CUV Ventures Corp. (CUV:TSX.V) is a disruptive technology company with multiple online divisions, including in banking (global remittances) and the travel industry (wholesale travel club memberships).
The company 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 three 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 billion 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 CA$63 million in seed capital and has two other seed capital providers 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 CA$100 million in revenue in the 12 months ending February 29, 2020.
A seemingly aggressive prediction like CA$100 million 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/year, 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 equals 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 CA$75/day, that's CA$54.75 billion in annual revenue. If CUV Ventures could get win 1% of that, it would be CA$547,500,000/year; 3% of that amount would be CA$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 and Director Steve Marshall can execute over the next 12 months. How much annual high margin revenue would the company need to justify its CA$33 market market cap? I would argue a lot less than CA$100 million.
The top 10 cannabis companies are trading at sky-high revenue multiples. On a trailing 12-month 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 is the founder of Epstein Research. His background is in company and financial analysis. He holds an MBA degree in financial analysis from New York University's Stern School of Business.
[NLINSERT]Epstein Report Disclosures: The content of this article is for information only. Readers fully understand and agree that nothing contained herein, written by Peter Epstein of Epstein Research [ER], (together, [ER]) about CUV Ventures, including but not limited to, commentary, opinions, views, assumptions, reported facts, calculations, etc. is to be considered implicit or explicit investment advice. Nothing contained herein is a recommendation or solicitation to buy or sell any security. [ER] is not responsible under any circumstances for investment actions taken by the reader. [ER] has never been, and is not currently, a registered or licensed financial advisor or broker/dealer, investment advisor, stockbroker, trader, money manager, compliance or legal officer, and does not perform market making activities. [ER] is not directly employed by any company, group, organization, party or person. The shares of CUV Ventures are highly speculative, not suitable for all investors. Readers understand and agree that investments in small cap stocks can result in a 100% loss of invested funds. It is assumed and agreed upon by readers that they will consult with their own licensed or registered financial advisors before making any investment decisions.
At the time this article was posted, Peter Epstein owned stock in CUV Ventures and it was an advertiser on [ER]. Readers understand and agree that they must conduct their own due diligence above and beyond reading this article. While the author believes he’s diligent in screening out companies that, for any reasons whatsoever, are unattractive investment opportunities, he cannot guarantee that his efforts will (or have been) successful. [ER] is not responsible for any perceived, or actual, errors including, but not limited to, commentary, opinions, views, assumptions, reported facts & financial calculations, or for the completeness of this article or future content. [ER] is not expected or required to subsequently follow or cover events & news, or write about any particular company or topic. [ER] is not an expert in any company, industry sector or investment topic. [ER] may buy or sell shares in CUV Ventures and other advertising companies at any time.
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