Formally based in Sydney, Australia, MOKO Social Media has moved their chief operations to the U.S. and is rapidly gaining market share in key, high growth, social media niches.


 

MOKO logo

 

 

 

MOKO shares closed at $5.25 on 4/27/15.


MOKO Social Media Limited  (NASDAQ: MOKO) (ASX: MKB) is a high growth social media company with multiple drivers we believe will take shares much higher as the U.S. market discovers the company.

These drivers are:

  • Ultra-fast growth in Monthly Active Users (“MAU”)from 1.5 million in July 2014 to 8 million by March 2015
  • Targeted niche focus that increases user retention rates and competitive position
  • Superb management team which includes the recent addition of Leo Hindery, former President and CEO of AT&T Broadband to the board
  • Despite high growth in both users and revenues, MOKO shares are trading at a discount to the $7.50/share U.S IPO in June 2014
  • Revenue increasing from $1.3 million USD in fy 2011 to $7.8 million in fy 2014, with a continuation in strong revenue growth expected
  • MOKO shares are trading at a (very) significant discount to recent corporate buyouts in social media space
  • The best time to buy a stock is before the market discovers it, not after. While MOKO is still relatively unknown to U.S. investors, this will change as the company is quickly capturing US market share in key, high growth social media niches. The majority of MOKO’s staff are now American and are headquartered in the company’s new Alexandria, VA office (including CEO, Ian Rodwell)

Please be advised that U.S. listed shares of MOKO are tightly held and (at the moment) thinly traded, which could lead to volatility.

MOKO is a multi-media platform providing tailored content for high value, niche user groups with mobile devices accounting for greater than 90% of user engagement. The company targets students, political supporters, and active lifestyle participants. These communities share common interests and engage regularly and efficiently. MOKO aims to capture these audiences by becoming their destination of choice for information and interaction. The company creates highly relevant and exclusive content, and provides platforms enabling communities to consume and share content seamlessly across devices.

To address these target markets and sectors, MOKO’s portfolio includes seven standalone platforms and apps dedicated to these targeted audiences:

MOKO social media apps

MOKO generates revenue from sponsorship, content syndication, social network distribution, advertising, and other monetization of the platforms. Revenue has quickly grown from $1.3 million USD to nearly $8 million USD between 2011-2014.

Shares Outstanding: 18 million. The company is dual listed on the Australian Stock Exchange and in the United States on the NASDAQ Stock Exchange. All shares are fully fungible with ~720 million fully diluted ASX shares outstanding. 40 ASX shares represent 1 NASDAQ share, therefore there are 18 million American Depository Shares (ADS).

Float: approximately 9.47 million ADS

Insider Ownership: 15%

Market Cap: ~ $95 million


 

PRODUCTS

MOKO - REC*IT logo

Launched in September 2014, REC*IT is the source for everything intramural sports and fitness on college campuses. Users can check game schedules and results, communicate with team members, and receive real-time campus updates directly through your mobile device.  REC*IT makes the intramural administration process exponentially easier and is free to users and administrators.

Since launch, MOKO announced multiple partnerships enhancing the products features, strengthening REC*IT’s competitive position and expanding its markets.

In January 2015, MOKO agreed to provide intramural data feed services imleagues’ colleges on an exclusive basis into perpetuity. imleagues provides registration, scheduling, communication, notifications, live stats, and detailed reports to 860 colleges with 11 million students. The exclusive nature creates an extremely favorable competitive position and allows REC*IT time to continually improve the features and functionality of the product to best meet the students’ and administrators’ needs.

In February 2015, MOKO entered into an exclusive partnership with InnoSoft Fusion. InnoSoft operates an enterprise software system for universities including membership management, program/camp registration, equipment/inventory management, point of sale, access control, online e-commerce and more. MOKO and InnoSoft will develop a range of initiatives, including the ability to seamlessly include student identification and authentication into the REC*IT app, and initiatives to improve the user experience where access to REC*IT was limited due to student authentication system barriers. The partnership also extends MOKO’s reach into the active lifestyle market by developing a mobile app exclusively for InnoSoft’s current and future customers using its online and mobile platform for recreational sports, fitness facilities and other activities. The initial length of the agreement is two years, which MOKO has the option to extend.

