Research Report for Snakk Media Limited

5 November 2018

NXT Company Spotlight
Broadening out the offering
The benefits of the restructuring initiated in FY17 and continuing through
FY18, should be more apparent in FY19 as the business runs for a full year
on a lower underlying cost base. The upheaval in mobile advertising
markets presents opportunities as well as threats and Snakk is
diversifying its offering beyond geolocation in-app advertising to include a
broader range of digital and data products. The group is placing shares at
NZ$0.0425, raising $144k to ease its tight working capital position.
Strengthened team
Changes to the operational management team have been made to bring in a new
chief commercial officer, whose priorities include expanding the product range
within digital media, as well as growing the customer base beyond the core
advertising agency clients. The strengthened team is focused on driving product
development and ad operations, on tightened financial disciplines, as well as on
growing the top line. There remain challenges within the market environment and
revenues in H119 for managed services have been below earlier management
expectations.
Cash injection
At the end of March 2018, Snakk had a cash position of NZ$1.1m, but the funding
of working capital has placed significant restraints on the operation of the business
over recent months. Management has been reviewing its capital strategy and at the
AGM indicated its intention to raise funds through placing up to 20% of the issued
share capital, with two directors participating. Just less than 8% of the issued share
capital is being issued for $55k to Yee Industries (with Mr M. Yee to join the board),
with the two directors providing $55k and $34k respectively, initially via convertible
loans until shareholder approval is obtained.
Valuation: Below last published cash
Having reached NZ$0.10 in June 2018, Snakk’s share price has fallen away to the
current lows over the summer and autumn. The group had NZ$1.1m of cash at end
March, but this figure is outdated so, at this stage, it is not possible to determine the
group’s EV. Given the scale of the group, comparisons to global peers are of limited
use but, for context, these currently trade at median multiples of 0.5x EV/sales and
4.3x EV/EBITDA, having fallen sharply in value over the same period.
Snakk Media
Media
Price NZ$0.035
Market cap NZ$0.6m

Share price graph


Share details
Code SNK
Listing NXT
Shares in issue 16.3m
Cash (NZ$m) at 31 March 2018 1.1

Business description
Mobile advertising technology company Snakk Media
specialises in engaging consumers. It works to
identify and target mobile audiences, whether directly
by advertising to mobile devices or indirectly using
the mobile consumer data through other channels.

Bull
◼ Broadening range of products and services.
◼ Strengthened board.
◼ Cash injection.
Bear
◼ Slower growth of than anticipated.
◼ Highly competitive sector.
◼ Comparatively small scale.
Analysts
Fiona Orford-Williams +44 (0)20 3077 5739
Neil Shah +44 (0)20 3077 5700

media@edisongroup.com
Edison profile page

Snakk Media coverage is provided through
the NXT Research Scheme

Historical financials
Year
end
Revenue
(NZ$m)
Gross profit
(NZ$m)
PBT
(NZ$m)
EPS
(c)
EV/gross
profit (x)
EV/Sales
(x)
03/15 9.2 3.9 (4.0) (25.6) N/A N/A
03/16 10.5 6.6 (0.9) (6.6) N/A N/A
03/17 10.6 6.3 (3.2) (20.2) N/A N/A
03/18 10.3 6.0 (0.3) (1.6) N/A N/A
Source: Company accounts

Snakk Media | 5 November 2018 2
FY19 performance against KOMs
Snakk has now published its performance against target key operating milestones (KOMs) to date
for FY19e. The table below shows these in progression.
Exhibit 1: Performance against KOMs

Q119
(%)
Q219
(%)
H119
(%)
FY19 target
(%)
Gross margin 58 57 57 58
Compensation to revenue ratio 47 61 52 34
Impressions delivered to impressions booked 105 102 104 101
% of campaigns delivered to target 98 98 98 98, +/-5
Source: Snakk Media
The third and fourth KOM’s are new this financial year and are more appropriate for assessing the
group’s performance. Staff turnover and the click-through rate were dropped, the former as it was
inherently volatile given the small base and the latter because the measures that have replaced it
are more useful metrics.
The only one of these reported numbers noticeably adrift from target is that for compensation to
revenue. This is down to several factors; firstly that revenues from managed services were below
those anticipated; secondly that the working capital constraints have been in part behind the delays
in bringing new products and services to market; and, thirdly, the compensation bill was swelled by
payment of compensation for loss of office to the previous head of sales. Management anticipates
that the full-year figure will be 38.2% (provided revenues for the remainder of the year are as now
expected), implying a substantial fall in this ratio in H219.
Peer comparison
Snakk’s share price dropped sharply following the KOM updates in early April, falling from NZ$0.27
to NZ$0.09 initially. It then continued to drift, hitting lows of NZ$0.04 in April and May 2018,
bouncing to NZ$0.10 in June, then falling away again as the need for cash became more apparent.
The year-end cash balance was NZ$1.08m, but, given the time since elapsed, it is not practical to
use it to determine the EV. With an FY18 loss per share, the P/E is also not meaningful, rendering
peer comparison based on multiples impossible. For context, the quoted companies in the space
are trading at the multiples shown below. In June 2018, they were trading at 1.1x EV/sales and 8.6x
EV/EBITDA, twice the current levels.
Exhibit 3: Listed peer comparison

Quoted
currency
Price Market
cap (m)
EV (m) EV/sales
last (x)
Gross margin
last (%)
EV/EBITDA
last (x)
P/E
last (x)
Taptica GBP 3.0 192 194 0.9 36.5 6.2 5.9
Criteo US$ 21.3 1,380 924 0.4 35.7 3.4 13.0
SITO Mobile US$ 1.3 31.3 25 0.6 48.3 N/A N/A
Matomy Media GBP 20.4 20 52 0.4 21.9 5.2 N/A
Fyber € 0.2 27 213 1.2 27.3 N/A N/A
RhythmOne GBP 1.7 136 143 0.2 42.8 1.5 3.6
Median

0.5 36.1 4.3 5.9
Snakk Media NZ$ 0.03 0.6 N/A N/A 58.3 N/A N/A
Source: Thomson Reuters. Note: Prices as at 31 October 2018. Sales and net debt are last reported.

Snakk Media | 5 November 2018 3

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