Investor’s Digest of Canada columnist Mike Kachanovsky has uncovered a micro-cap stock that harbours the desire to become the dominant platform serving the Russian e-commerce and social media market. He says GoverMedia Plus offers an intriguing value proposition for buyers of stocks in this price range.
Worldwide growth in internet usage along with the development of mobile technology platforms has profoundly changed the way people interact. Social media participation has become the primary means of communication for many and online shopping continues to grow.
The transition has enabled the rise of powerhouse technology companies serving sectors that did not even exist 20 years ago, and early investors have achieved tremendous gains as the disruptive trends displaced legacy business units.
While the pace of change has slowed down as markets mature across much of the developed world, a newly-listed Canadian company is now pursuing an attractive growth strategy in Russia. GoverMedia Plus Canada Corp. (CSE—MPLS) is committed to delivering a full suite of online services through a wholly-owned technology subsidiary based in Russia. The company has developed the MFLY+ messaging platform, a fully functioning e-commerce and social media system created to appeal to the Russian market.
All-in-one platform via one account
The system has integrated the most popular internet functions, incorporating email, instant messaging capability, online auctions and marketing (similar to eBay), and social media applications including the ability to build a personal profile (similar to Facebook), in one coherent platform that is accessible via one account.
GoverMedia Plus is in a class by itself, combining so many of the most popular social media applications and also allowing users the option to access cryptocurrency transactions as an integrated part of the system.
The e-commerce system developed by GoverMedia Plus enhances the overall online experience for users. Mobile online access continues to grow in Russia and compared to most of the developed world, software technology is still relatively cheap. The MFLY+ platform is fully compatible to work on smart-phones, and can be downloaded from the Apple App Store and Google Android Store.
Micro-cap offers ultra-growth opportunities
As a newly-listed company that completed its IPO to begin trading on the Canadian Securities Exchange in February, the shares are tightly held and the market cap remains at an entry-level valuation relative to its peers. With fewer than 45 million shares outstanding, the market cap barely surpasses the $20 million level despite the advantages of its MFLY+ platform. However, this story may be considered as an ultra-growth stock.
Consider that other social media companies such as Facebook and LinkedIn commenced trading with public listings that were heavily promoted and priced to perfection at elevated values.
The Facebook IPO in 2012 was considered the biggest in technology history with a market cap well above US$100 billion.
Rather than trying to compete domestically with established heavyweights in the industry, GoverMedia has been focused on taking the best features of the e-commerce business model, adding some targeted improvements, and combining all of the most popular functions into one coherent system. This is presented using the Russian language and in compliance with Russian tax laws, to directly target an under-served market.
Some analysts are referring to GoverMedia Plus as ‘the Alibaba of Russia’. Modelled after the wave of success that eBay had achieved earlier, Alibaba Group Holding Ltd. (NYSE—BABA) was launched to target the online auction market in China, enjoying stratospheric growth. It now trades with a premium valuation above US$430 billion. GoverMedia Plus aspires to secure similar market share in Russia.
Searching for 100,000 friends
With the roll-out now underway, the first milestone is to attract 100,000 registered users to the MFLY+ platform.
As the system gains popularity the company expects rapid growth and has set its objective for 1 million customers by the first quarter of 2019.
Russian-speaking regions make up the second-largest European internet market, estimated at more than 100 million people, so this ambitious plan is nonetheless certainly achievable.
Online shopping is becoming more mainstream within Russia. Internet-based advertising is very early in the curve but showing strong growth.
The combination of a large market, rapid growth in the registered customer base, and rising trends for online sales, all combine in a very powerful business model for GoverMedia Plus.
Despite its current micro-cap status, there is a tremendous value proposition for the company as it commences its roll-out phase. The business model has already demonstrated its appeal to online users. The experienced management team has been selected with an emphasis on e-commerce and software development, plus a direct knowledge of the Russian market.
The standard of living and disposable income has been rising for individuals in Russia. However, outside of the major cosmopolitan cities, the opportunities for shopping and access to goods remain somewhat limited. Online shopping is growing rapidly in these areas. The modern MFLY+ platform is ideally suited to link retailers with this consumer base.
Payment options include cryptocurrencies
The company is well-positioned to generate revenue streams through auction fees, advertising and subscriptions. By integrating access to a range of cryptocurrencies including Bitcoin and Ethereum as part of the payment options, GoverMedia is on the forefront of technology advancement in the e-commerce sector.
It is estimated that online shopping will account for more than seven per cent of the Russian retail sector by 2020 and this is expected to keep rising. Total online sales have increased year after year as well. Russian e-commerce research agency Data Insight estimates that online revenue surpassed US$26 billion in 2016.
As GoverMedia Plus establishes its beachhead and achieves widespread acceptance within the Russian market, this stock may deliver strong growth in shareholder value during the next few quarters. The company has been largely overlooked by the market so far, allowing investors to accumulate cheaply in this early stage. Watch for a breakthrough in awareness as this story gains traction.
I think there is a place in a balanced portfolio for these speculative micro-cap companies that operate in enormous market sectors with high growth potential. It is quite possible for GoverMedia’s market value to increase by several hundred per cent and the stock could still be considered extremely cheap in comparison to established rivals that dominate the tech landscape today.
With its objective to become the dominant platform serving the Russian market, GoverMedia offers an intriguing value proposition for buyers in this price range.
Mike Kachanovsky is a freelance writer who specializes in junior mining stocks and also covers technology companies.
This is an edited version of an article that was originally published for subscribers in the April 27, 2018, issue of Investor’s Digest of Canada. You can profit from the award-winning advice subscribers receive regularly in Investor’s Digest of Canada.
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