In April 2015, MOKO announced an exclusive three-year agreement with Big Teams, the official software partner of the National Federation of State High School Athletics. BigTeams is the largest high school sports software platform in the US, providing online tools and data for US high schools to assist with sports team administration, event management and fundraising. MOKO will also acquire a 10% strategic investment in BigTeams.

MOKO will launch a tailored version of its REC*IT app specifically targeted at the students and parents of more than 4,000 US high schools that are currently serviced by BigTeams, using data generated by BigTeams. The new app will launch in August 2015, to coincide with the new school year.

Within the college market, in only six months since launch, MOKO has 950 universities using REC*IT, which the company estimates is over half of the addressable market. The overall number of university students engaged in sports and recreational activities is 15 million in the United States.

Within the high school market, the US National Center for Education projects 2015 enrollment of 16 million students. Big Teams is the largest high school sports software platform with a 15% market share. The remainder of the market is very fragmented with some 9 million high school students engaged in sports and recreational activities.

MOKO - 9 million high school students

In April 2015, REC*IT had 200,000 app downloads up from 150,000 at the end of December 2014. With REC*IT now accounting for roughly half of the universities and 15% of the high school market, REC*IT is the largest player in the market by a wide distance. The cost of design, product improvements, and customer acquisition are upfront, fixed costs meaning REC*IT can spend much more than peers to ensure it has the best product.


 

MOKO - speakiesy app

Speakiesy is a social app focused on the college market. The design and rationale for the app is a result of student focus group data received during the initial development and pilot phase of REC*IT. Speakiesy is school specific. The only way a student will be able to join their specific college’s community is with an official university email account (.edu), thus preventing outsiders from access to the app’s content.

The deliberate design of a “closed circuit” app means that users can only engage within their own college community without interference from unwanted non-student body interactions. The app will also feature the ability to follow and post content anonymously, as well as from established profiles. The app will be closely monitored with all visual content being screened via the MOKO moderation system as a failsafe to protect students and schools from undesirable content.

Speakiesy is currently in beta on nine campuses. The main competitor is Yik Yak, which is a more general community app without the closed community feature Speakiesy offers and is not focused specifically on university students so Speakiesy has a clear advantage. If Speakiesy can take hold on campuses, it will have a very strong competitive position, as it is a multi-sided platform where the level of users increases the value for all users. This network effect often leads to natural monopolies.

The graph below illustrates REC*IT, Speakiesy and competitors with the x-axis illustrating the level of focus or targeting and the value on the y-axis. REC*IT and Speakiesy are the most target apps and should better serve their target market.

MOKO - target markets


MOKO - runhavean app

MOKO developed RunHaven to address the general endurance sports, health and fitness category, which is an underserved market opportunity in the US. Currently, there are more than 30,000 running races or events in the US each year, which draw over 50 million participants.

RunHaven is set to be the go-to online and mobile destination for users passionate about running. The app is designed to be a complete one-stop destination for all things running; with significant digital touch points dedicated to Reading, Racing, Shopping, and Sharing.

RunHaven currently delivers daily content produced by 32 contributing runners representing 21 States in the US, Canada and Australia. MOKO is collaborating with Pacers Running Stores with the goal of creating a dedicated RunHaven online Store (Shop). This will enable our community to get all of their running products without ever leaving our site. The new sites will include a Forum and Photo Albums (Share) to allow runners to interact with one another as a community.

RunHaven is one of the fastest-growing online media brands for health and fitness enthusiasts and the 3rd largest running community on Facebook and has 1.2 million monthly unique visitors.

MOKO - RaceAdvisor appIn addition to RunHaven, MOKO will roll out a new sister app called RaceAdvizor.  Management believes RaceAdvizor will become the country’s largest online databases with over 30,000 events (races). Through RaceAdvizor, runners will be able to search and choose their next race, whether it is across town or across the country. Runners will also be able to read/write race reviews and view/share race photos.

