Total Brain Limited

Decent Corporate Revenue Growth in FY19:Total Brain Limited (ASX: TTB) operates in developing and selling brain health products. The company majorly focuses on mental health and fitness platform, powered by the world’s largest standardized brain database. The in-house platform of the company helps people scientifically measure and optimize their brain capacities while managing the risk of common mental conditions. The company has prestigious clients like American Heart Association, Mental Health America, CNA Insurance and two clients from fortune 500 company. The company recently, updated that Mitsubishi UFJ Financial Group, Inc. has become its substantial with the initial voting rights of 5.17%.

Partnership with IBM:Recently, TTB announced its partnership with IBM (NYSE: IBM) which implants Total Brain’s technology in IBM’s THRIVE360° of mental fitness platform as prime functionality. The IBM platform powers GRIT (Get Results in Transition), a mobile based solution, which assists to understand and strengthen mental fitness, social connections, and overall well-being of individuals.

FY19 Financial Highlights:Total Brain Limited reported FY19 revenue at $2,602,137, down 0.5% on y-o-y.  The company reduced the losses to $8,570,754 from $23,947,680 in FY18. Growth in corporate revenue was the primary driver of growth for the business, offsetting declines in other revenue by 36%. Total expenses during FY19, decreased by $15.4 million or 58% to $11.2 million, aided by $17.7 million or 90% decrease in non-cash, non-recurring expenses during the period. Total cash expenses increased by $2.9 million or 46% to $9.2 million, due to an increase of $1.9 million in employee expenses and $0.8 million in corporate and operating expenses.

Operating Performance:  At the end of FY19, the business reported user registrations to 715k and the total number of brain profiles to 534k, reflecting a robust annual growth of 19% and a CAGR of 56% since December 2015. TTP increased its promotional activities through several events and speaking opportunities conducted for CY2019, representing a 3x increase on YoY. The company successfully raised the capital of $6.9 million, including a placement, entitlement offer, and shortfall placement. The fund is planned to be deployed for growth in the software and product development, followed by sales & marketing and others. TTB launched an Account-based marketing strategy, targeting the largest enterprises across the United States to increase the efficiency and effectiveness of marketing department. The new strategy has given positive results for the company, resulting in, 160 plus new marketing leads added to the database. During the year, TTB transferred to more than 600,000 existing retail users, 23 corporate clients and 5 channel partners to the new platform.


User Registrations and Brain Profiles (Source: Company reports)

Outlook:The Management stated that it will focus on improving B2B Corporate revenue with higher penetration of existing and new channel partners and executing of the financial based marketing strategy. The company will look for clients from diversified sectors with shorter sales cycles.

Stock Recommendations:The stock of TTB is trading at $0.052  with a market capitalization of $42 million (as at 5 September 2019). Currently, the stock is trading towards the higher end of its 52-week range at $0.019 - $0.058. The stock has given stellar return of ~107.69% and ~116.82% in last three months and six months, respectively. The stock is available at EV/Sales multiple of 8.9x on TTM basis compared to its industry median of 1.9x. While, Price to book value multiple at 2.1x is also above the industry median of 1.4x. Current business prospect, collaboration strategy and brand promotion, etc., boast for the future growth. However, considering the current valuations and price movement in the last 3 months and 6 months, we presume that most of the positives are factored in at the current level. Hence, we suggest investors to closely watch the stock at the current market price of $0.052, down 3.704% as on 5 September 2019 and wait for better entry point.

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