MUA (ASX) - BUY ~ 1.05


Company Profile

  • A technology focused company, MUA currently operates 108 vertical search sites in 51 countries, while also operating 10 direct property portals in 9 countries. MUA’s core brands include Mitula, Nestoria, Nuroa, Fashiola and DotProperty that aggregates classified advertisements in the areas of employment, real estate, automotives holiday rentals in some countries and now fashion.

  • MUA is akin to the Webjet model, but instead of aggregating flights it aggregates global listings for Jobs, Cars and Homes.

  • The company seeks to provide visitors a place where they can access all the listings available in these markets, with the objective of generating traffic to the advertisers websites.

  • Internet penetration and the penetration of smartphones and tablets worldwide has resulted in significant growth in online advertising, with the ability to increase traffic of significant importance to advertisers and online stores.

  • MUA is the third largest vertical search aggregator in the world. Its two largest competitors, Indeed and Trovit, were recently acquired by large Japanese conglomerates.

  • The company has recruited people that have worked in companies that operate successful online property portals. Such as the Chairman of the Board, Simon Baker, who was previously the CEO and Managing Director of the REA Group and Chairman of iProperty Group. Sol Wise, a Director, was formerly the Financial Controller at REA Group, while the CEO, Gonzalo del Pozo and Director, Gonzalo Ortiz, founded Globaliza, a Spanish property portal.

  • The company has 2 main revenue sources:

(1) Cost per click out (CPC) revenue: CPC revenue is the primary source of revenue for the company and refers to the revenue received when a visitor to an MUA or affiliated website clicks on a listing and is redirected to the advertisers website. MUA gets paid for generating the traffic to the website.

(2) Google AdSense revenue. Google AdSense revenue refers to the revenue generated from any clicks on the Google Ads which appear on MUA’s websites. The revenue from these Ads is shared between Google and MUA. A long-term goal of the company is to reduce the reliance on Google AdSense revenue.

General Thoughts

  • Growth in Internet Usage by Individuals Globally. The penetration of the internet and mobile devices globally has driven the growth in the online advertising market, with online advertising now the second largest advertising platform globally, after TV.

  • Websites are experiencing a growing amount of traffic routed to them through search engines, which is driving demand for paid search advertising.

  • The company also offers the same services for real estate and jobs, which together with cars, form the three biggest classifieds categories in the world

  • Following a high margin, low recurring cost business model has allowed them to build a strong cash position and is backed by very strong growth seen across sales, earnings and profits

  • Revenue has grown significantly year on year over the past four financial years with revenue increasing 92% in 2015.

  • The Gross Profit Margin has remained strong, in excess of 80% for all periods

  • 32.9% increase in EBITDA to $12.7 million for the 2016 financial year

  • In the March 2017 quarter Mitula delivered a record $8.2 million in revenue, up 30.2% on the previous corresponding period

  • No debt, a healthy cash balance, and strong sales growth. $20.5 million in cash, no debt and minimal capital requirements as an internet business

  • Operating cash flow continues to grow and in aggregate has historically exceeded reported profit. The relatively capital light business model allows MUA to self-fund its growth objectives

  • The difference between a vertical search website (such as MUA) and a general search website (such as Google and Yahoo) is that a vertical search website focuses on specific listings compared to a general search website that focuses on all websites.

  • Mitula even has highly credentialled ex-REA Group boss and noted angel investor, Simon Baker on board.

  • Board that own 40% of the business

  • Mitula shares many of the characteristics of the fantastic “list stocks” of the ASX like Carsales.com Ltd (ASX: CAR) and REA Group Limited (ASX: REA)

  • Chart trending upward since Nov 2016

  • MUA has not paid out any dividends (and is unlikely to begin paying out dividends in the near term) so in our view the business firmly remains a prospect for growth focused investors with a medium to high risk tolerance.

  • MUA is only in the early stages of its listed life, we believe it is interesting for the growth focused investor.

  • MUA is a high ROE business with a strong net cash balance sheet, is a sound generator of cash flow, has experienced and aligned management, a strong growth profile and is available at a sensible price.

