CUV Ventures (TSX-v: CUV) has BIG plans by taking perhaps just 1% or less market share from an ever growing list of markets it is aggressively targeting. For example, in the $700 billion global remittances market, 1% would be $7 billion. Heck, even just one-tenth of 1% would be $700 million. Not bad for a Company with a market cap of C$33 million. This won’t happen overnight, but the Company expects revenues to grow very rapidly in 2019 vs. 2018. There are 3 key aspects of this story; first, most revenue will enjoy high margins, second, much of the revenue will be recurring, and third, CUV Ventures is harnessing technology to disrupt banking and several online industries.
The Company is built around a proprietary app called RevoluPAY®, an Apple and Android enabled e-wallet and multinational remittance app, powered by blockchain protocols. Other apps go after the remittance market, some are pretty good, but they’re largely one-dimensional. Creating an app for a single use is not hard, creating an app that is useful, easy and convenient for use in multiple end markets is very hard. In fact, it’s disruptive. RevoluPAY® is disruptive because in addition to handling remittances, the user of the app can pay for goods and services, pay friends’ and family mobile phones and utility bills (called top ups or recharges, a fast growing $10 B market), and get wholesale pricing on travel– which is disruptive of the online travel industry.
There’s also RevoluFIN, a web based factoring platform, enabling third-party financiers to directly finance outstanding secured receivables. RevoluFIN is expected to appeal to small and medium-sized enterprises (SMEs) looking for an improved way of working capital financing. Contrary to traditional invoice finance, RevoluFIN is fast, flexible and employs transparent financing terms. CUV Ventures has obtained approval for up to CAD$63 million in seed capital and has 2 other seed capital providers potentially interested in participating if and when necessary.
The entire CUV Ventures network is a closed loop centered on RevoluPAY®, all of the Company’s verticals require downloading the app. This closed loop ecosystem is the secret sauce that could make CUV Ventures a big winner. Each transaction on the app increases the chances that the user will transact in different ways with other users in a chain reaction. Remittance senders will discover the ease of use and huge savings of the RevoluVIP travel club to go visit the people they send remittances to.
Next month, possibly sooner, CUV Ventures expects to receive a European PSD2 Electronic Money Institution banking license. This will not only save the Company on transaction costs, it’s a prestigious license to obtain. This license will enable:
- Operating a payment account and enabling cash to be placed on and, withdrawn, from a payment account
- Executing payment transactions
- Issuing payment instruments or acquiring payment transactions
- Money remittance
- Payment initiation services
- Account information services
- Proprietary SEPA and Swift Codes
These abilities will allow CUV Ventures to actively pursue all of its initiatives and more. Most of the costs to set up RevoluVIP, including the costs of obtaining a banking license have been spent. In fact, several of the verticals were largely paid for last year and are awaiting a ramp up in revenue. The question is, how fast will revenue grow? Some shareholders believe that we could see C$100 M in revenue in the year ending February 29, 2020.
A seemingly aggressive prediction like C$100 M in revenue is partly based on the belief that the Company’s RevoluVIP Travel membership club will be a great success. On paper, it can’t be beat– with a Diamond membership for US$249/yr., one gets wholesale prices on all travel. The savings are enormous on wholesale vs. retail pricing. Therefore, some believe that tens or even hundreds of thousands of Diamond memberships will be sold in the next 12 months. Each 100,000 Diamond members = US$24,900,000 = C$33,000,000 in high margin revenue.
Recall that RevoluPAY® processed its first US$25,000 of VCC cards on the very first day the system was live, (about 5 weeks ago) receiving a 3% fee = US$750 in revenue. With over 3 million B&Bs worldwide that could use CUVs RevoluPAY®, the revenue number could grow quickly. AND, the profit margin embedded in the 3% fee is quite robust. A recent press release confirmed that this revenue stream is indeed growing. Assuming that the 3 million B&Bs have a 66.67% occupancy rate and charge C$75/day, that’s C$54.75 billion in annual revenue. If CUV Ventures could get win 1% of that, it would be C$547,500,000/yr. 3% of that amount would beC$16.425 million in high margin processing fees.
I have no predictions on revenue, I think it’s too hard to call. However, revenues are ramping up this year, now’s the time to be watching to see if CEO & Director Steve Marshall can execute over the next 12 months. How much annual high margin revenue would the Company need to justify its C$33 M market cap? I would argue a lot less than C$100 M.
The top 10 cannabis companies are trading at sky-high revenue multiples. On a trailing 12-months basis (through Sept 30, 2018), they’re trading at roughly a 130 times multiple. A year from now they will probably be trading at about 30-40 times trailing revenue. If CUV Ventures (TSX-V: CUV) does what it has set out to do, its revenue will be growing much faster, and its margins will be much fatter, than those in the cannabis sector. What multiple of trailing 12-months revenue should CUV Ventures command on the 12 months ending February 29, 2020 financials?
— Peter Epstein, epsteinresearch.com
FULL DISCLOSURE: CUV Ventures is an Equity.Guru marketing clientDisclaimer: ALWAYS DO YOUR OWN RESEARCH and consult with a licensed investment professional before making an investment. This communication should not be used as a basis for making any investment.
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