Company Overview: SportsHero Limited, formerly Nevada Iron Limited, is an Australia-based social media company. The Company is engaged in developing real-time sports social prediction platform. The Company's SportsHero application is a social network mobile application dedicated to sports prediction. The SportsHero application focuses on working with global brands to drive peer-to-peer commerce and user engagement, by providing a platform to reach sports fans around the world. The SportsHero application is available in over 160 markets across six continents. The SportsHero application allows users to compete with other users, predicting outcomes of games, matches and competitions that spans a range of sports, including football (soccer) and other sports. The SportsHero application also features in-application virtual currency, available through SportsHero Points and Golden Tickets, exchangeable for merchandise, event tickets and other items on the SportsHero.


SHO Details

Unique business model in the software sector: SportsHero Limited (ASX:SHO) is a small-cap company with the market capitalization of circa $27.43 Mn, which operates in the software industry based in Australia. It is one of the world’s first social networks company dedicated to sports prediction. It has built first Asia’s real-time fantasy sports app and social prediction platform wherein top-ranked fans can win daily, weekly and monthly prizes through interaction with fellow sports fans on the SportsHero platform to make the various sporting events and games more interesting and engaging. It has a unique revenue generation model i.e., free to play (F2P), pay to play (P2P), and pay to follow (P2F) which has evolved over the years. Robust business model, strong management and company’s brand would always give SHO an edge over other players (such as FireFan) in the sector. The vision of the company is to be the number one social network dedicated to sports in the world. With its growth driven by the fast-growing sports prediction and eSports markets, as well as the growing sports culture (particularly across Asia including India), the company has the potential to become the dominant social media platform for sport.


Unique revenue generation model (Source: Company Reports)

World Cup Campaign – a key driver for revenue: The company has initially launched its World Cup Campaign in Indonesian demonstrated proof of concept and delivered very encouraging early revenue flows. In the first two weeks of the World Cup, the company has witnessed an improvement in terms of profitability wherein localized Indonesian users generated gross revenue of A$50,180, which translates into a gross profit of A$42,653 for SportsHero. Further, the company expects from its partners to generate gross revenue substantially in July to more than A$100,000 because of the following start of the 2018/19 English Premier League and Spanish LaLiga seasons - the two most followed football leagues in the world that are a key focus for growth for SportsHero. We expect that the world cup campaign could be the development catalyst for the growth.

Integration of commercial partnerships with brand: The company has plans to scale up its business through expanding its footprint across the globe through a partnership with social media network and various entrepreneurs. On 26 September 2017, the group announced the forming of a strategic partnership with YuuZoo Corporation, whereby YuuZoo has been appointed as SportsHero Limited’s Official African Marketing Partner. This partnership gives SportsHero access to more than 100 Mn African football (soccer) fans. In Africa, YuuZoo has inked a collaborative partnership with a dominant Nigerian broadcaster, the Nigerian Television Authority (NTA). NTA runs the largest television network in Nigeria with stations in several parts of the country. This well-built broadcast platform combined with the popularity of the show will support to enhance the user base on the SportsHero platform. All revenues generated from the YuuZoo partnership will be shared equally between YuuZoo and SportsHero Limited. Besides this, the company has recently secured its new partnership with Mr Tri Putra Permadi and PT Walletku Indompet Indonesia and to deliver further global expansion and increase its user base wherein Mr Tri Putra Permadi will provide a dynamic and evolving platform into his existing networks and strategic corporate relationships while PT Walletku Indompet Indonesia (Walletku) will facilitate the sale of SportsHero tickets to Walletku’s users needing to take part in SportsHero's Indonesian rivalries. This partnership provides SportsHero the capacity to adapt Indonesia's energetic and significant football fan base.


Strategic Partnership (Source: Company Reports)

Quarterly Activity (31 March 2018): The company released its Quarterly report for the quarter ended 31 March 2018 wherein the group had total cash of $1.24 Mn and is actively focusing on to build its fully localized version of the SportsHero app for the Indonesian market to maintain its position as one of the leading sport prediction apps in the world. Following the introduction of the Company’s platform to certain strategic corporate entities in Indonesia, the Company is very confident that South East Asia will become SportsHero’s biggest football audience and market. Further, the group estimated cash outflow for the next quarter of approximately $540K, comprising of Product manufacturing and operating costs ($70K), Advertising and marketing costs ($20K), Staff costs (200K), and administrative and corporate costs ($250K).


