Frost & Sullivan Publishes Update Coverage Report on Vonetize Plc: Cancellation of the deal with the television studio is not expected to affect the company's operations
However, the company is not expected to meet our expectations for 2018; Vonetize needs additional sources of funding; in light of this information, we reduce the target price to NIS 0.79 per share
TEL AVIV, Israel, Dec. 6, 2018 /PRNewswire/ -- TASE analysis project was launched in 2016 in order to raise the investors' level of knowledge of TASE listed technology and life-science companies and the markets in which the companies operate, thus creating appropriate pricing and increasing the exposure of investors from Israel and abroad. Its goal is to encourage investments in these companies by removing the barrier of lacking understanding in the market.
In order to maintain professional, independent and unbiased analysis, the companies signed an agreement with the TASE to receive the analysis services for an obligatory period of two years. The companies cannot withdraw from the project during this period. The analysis is funded by the companies surveyed with funding from the Chief Scientist and the TASE.
Summary of Highlights
In our Q1 2018 report published at the end of June 2018 and in our immediate report published July 2, 2018, as well as in our immediate report from the beginning of November 2018, we reported the delays in completing Stage 1 of the deal to sell the controlling shares in Vonetize to Desilu Studios Inc., a Hollywood television studio.
For further details on the deal and the acquiring company, see the annual report we published on May 7, 2018.
On November 4, the company notified Desilu Studios of the cancellation of the deal to sell the controlling shares. We did not grant additional value to the company's activities due to the anticipated deal and therefore there is no change in our view of the company's value due to the cancellation of the transaction.
Vonetize released its third quarter report for 2018 on November 30 which included the following highlights:
A decrease in revenues from end users alongside promotion of cooperation and advancing activity in Russia
- The company's revenues remained at a similar level to those of the first nine months of 2017, amounting to approximately $ 980 thousand. In the last six quarters, we identify a certain reduction in revenues from end-users.
- The company's cash and cash flows as of September 30, 2008 amounted to approximately $600 thousand, while cash used for operations amounted to approximately $ 2.9 million, meaning the company needs financing in the short term.
- The company's auditors gave it a "going concern" warning.
- On October 2, and following previous reports of a binding memorandum of understanding signed between Vonetize and a leading corporation in Russia, the company announced the launch of a global content service (TotalNow) and channel (TotalAction). Also in October, the company announced that it had signed a deal with an internet provider from Brazil, primarily for the distribution of SmartVOD and application services to the ISP's customers, and in addition, is in advanced negotiations with a television network in the country to distribute these same services.
- On October 7, the company announced that it had signed an agreement with Hongkong Zeasn Information Technology Company Limited, a manufacturer of operating systems for smart TVs from various manufacturers, based in Hong Kong. The agreement was in regard to the distribution of Vonetize services.
In light of the developments described above, we reduce the value of the company to NIS 32 million (approximately USD 9 million); previously, our estimate of the company's value was NIS 41 million / $ 11.2 million; the target price now ranges between 0.67 NIS to 0.92 NIS and on average is 0.79 NIS.
The decrease in value is due to the company not meeting our revenue expectations. We originally estimated $ 1.6 million in 2018 revenues, and now estimate revenues of $ 1.3 million for the year. We have also decreased our 2019 revenue projections due to the company not meeting its operational goals in Russia as a result of the delay that occurred this past year.
For further details, including market analysis, the company's product and technology, see our annual report published on May 7, 2018 and the initiation of coverage published by Frost & Sullivan on June 8, 2017. For our valuation methodology see the first valuation dated October 2, 2017.
About the company - Vonetize Plc ("Vonetize"), an Israeli-headquartered company, offers Video-on-Demand (VOD), Over-The-Top (OTT) content services, technology platforms as fully-managed services for set-top boxes, smart phones, smart TVs and other Internet-connected devices. The company offers multi-screen end-to-end video content solutions, including; premium content from Hollywood studios, cloud-based digital video delivery of live VOD content, content management systems, billing, CRM, and marketing/business intelligence (BI) analysis systems. The company is active in Israel, Latin America, Africa, and the UK. Vonetize has been listed on the Tel Aviv Stock Exchange since July 2016. It was established and incorporated in Cyprus as Pixelate T.V. Ltd. in April 2011, and rebranded in February 2016.
See full report here.
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SOURCE Frost & Sullivan
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