Entry Price: $1.05

Brokerage cost: $20

Position Size: 2,000

  • Risk = 1%

  • ATR Multiple = 2

  • Recommended Quantity = 2,000 shares

  • Initial Buy = 2,000 shares @ 1.05

Stop Loss: $0.87

  • MA50 = 0.949

  • MA150 = 0.920

  • MA200 = 0.918

Target Price: $2.00

Reasons to Buy

Reports

Mitula Group: Executing To Strategy - By Edison - Feb 13, 2017

Small-cap with big growth potential - Analyst :Adrian Ezquerro,Senior Analyst, Clime Asset Management

Valuation:

By building its position in higher growth markets rather than fighting for share in more established ones, Mitula is able to maintain a fairly light cost structure while growing above its more established peers. While its exposure to emerging markets may add a degree of trading volatility, in our view the 40% EV/EBITDA discount on which the shares trade versus Mitula’s global peer group is unjustified given the operational progress the group is making, as well as its strong balance sheet, which positions it well to add to this growth. Our DCF and peer valuation point to a per share value of approximately A$1.3 (down from A$1.4 in our last note). While some discount to reflect its size and geographical profile might be justified, our valuation is at a 50% premium to the current share price.

News

Growth Focus: Mitula Group Ltd (MUA) by Patrick Taylor - 30 June 2017 - Our primary focus here is capital gain

• MUA is capable of aggressive moves – here we find them working against major resistance which is so far holding down a potential rally backed by good fundamental performance and forecasting that combines well with an exciting, highly-correlated technical setup.

• With earnings growth above 30% last year and even greater growth predicted for the year ahead, MUA should have good newsflow on top of a price target above old highs at $1.30.

• Technically strong with positive multi-timeframe signalling coming through underneath overhead resistance at $1.00, $1.10 and $1.20 - with good support layered down from 90c, 85c and 80c.

Small-cap with big growth potential

It’s market price of $0.92 also compares favourably with our CY2017 valuation of $1.07 and the 12-month forward valuation of about $1.22.

MUA exhibits all of the characteristics that are at the core of Clime’s investment process: MUA is a high ROE business with a strong net cash balance sheet, is a sound generator of cash flow, has experienced and aligned management, a strong growth profile and is available at a sensible price.

Mitula Group delivers record number click outs to advertising partners

Mitula expands into fashion: buys Dutch company

Mitula Group reports record revenue, profit growth

When You See Value It Smacks You Right In The Face

MUA’s larger capitalized peers are trading on 25-35x multiples. To be conservative we apply a discount to its listed peers multiples and value MUA at $1.60 based on CY2018 earnings forecasts.

Why Is Mitula Group Limited (ASX:MUA) Trading Below The Industry Average? Phillip Young April 19, 2017

Ry Padarath | December 2, 2015: Mitula will outperform not only Baby Bunting, but many of the other businesses on the ASX.

Applying the average sector EV/ EBITDA multiples to Mitula’s FY17e forecasts (which we do notconsider overly aggressive given we forecast revenue and earnings growth towards the top of itspeer set) derive a value per share of A$1.3 (EBITDA basis) to A$1.5 (P/E basis).

Fundamental Reasons

From http://www.nracapital.com

Technical Reasons

Mental Thoughts

24 Jan 2018

Extraordinary returns follow extraordinary discipline. Discipline in buying and selling, and maybe the most important one of all, Holding.

There are 5 possible outcomes to any trade: A large loss, small loss, flat or break-even, small win, and large win.

When you eliminate the large losses by using stops properly, we expect the small losses and small wins to cancel each other out, leaving you only large wins.

Here is the problem: many traders get into the unfortunate habit of closing their winning trades too soon, before the move is done.

If you consistently exit your winning trades too early out of fear of losing profit, guess what happens to your big wins? They don’t exist, that’s what! You might not be losing money as a trader with this strategy, but your probably aren’t making good money either.

“While it may feel good, snatching at profits is a character trait (a habit) of a loser. In fact, I discovered that 61 per cent of investments that were sold for a profit of less than 20 per cent kept going up. Had the investor stayed invested, they would have made more money. Worse still, big winners were to be found among those [stocks that were sold].”

https://www.atradernotes.com/single-post/2017/10/01/Readings-Week-25-Sep---1-Oct-2017

https://www.atradernotes.com/single-post/2017/10/22/Readings-Week-16---22-Oct-2017

https://www.atradernotes.com/single-post/2017/07/10/Readings-Week-03---09-Jul-2017


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