GoverMedia Plus Canada Corp. (CSE:MPLS) could be an attractive option for investors looking for exposure to the e-commerce space, says Zacks Small Cap Research, whose new report on MPLS argues that if the company delivers on its strategy over the medium-term, its share price could hit between $1.00 and $1.25, representing a 376 to 495 per cent return on investment at the time of publication.
GoverMedia began trading on the CSE on February 28 of this year, with an IPO of 3.54 million common shares at $0.50 per share, raising gross proceeds of $1.77 million. That IPO followed a $1.0 million capital raise that saw the company issue 2.0 million shares at $0.50 per share.
The company is targeting the Russian-speaking world (GoverMedia Russia launched in August, 2016) with a “one stop-shop” online ecosystem that incorporates e-commerce, social media, multimedia, corporate auctions, messaging, crowdfunding and cryptocurrency payment processing and trading.
With 180,000 active users, the company seeks to tap the underserved, rapidly expanding Russian online community. There are approximately 50 million internet users in Russia, currently representing 42 per cent of the adult population. According to eMarketer, Russia had 54 million smartphone users in 2015 and is expected to reach about 73 million by 2019.
The Russian online retail market has grown from R$7.9 billion in 2011 to R$12 billion in 2016 and is projected to reach R$90 billion by 2025, with an estimated 35,000 new online stores activated each year.
Zacks says it’s optimistic about the growth of the Russian e-commerce space and sees GoverMedia Plus Canada as a potentially attractive option for investors, with the company aiming to generate revenue from several different offerings.
“The company is pursuing an ambitious growth strategy, although it is early in its development,” reads the Zacks report. “We believe GoverMedia shares represent an option on management’s ability to execute its strategy in a cost effective way and capitalize on the expected growing traction of its online ecosystem and platform.”
“At this stage of the company’s development, it is difficult to compare the company to more established players within the space in other markets, in our view. Specifically, we would expect GoverMedia to have a higher growth rate in these early years than many other players with longer histories if its strategy is successful,” the report states.
“That said, we believe the risk/reward ratio could be attractive for investors who want exposure to the sector and have a higher than average risk tolerance and longer time horizon,” the report states. “Moreover, there are only a few ways for investors to gain exposure to this space.”
As of March, 2018, MPLS had total assets of $1.8 million and total liabilities of $181,000, with a Q1/18 net loss of $682,000. At present, the company has no recurring revenues other than minimal interest income.
Disclosure: GoverMedia is an annual sponsor of Cantech Letter