 


MOKO - BNR / Blue Nation Review app

Blue Nation Review is one of MOKO’s political platforms encompassing both a website and an app. At the end of March 2015, the website has 3.5 million monthly active users and the app has been downloaded over 500,000 times since its launch in September 2014. BNR is also being quickly recognized by key political groups and operatives as a hub for relevant media and the go to community representing today’s progressive agenda. In September 2014, BNR’s Executive Editor Jimmy Williams was invited to participate in the important Democratic event – the “Harken Steak-Fry” – in Iowa, where Hillary and Bill Clinton headlined.


MOKO - Voycit app launch pending

VOYCIT (launch pending) will be a non-partisan political group and community app that grew out of the growth of BNR. The launch of the app is perfectly timed for the height of the 2015 US political cycle. MOKO designed VOYCIT to be a non-partisan, user-generated content app empowering users to create and/or choose to follow groups devoted to specific issues, candidates or causes. Active office holders and aspiring candidates can create customized content channels within the VOYCIT platform enabling them to engage and interact with other members/users. In addition to message propagation, the app can dramatically impact local and national fundraising, petition awareness, the establishment of localized activist groups and/or the organizing of local protests and rallies.


MOKO - tagroom app

On October 1, 2014, MOKO acquired 80% of Tagroom, a news and entertainment service. Tagroom publishes popular leisure content from across the internet such as viral and trending news, product discoveries and engaging videos. The beta launch has generated upwards of 5 million monthly page views. According to Alexa.com (an Amazon company that measures global internet traffic and user engagement), Tagroom.com is also experiencing exceptional user engagement; average daily users spend more than 11 minutes on the site. At the end of March 2015, Tagroom had over 3 million monthly unique visitors.

The addition of Tagroom.com to MOKO’s portfolio is synergistic with the company’s overall audience profile providing marketers and brands with direct access to the coveted hard to reach audiences. Brands and agencies seeking to engage with young adults will find Tagroom complete with a host of native advertising offerings.

MOKO is in the process of developing a dedicated native mobile app for Tagroom with the intention of cross promoting it across its other properties. The acquisition of Tagroom also brings with it three new senior team members experienced in the creation of viral media and shareable entertainment content for the important 18-30 year-old demographic.


NICHE FOCUS

As illustrated by MOKO’s products, the company has a niche focus. This niche focus allows the company to truly understand its customer and produce a product for that customer. This can be seen with REC*IT’s partnerships with imleagues, and InnoSoft significantly enhancing the REC*IT by addressing customers’ concerns. If MOKO was not so focused and tried to cater to all different customer segments, it would end up creating a product that met no customer needs.

This focus also leads to a much greater competitive position and profitability. REC*IT has exclusive agreements and caters to over 50% of universities through imleagues and 15% of high schools through BigTeams, despite just launching the product in September 2014. These are both leading positions and it is down to the ability to cater directly to the specific customer rather than being a generalist allowing the company to outspend any competitors within the segment on upfront fixed costs that are so prominent in the software industry. The exclusivity of REC*IT’s agreements and MOKO’s focus makes it very difficult for any competitor to potentially compete.

Additionally, MOKO’s niche focus leads to high retention and a much more engaged and therefore valuable customer. For example, after the first 30 days, REC*IT’s user base had a 98% retention rate compared to an average app retention rate of 2.3%.  REC*IT’s engagement per session was 5.5 minutes of engagement compared to the average app engagement per session of under 2 minutes. Most importantly, the average click through rate of REC*IT users was 5.22% well above all other average click through rates.

MOKO -retention rates

 

 


MOKO is almost exclusively focused on the US. This makes the company’s user base even more valuable as US social network users have the highest ad spend.

MOKO - ad spending rates

The US social network user ad spending is double its closest competitor in Western Europe and almost 7 times any other region making these users many times more valuable than anywhere else in the world.


 

MANAGEMENT

 As illustrated by the focused strategy and the recent partnerships, MOKO has a very strong management team and board of directors.

Ian Rodwell is the company’s Founder and CEO. Mr. Rodwell has over 20 years experience multimedia, corporate and consumer design and has successfully managed multi-million dollar projects across the globe for McKinsey, BMW, Unilever and MTV.

