Maxim Group LLC (“Maxim”) issues Equity Research Report on Society Pass Incorporated (“SoPa”) (Nasdaq: SOPA), SEA’s leading data-driven loyalty, fintech and e-commerce ecosystem.
Click here to view the full Maxim Group LLC Equity Research Report. https://maxim.bluematrix.com/sellside/EmailDocViewer?encrypt=eb2534e9-6164-47b7-a389-c2efe2f9983d&mime=pdf
Summary Points:
– Positive view of early stages of building SEA ecommerce company. Luxury store, Leflair provides luxury goods online. Additional businesses include online delivery companies Handycart and Pushkart (bought during 1Q22), as well as Gorilla Networks, a telecom MVNO (early June 2022). During 3Q22 the company acquired Thoughtful Media, a digital influencer, Mangan.ph, restaurant delivery, and NusaTrip, an online travel agency. SoPa will launch a loyalty points offering. Maxim believes Thoughtful Media can market SoPa’s other brands and the food delivery and luxury brand businesses can be expanded geographically. Maxim has a positive view on the SE Asian market due to increasing mobile and ecommerce penetration, younger populations, travel coming back, and the opportunity to consolidate smaller companies.
– Significant year on year revenue growth in 3Q 2022. 3Q22 revenue of $2.1M increased significantly from $84K in the prior year quarter. Digital marketing accounted for over half of the quarter’s revenue. Results were also held back as most of its businesses were very early stage. The company is in the process of restructuring several of its businesses to improve revenue and profitability.
– Healthy balance sheet and cash levels. The company ended September 2022 with $23M in unrestricted cash and no debt. Maxim projects current cash levels as sufficient to fund organic growth over the next two years.
– Challenging macro environment, yet positive on micro company business plan. Maxim factors in a more challenging macro environment impacting Society Pass’ end markets and notes that Sea Ltd (SE – NR), SE Asia’s largest internet company, has laid off 10% of staff in past 6 months and during its 3Q22 conference call projected lower than expected bookings for 2022. Maxim still expects SE Asia to be one of the fastest relative growth markets and anticipates SOPA to grow from spending on marketing, expansions, the launch of loyalty points in 4Q22, and contributions from all announced acquisitions. Maxim believes many of the businesses can be expanded geographically and benefit from greater capital.
– Strong revenue generation in 2023. Maxim projects revenue to increase from $0.5M in 2021, to $7.0M in 2022, and $40.1M in 2023. The increase is due to the significant expected contribution from acquisitions and organic growth. Maxim projects 2022 adjusted EBITDA loss to widen to ($20.7M), from a loss of ($4.9M) in 2021. The wider loss is due to one time costs related to acquisitions and higher public company expenses. For 2023, Maxim projects EBITDA loss estimate to ($11.0M).
– Compelling valuation. – SOPA trades at an EV/revenue multiple of 0.5x Maxim 2023 revenue estimate with over half of its market cap in cash. Maxim $5 price target is supported by our 10-year DCF analysis, which utilizes a 22% discount rate, 15x terminal multiple, and 3% terminal growth rate and equates to an EV/revenue multiple of 2.5x. The 2.5x multiple target is roughly inline with the peer group average of 2.4x. Our positive outlook is supported by the attractive SE Asian markets and opportunities to consolidate smaller companies. Maxim reiterates Buy rating.
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