Estimated Cash Outflow for Next Quarter (Source: Company Reports)

Product Innovation: The company trusts that it provides a meaningful and connecting social media platform. In addition to its current products, features, and services, SportsHero is planning to offer new products, features and apps to its users. Currently, the company has been working towards the launch of Version 3 App (delivery expected to be before September 30, 2018) so that it will be a beneficiary in advance from the 2018/2019 English Premier League and the Spanish LaLiga seasons. Under the new user interface, the company has introduced new sports such as cycling, AFL or rugby, with a potential to generate revenue. Further, this will support the rapid on-boarding of new sports and commercial partner integration in the long run. Hence, we expect that the company’s strong product pipeline will boost volume growth in the upcoming period.


The App with various features (Source: Company Reports)

Business model to initially focus on growing market share: The company focuses on to maximize sales and market share gain, and not just profitability. As a result, the company is undertaking synergistic investment to market its product and business development around the world. Just once the Company has accomplished its market penetration and customer dependence objectives will its focus shift to maximizing profitability. At present, the company has millions of users and is expected to touch billions of users in the forthcoming period at the back of robust product innovation, branding, and brighter industry outlook.
 
Financial Highlights: During the first half of the year, the consolidated revenue from continuing operation substantially increased year on year (YoY) to $6,385 in 1HFY18 from $83 in 1HFY17. However, loss after income tax expense amounted to $ 2,741,530 in 1HFY18 from $ 387,080 in 1HFY17 at the back of higher Employee & consulting expenses, depreciation and amortization expense, rising finance cost, restructuring expense and foreign exchange loss during the same period. As a result, basic loss per share stood at 1.24 US cents per share from nil EPS in the previous year. As on 31 December 17, the Group had consolidated net assets of $448,113(1HFY17: $ 2,840,714) with the cash balance of $ 675,464 from cash reserve of $ 1,489,666 in 1HFY17. The net asset declined due to nil of intangible asset as of 31 December 2017. In January 2018, SHO raised US$ 782,800 (A$1,000,000) through a share placement. This fund was slated for use in accelerating ongoing developments and commercialization of the SportsHero Business and administration, and fulfilling other  working capital needs. The company has a decent cash balance in 1HFY18, while the company had only $6,385 in sales, but its cash and short-term investments as of December 2017 were $ 675,464, or 106.24 times the annual sales. No dividends were proposed or paid during the period.


1H FY18 Financial Highlights (Source: Company Reports)

Positive Outlook: The company has a brighter prospect at the back of enormous market size in the US, Indonesia, Asia and rising sports lovers over the world year on year. The fantasy sports market in the United States alone has been valued at US$70 Bn annually. Moreover, it is evaluated that there are more than 1 Bn smartphone users across the Asia Pacific area (including China) and it has been further estimated that around 50% of these users are sports fans. The enthusiasm for football (soccer) is especially vast and this is one of the first sports to be featured on the SportsHero app. Throughout the following decade, it has been anticipated that the global sports world is going to shift on its axis to Asia and SportsHero intends to be a significant player in this rapidly expanding market. To capitalize on this growth potential, the company has set the target of smartphone market over Asia, including China, by providing various features such as video highlights, live scores, user tournaments, and games. The group is also planned to expand the app into Europe and the Americas.

Stock Performance: Continuous product innovation, focus on business development of a notional amalgamated community of over 1 Bn people by combining the communities of its Affiliates (such as social platforms, B2B and B2C brands and professional sports teams) to create a robust user-base of sports fans who come together to play sports games, consume content and interact with ambassadors and personalities, pave the way for enhanced scale on account of execution capabilities. Meanwhile, Mr Chris Flintoft has agreed to join SportsHero as the Company’s Chief Digital Officer (CDO) and he will lead the design and implementation of the Company’s digital product strategy and growth plans as it extends into new markets and partnership opportunities. In the meanwhile, Tony Wee (SHO’s corporate advisor) became the substantial holder of the group as he had acquired a total share of 9,551,953 shares via on-market purchase at the cost of $616,371.29, which includes recent purchases at 18.5 cents per share. In the past one year, this stock has outperformed and marked a multiple fold growth on ASX at 254.84 per cent as on July 12, 2018. For the six months, the stock has fallen 24.14 per cent, but was up by 29.41 per cent in the past month with a subsequent fall of 15.38% in last five days. Hence, we give a “Speculative Buy” recommendation on the stock at the current market price of $ 0.110, considering trading volatility and potentiality into the business in the long run underpinned by aforesaid factors.
 

SHO Daily Chart (Source: Thomson Reuters)

 
Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.