end.
By Sept. 2020, it has around $1.9m in $6.1m in debt. After Q3, it received CA$5.0 + CA$17.5m from 20m new shares offering. It should have $8m in net cash by the year-end.
4. Valuation and comments
(1) Currently, the company generates less than 20m in revenue and $4m in EBITDA. Its market cap is around $72m in USD. Remove the $8m cash, it is traded around 16 times EV/EBITDA. On a revenue basis, it is traded 3.5 times its revenue. The valuation is not cheap at all.
(1) Currently, the company generates less than 20m in revenue and $4m in EBITDA. Its market cap is around $72m in USD. Remove the $8m cash, it is traded around 16 times EV/EBITDA. On a revenue basis, it is traded 3.5 times its revenue. The valuation is not cheap at all.
(2) The company will most likely continue to acquire new games. There is quite some potential that the strategy works. Also, it might be able to continually generate more cash from existing games by cutting costs and improve revenue.
(3) The management team is quite seasoned with excellent past experience.
5. Risk
(1) It is a new IPO and there is a limited history of the company.
(1) It is a new IPO and there is a limited history of the company.
(2) The mobile gaming space is very dynamic and the performance of its game may change quickly. Should monitor it closely.
6. Conclusion
The company seems managed well and has a quite good potential to grow. However, the current price is not cheap and there is some risk with its business. Should watch it closely.
7.Links