Shripal Shah recently joined MOKO as the Chief Operating Officer from the Washington Redskins where he was the Chief Strategy Office. Mr. Shah has more than 16 years of experience in digital strategy, development and execution. Prior to the Redskins, he was with Catalyst Public Relations where he was the social media architect of multiple award-winning digital marketing programs. He has also held stints at several web development agencies, developing strategies for Kenneth Cole, Seagram’s, Bank of New York, and Morgan Stanley, among others.

Leo Hindery is Managing Partner of InterMedia Partners, a New York-based media industry private equity fund. From 2001 until October 2004, he was the founding Chairman and CEO of The YES Network, the regional television home of the New York Yankees, where he won five executive producer Emmys for outstanding programming. Mr. Hindery was President and Chief Executive Officer of AT&T Broadband, which was formed out of the March 1999 merger of Tele-Communications, Inc. (TCI) into AT&T. Mr. Hindery was elected President of TCI and all of its affiliated companies, then the world’s largest cable television system operator and programming entity, in February 1997. Mr. Hindery, a member of the Cable Industry Hall of Fame, has been recognised as International Cable Executive of the Year, Cable Television Operator of the Year, and one of the cable industry’s “25 Most Influential Executives Over the Past 25 Years.” Mr. Hindery, a member of the Council on Foreign Relations, has a Master of Business Administration from Stanford University’s Graduate School of Business.


USER GROWTH

Despite MOKO recently launching or acquiring the vast majority of its products, the company has been able to grow its user base from 1.5 million in July 2014 to 8 million by March 2015. The 8 million users is further broken down to 200,000 to REC*IT, 1.2 million to RunHaven, 3.5 million to BNR, 500,000 to the BNR app, and 3 million to Tagroom.

MOKO - app user breakdown

 

The company is targeting at least 10 million users by the end of 2015. Given the company’s current user base and growth, management seems to be very conservative with its targets.

 

  • REC*IT has a virtual monopoly in the 950 universities it currently serves. Assuming over the next four years (typical student life in college and high school), MOKO can acquire 50% of the other schools it has not yet signed up; it would have 75% of the overall market or 11.25 million users.
  • In high schools, given the size advantage and ability to outspend competitors on its product development and marketing, assume it doubles its market share over the next four years to get 30% of the overall market or 3 million users.
  • RunHaven currently has 1.2 million users. Given its fast growth, we believe RunHaven and RaceAdvizor can capture at least 10% of all runners combined, or 5 million combined users over the next four years.
  • BNR website and app already have 3.5 million users. Over the next four years, this figure should double to 7 million users.
  • Tagroom has 3 million users and should reach 5 million users over the next four years.

Overall, this leads to an end of 2015 user base of 10 million based on management projections and and estimated 27.5 million users over the next three years without taking into account Speakiesy or any new product launches.


VALUATION

Recent acquisitions provide an understanding of what the industry sees as fair value for social media companies.  Of particular interest is the resulting value per user.

MOKO - average industry value/user

As illustrated above, the average value per user is $59.52 based on recent transactions. Management believes the company will reach 10 million users by the end of 2015, which we believe is conservative given current user base and growth rates. Given the 10 million user target and an average value per user of $59.52, MOKO (as compared to recent transactions) should be valued at $595 million or $33.o6 per share representing 530% above the current $95 million valuation.

Using a much more conservative valuation of $22/user, 10 million users projects a market capitalization of $220 million, or $12.22/share.

We believe as the US market discovers MOKO, the company’s strong revenue and MAU growth, world class management team, and discount valuation to recent transactions, shares will appreciate over the next 6-12 months to the $12.00-$12.50 range.


 

CONCLUSION

MOKO shares are trading at a discount to the U.S. IPO last year and at a steep discount to recent transactions in the social media space.

MOKO has a compelling, multiple-niche strategy and a strong competitive position. The company is attracting users that are extremely valuable to advertisers due to their higher retention, engagement, and click through rates. Additionally, a very strong management team is making all the right moves to continue growing the company’s user base, improve the company’s competitive position, and drive future profitability via partnerships, acquisitions and product enhancements.

MOKO - sig

 


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Disclosure: The publishers of MicrocapResearch.com own shares of MOKO bought in the open market and received compensation of $18,000 from an unrelated third party


 

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