Y Ventures Group Ltd - CGS-CIMB Research 2018-08-01: Venturing Into E-commerce Cryptocurrency

Y Ventures Group Ltd - CGS-CIMB Research 2018-08-01: Venturing Into E-commerce Cryptocurrency Y VENTURES GROUP LTD. SGX:1F1

Y Ventures Group Ltd - Venturing Into E-commerce Cryptocurrency

  • We obtained more clarity and insights from Y Ventures Group (YVEN)’s briefing today following its announcement of its US$50m Initial Coin Offering (ICO) launch for its AORA coins.
  • AORA coins will be used as primary tokens for online shopping on AORA, the first blockchain-enabled global buying platform and slated to launch in 2Q19.
  • Maintain ADD. Our Target Price of $0.62 is based on 30x FY19F P/E (16% discount to peers).

Launches US$50m ICO for AORA

  • Y Ventures (YVEN) formed a 60:40 JV with Arke Blockchain Engineering Pte Ltd for the development of AORA, an e-commerce buying platform that will help consumers to purchase products from several of the world’s most popular webstores and marketplaces from the US and China.
  • The JV launched its own utility coins – AORA coins – through an ICO to raise US$20m-50m that will be used to fund the development and roll-out of AORA.
  • ICO commenced at end-Jul 2018 and will end on 30 Nov 2018. ICO will release 250m AORA coins out of a total supply of 625m.

~ SGinvestors.io ~ Where SG investors share

Global buying platform will allow for rapid scalability

  • Similar to comGateway, AORA will not be dependent on merchants to onboard its platform, thus allowing for rapid scalability.
  • Key feature of AORA will be its “search items or paste product URL bar” that will allow consumers to purchase from other online marketplaces that does not offer direct shipping to some Asian countries without additional mark-up on product pricing.
  • Slated for launch in 2Q19, AORA would allow purchases from Walmart, Taobao.com, Amazon.com and Tmall.com in the initial period and will extend to other ecommerce sites such as Expedia, and Ctrip in 4Q19.
  • On the consumers’ side, management stated the AORA platform will be launched in Southeast Asia countries, Australia, Japan and possibly targeting China as well. These markets are targeted for their high growth in online cross-border purchases.

Potential impact on earnings

  • AORA would earn c.1-2% of the gross merchandising volume (GMV) transacted through the conversion of fiat currency, US dollar, Bitcoin or Ethereum to AORA coins.
  • Management targets to achieve US$10m GMV transacted through AORA in the first year following its launch in 2019, which may yet turn in profits in our view.
  • The accounting treatment of the proceeds raised from ICO is unclear at present; further clarity on the accounting treatment could be provided in the coming months.

Risks and view of AORA

  • Key risk is that the AORA coins could become a speculative tool for crypto traders that could lead to a collapse in its value, thus ultimately dampening shopping demand on AORA platform.
  • We view this as a positive development nonetheless as the JV will raise its own funding for the development and roll-out of AORA to bear its operating risks.

Maintain Add with an unchanged Target Price of S$0.62

  • We leave our EPS forecasts unchanged till further clarity can be sought on the accounting treatment and progress on the ICO.
  • Re-rating catalysts could come from onboarding of more brand partners. Downside risks include overstocking of inventories and termination of distributorship agreements.

Colin TAN CGS-CIMB Research | https://research.itradecimb.com/ 2018-08-01
SGX Stock Analyst Report ADD Maintain ADD 0.620 Same 0.620