YuuZoo grows its international business through a licensee program. YuuZoo provides the licensee with a complete technology, content, advertising, billing and payment package, enabling the local partner to immediately launch a business that for the partner can generate huge revenues and profits.
YuuZoo recognises the importance of having local partners on the ground in order to maximise the relevance of our media products. Existing licensees have had huge success in building the business in the territory for which they have secured an exclusive license.
Building the storefront, the backend, the content agreements, the content uploading system, the content delivery system, the analytics, the advertising platform and all the associated parts could easily cost you several millions of dollars and take 18 – 24 months to complete. With the YuuZoo Licensee Program, the local licensee has all this infrastructure established from day one and can begin driving revenues immediately.
Based on the global peer comparison, we applied 5.5x multiple to our 2016E revenues for EV/ Revenue multiple and 16.5x multiple to our 2016E EBITDA for EV/ EBITDA multiple, we arrived at a fair value of USD 1.0 per share.
Valuation...represents a c.55% discount to larger peers’ 25x trailing 12-month PE, which appears inexpensive despite its much smaller scale and we believe that the stock should re-rate if YuuZoo Corp can demonstrate the commercial viability of its social networks through consistent delivery of revenue and earnings growth.
YuuZoo takes a revenue share of the e-commerce transactions on its network. This is like shopping malls collecting rent from their shops. It also offers a payment solution for these both online and mobile transactions. This is another revenue source. In addition, it also charges for advertising. YuuZoo also seeks out ways to work with its customers for their specific network.
One reason why YuuZoo has expanded so quickly to so many countries is its use of the Franchisee model. It seeks out a Franchisee for each country and then signs an agreement with the Franchisee to jointly run the country network. YuuZoo currently has 84 country specific networks.
This business model is interesting because it allows YuuZoo to expand globally without considerable resources. It is also able to pick a strong country partner to help it grow its social e-commerce network in that particular country. For the franchisee, YuuZoo customises the front end of the its user interface to local requirements. For this it charges a one off fee to its franchisee. The subsequent fees are through revenue share.
As with online and technology companies, scalability is what makes them exciting. YuuZoo already has the backend social e-commerce platform to run its networks. This includes access through the computer and the mobile phone. It also has various interesting technological solutions such as a payment gateway, advertisement serving and personalisation systems as well as loyalty card solutions. It is this scalability as well as the huge growth and acceptance of e-commerce and m-commerce that makes companies like YuuZoo attractive. This also gives it strong potential for exponential growth going forward.
Quantitative Equity Report
Singapore Market Focus
“YUUZOO’s 38.1x valuation is higher than average of Asia-listed peers”
“Virtual shopping mall? Social network? Lottery operator? E-commerce enabler? YuuZoo has it all. For now, however, it has yet to prove its franchising model.”
Maybank Kim Eng, 4 Dec 2014