Linius Technologies (LNU)- Initiation
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03 December 2020 Linius Technologies (LNU)- Initiation Wayne Sanderson – Head of Research Commercialisation phase set to Zoom - Multiple shots on goal [email protected] +61 400 434 548 Recommendation Speculative Buy Summary Linius Technologies Limited (LNU) listed in March 2017 with Risk Rating High an exciting patented video search and re-compilation 24-mth Target Price (AUD) $0.25 technology, but no product or customers. Share Price (AUD) $0.039 Traditional search engines cannot automatically crawl videos, 12-mth Price Range $0.007 - $0.048 so have to rely on text data associated with the video. LNU Forecast 12-mth Capital Growth 525% has invented and patented the Video Virtualisation Engine Forecast 12-mth Dividend Yield 0.0% (VVE) which indexes, analyses, and tags each frame in a conventional video and transforms it into a fully searchable 12-mth Total Shareholder Return 525% “Virtualised Video”. This allows a hyper-personalised single video reel to be compiled on-the-fly from an infinite number of Market cap ($m) 58.7 source videos applying the users’ bespoke search criteria. Net debt (net cash) ($m)(Sep 20) (5.3) Each reel contains just the footage the user wants to see. Fully Enterprise Value ($m) 53.4 automated and repeatable, it can be a personalised video Gearing (Net Debt/ Equity) N/a – Net Cash channel. Costs to serve are remarkably low. Shares on Issue (m) 1504.1 Commercialisation Begins – Set to Zoom Options / Perf rights on Issue (m) 45.8 LNU has announced a new product – “Whizzard” for the Sector Software & Services booming video conferencing and higher education markets, Average Daily Value Traded ($) $80,000 available to Zoom, Webex and Microsoft Teams users. Zoom ASX 300 Weight n/a and Webex represent 52% of the world’s video-conferencing market with millions of users. Users can search and compile video content from recorded meetings and lectures held within these video-conference platforms. LNU’s partner LiveTiles (LVT) will co-market its’ white-labelled version “LiveTiles Smart Video” to its 1,100 enterprise and higher education customers targeting Microsoft Teams and Zoom users. The first deployment to a large Australian University has commenced. LVT expects strong interest. Sports, Business News and Security ready to go ● Racing.com deployment now 12-mth in. Being expanded. ● Australian basketball - NBL to launch December. NBL incentivised to introduce international basketball teams / orgs. ● Indonesian soccer – SportsHero to re-launch Feb 2021. ● UK / Euro football – partner Swanbay in discussions with major Sports organisations. Golf & other sports possible too. ● Business news – partner Grafa’s launch is imminent. ● European Defence / Security application – pilot continuing. LNU SHARE PRICE PERFORMANCE Recommendation & Opinion Based on our research and discussions with LNU’s partners, we are confident in the technology advantage and large commercialisation opportunities (especially post-Covid). We have modelled potential revenue of $21m in FY22 and $60m in FY23 but a wide range of outcomes are possible. Investment risk is high as the business model(s) are not yet proven. Potential user numbers and TAMs (total addressable markets) are huge. We initiate coverage with a Speculative Buy / High Risk recommendation. Our valuation range based on 3-5x FY24 revenue (i.e. Year 3) is $0.25 to $0.35 per share. We set our 24-mth price target at the lower figure of $0.25. Sequoia Financial Group | Equity Research Linius Technologies Limited (LNU) Table of Contents Sequoia Estimates ...................................................................................................................................................................... 3 Brief History of Company ........................................................................................................................................................... 4 Company Description ................................................................................................................................................................. 5 How Video indexing works .................................................................................................................................................... 5 Potential Use Cases .................................................................................................................................................................... 7 Reasons to Buy ......................................................................................................................................................................... 10 Risks / Negative Factors ........................................................................................................................................................... 12 Valuation and Recommendation .............................................................................................................................................. 13 Potential Share Price Catalysts ................................................................................................................................................. 14 Business Meetings - Partnership with LiveTiles Limited (LVT) ................................................................................................. 16 Our Forecasts for LVT and LNU’s ......................................................................................................................................... 16 Thoroughbred Racing - Partnership with Racing.com .............................................................................................................. 18 Racing Victoria ..................................................................................................................................................................... 18 Betting Engine application .................................................................................................................................................. 21 Australian Basketball – Partnership with NBL Australia ........................................................................................................... 22 Indonesian Soccer - Partnership with SportsHero (SHO.AX) .................................................................................................... 24 UK / European Sports - Partnership with Swanbay TV ............................................................................................................. 28 Business News - Partnership with Grafa .................................................................................................................................. 32 Defence & Security – Unspecified pilot .................................................................................................................................... 33 Competition .............................................................................................................................................................................. 34 Board & Management .............................................................................................................................................................. 35 Advisory Board .................................................................................................................................................................... 35 Appendix 1 - IMG Entertainment (for industry background purposes) ................................................................................... 37 Appendix 2 – Whisper (for industry background purposes) .................................................................................................... 38 Appendix 3 – Major Sporting Event Attendances (possible guide to video viewer popularity) .............................................. 40 SEQUOIA FINANCIAL GROUP (ASX: SEQ) - About Us ................................................................................................................ 42 CONTACT INFORMATION ......................................................................................................................................................... 43 Recommendation Criteria ........................................................................................................................................................ 44 Page 2 Sequoia Financial Group | Equity Research Linius Technologies Limited (LNU) Sequoia Estimates We believe that LNU is now on the cusp of commercialising its unique video search, recompilation and video personalisation technology across a number of potentially large applications in Sport, Business video-conferences (Zoom, WebEx and Teams), Higher Education and Defence. LNU currently has minimal revenues with only two live customers – Racing.com and an Australian University customer of LiveTiles Limited (LVT) being deployed now. Other deployments are imminent with Grafa, NBL and SportsHero. Our discussions with LNU’s go-to-market business partners indicates a high level of satisfaction and confidence in the prospects for the Linius technology. Our revenue estimates assume the technology is successfully adopted and rolled-out with these partners, and that LNU’s suggested pricing holds. Our forecasts should be considered HIGH RISK and INDICATIVE ONLY, as a wide range of outcomes are possible (Success in each targeted sector, customer adoption rates, churn, pricing, etc. etc.). We initiate coverage with a HIGH RISK, SPECULATIVE BUY recommendation. LNU - Revenue