Enterprise value..

Posted by fluid3d Enterprise value of Cloudtag pt1 19:04 on LSE

“Evening all. I’ve spent a bit of time analysing the Onitor rebrand, and must say as an investor looking at the potential business value, I’m very impressed.

I’m also surprised at how many here are missing the point of investing in Cloudtag entirely, so wanted to share my view.

The key mistake many seem to be making is to base judgement on the featured product. Firstly, investors (and detractors) are waxing lyrical over the aesthetics, the functionality, the features – and comparing against other wearables in the consumer sector. I understand that this is the one tangible aspect for us to pore over, but it’s just scene dressing. Cloudtag has never been a company whose enterprise value is based on a specific product, so im almost completely disregarding the hardware, and certainly won’t base my investment decisions on a poster crying over details such as whether this has a screen, or works in the shower.

Tech valuations don’t work like most other AIM stocks. Revenue isn’t a factor in a valuation, nor is the potential of stock to be sold into the market. This confuses most investors who may be used to assessing the next big mining stock, but thankfully doesn’t confuse the institutional investor or large cap buyer.

Not having a product out on the shelves already is a major bonus to a buyer, believe it or not. There’s less to unpick when the chequebook has come out and Cloudtag has to be integrated. For example, not having to recall shipped devices to rework the packaging, not having to rebuild the website, not having to refactor the EULA’s for all those users who have agreed to have their medical data stored on the cloud. Phew – what a costly mess that becomes! Cloudtag are at the perfect point for takeover, with a nicely developed packaged offering of a business – hence why the big focus on CES 2017. Deals will be made here.

If you are looking to buyout this company (which is the strategic intent of the BoD), or indeed offer an OEM contract – the business model is what’s important.

Factors to consider; Can we develop multiple revenue streams? Is a channel to market developed and tested? Will this shortcut the complex processes of developing, protecting and manufacturing a technology to spec and to cost? Do we have a clearly-defined usp, and a suitable target market? Is the brand broad enough to get share of wallet in that market? Is the business structure versatile enough to merge with another business, and develop growth?

These are the areas a potential buyer or OEM partner will be looking at, not whether the damn thing clips to your bra.

Cloudtag’s mandate is to simply provide an infrastructure and a commercial vehicle for Imec’s technology – which, if you are unaware, is world leading ip, that sports a business model preventing it going to market via a consumer product under it’s own steam. And IMEC chose Cloudtag to do that, exclusively at its most fundamental level, Cloudtag then adds additional value to IMEC’s ground-breaking hardware, by augmenting additional revenue opportunities in support of its ability to generate accurate data.

Accurate data is valuable of course, and this makes the concept of Onitor interesting beyond the consumer – as a volume of live, field-tested accurate medical data doesn’t currently exist. Accurate data can be measured scientifically, or used in a court of law for example – it has intrinsic value beyond the mainstream.

Imagine being able to adjust a healthcare insurance premium in real-time based on the members exercise regime and current BMI?

Imagine an automotive insurer challenging blame over a car accident, as the driver’s heart rate data (stored safely in the cloud), showed arrhythmia prior to the accident, and was therefore legally culpable? Do you think someone like Axa, Lloyds or Bupa might be prepared to pay a fortune for access to an ocean of accurate user data like this?

This is our customer, and they have money. Lots of it.

Of course, consumers subscribing to the Onitor cloud service then becomes an additional cash cow, by creating a predictable, repeatable, recurring revenue stream that co-incidentally generates an ocean of valuable data that is gold to the medical, insurance and sporting world. Two lovely revenue streams already then, that dwarf the margin of a few million hardware sales. Large caps like predictable revenue too – and are willing to pay premium for it.

Make no mistake, Cloudtag’s enterprise value revolves around the licensing opportunities associated to Onitor and all that resides under it, not the volume of hardware it can ship, or the form factor of it’s design. This is why they haven’t seen large volumes of product made. We don’t need it, it’s costly to put into a warehouse and its largely immaterial.

The hardware we are looking at on the website is simply a statement of intent – it displays a reference model / prototype / proof of concept – of a product that sums up the design language and philosophy of the company. You want to OEM technology powered by cloudtag? Then one glance at their brand tells you that you’ll be working with premium tech, that’s medical grade, that puts battery life as a critical requirement enabling it to run reliably when it’s needed – at the gym or in sub-zero temperatures, that doesn’t need a screen as it’s designed to be powered by remote computing and an app, and safely stores its data in the cloud (a must for medical records).

It’s based on a technology that is an enterprise, prosumer offering, not consumer focused drivel – and all this is communicated by a website and an intentionally modest amount of manufactured product. Cloudtag have invested their money in developing a brand and concept that sells the company story, it’s that simple in terms of structure, Cloudtag have positioned themselves as a licensing provider, with a distinct IP division and a manufacturing arm primed with distribution deals ready to leap into action. Since the rebrand, the company is now much more commercial – but crucially it opens the door to a more diverse business model than current wearables. Onitor extends way beyond the single product, and very much explains where the team’s efforts have gone, and money has been spent. One look at Onitor today shows a single product and an app, but really you are looking at a platform that can encompass smart clothing, footwear, medical devices, prosumer tech, consumer tech, the weight loss market, biometrics, data licensing…RNS’s all to come.

I’m most excited by the increased potential in the prosumer space, the OEM deals and data licensing that the ‘powered by cloudtag technology’ now affords us. If I was a technology company, itching to get into the wearables sector but put off by established brands that are hard to refactor, then I’d look at Cloudtag in the way outlined above.

Finally, how to put a number on this? Very simple. Measure the business potential against it’s peers, and if you have a look, it’s peers are certainly trading way higher than 7p.

Have fun.”

onitor-model

All images are taken from the official cloudtag Onitor website

*Please ONLY ever invest what you can afford to lose, because investments can go down as well as up and there is a risk of losing your entire investment. This blog is only to be used for research and information purposes, I am not qualified to provide any financial advice and do not suggest you buy any shares off the back of the information I’ve put together here. Please do your own research*

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