Own Moko Before Facebook, Twitter or Google - Or At Least Ahead of Major 2015 Catalyst

April 01, 2015


If Facebook paid $1 Billion for Instagram and $19 Billion for WhatsApp, we believe an acquirer could potentially pay a sharp premium to own shares of one of the best-in-class and undiscovered plays in social media – a company called Moko Social Media (NASDAQ: MOKO).

User engagement on mobile apps is less than 2 minutes on average; Moko’s REC*IT mobile app for intramural college sports and recreational activity more than doubled the average to 5.5 minutes with user retention at 98% after 30 days (as shown below).

REC*IT Soft Launch Results

Source: Company Report

Social Platforms With Strong User Engagement Commanding Premium In Acquisitions

In the last few years, Google (NASDAQ: GOOG), Facebook (NASDAQ: FB), Yahoo! (NASDAQ: YHOO), Twitter (NASDAQ: TWTR) et al. have paid anywhere from $20 to $150 for each monthly active user (“MAU”) when buying a social media company. We illustrate this with several sample transactions, including MAUs at time of acquisition, in the table below.

As of December 31, 2014 Moko had roughly 5 Million active monthly users. Using the average of 4 sample transactions (illustrated above), Moko could arguably be worth more than $300M to an acquirer today. Even if we use a weighted average to offset the outlier in the Microsoft/Yammer transaction, we’re still at $207M, roughly 3.5X the closing price of MOKO on March 31, 2015.

We can further support this by looking at LinkedIn (NASDAQ: LNKD), whose 93 Million MAUs would imply a cost of $333 per user, or Twitter (NASDAQ: TWTR) whose MAU is valued at $111.

MOKO Validates Platform; Scale Across Platform Could Attract Acquirer

In our view, Moko has already demonstrated the ability to engage and retain demographic groups coveted by advertisers; the onus is on the Company to demonstrate this feat in scale for an acquirer to take a meaningful interest. For risk-tolerant investors, this creates a meaningful catalyst as little as 30 days out when the Company reports quarterly results for the 3 months ended March 31, 2015 and a potential inflection point in calendar 2015 as the Company potentially meets its target of 10 Million MAUs. Importantly, we are not yet privy to how user growth might respond to marketing efforts underway or seasonality, for instance with Moko’s progressive political social media app Blue Nation Review on the heels of the 2016 U.S. elections.

Moko designed its applications around specific user communities and their needs, for instance intramural college sports, rather than building a product that would require the Company to educate the end user about the benefits of its product.

The reason active LinkedIn users are [potentially] an attractive demographic to advertisers is the same reason premium advertisers covet Moko’s user base – engagement and high-affinity for sponsor products or services. Moko has created a barrier to entry for competitors by executing exclusive agreements with content and/or data providers for its mobile platform(s). For instance, in intramural college sports Moko has exclusive rights to “intermural sport, fitness and recreational activity data for more than 700 colleges and universities across the U.S. with a combined enrolled population of approximately 10 million students” according to the Company’s 2H 2014 report. An update in February revealed the Company had further expanded this reach by partnering with InnoSoft to seamlessly integrate REC*IT within additional college campuses and communities in Canada and the U.S -- and corporate groups, which, coincidentally was a driving factor in Microsoft’s acquisition of Yammer.

Major 2015 Catalyst Gives Investors A Reason To Own MOKO Ahead Of Potential Inflection

Moko is largely institutionally-owned and insiders have a meaningful stake that should align their interest with common shareholders of the Company. An update demonstrating continued user growth and retention at the end of April for the period ended March 31, 2015 could be MOKO’s window to broader investor awareness and perhaps an early glimpse at how the Company could ramp sales to the point of profitability in calendar 2016. Even if, as an investor, you were to take a sidelined position on the Company, the fact of the matter remains that Moko is perhaps the most compelling small, pure-play social media company readily accessible to investors. That in itself could command a premium. If the Company is able to ramp monthly active users to 10 Million in 2015, what goal would it set for 2016? 20 Million MAUs? 25 Million? A quick analysis of acquisitions in the social media sphere would reveal that 25-30M MAUs is the threshold where MOKO’s product platform becomes meaningfully accretive to a larger social media company and, potentially, an acquisition target.

About One Equity Research

One Equity Research is a leading provider of proprietary and in-depth research crafted by respected financial analysts and domain experts. Our team includes trained finance professionals with diverse backgrounds in equity research, investment banking, and strategic consulting at preeminent firms. We distribute our research through mainstream media partners and to subscribers of our Intelligence Service. To learn more please visit http://www.oneequityresearch.com/

Legal Disclaimer: This research note has been prepared by One Equity Research, LLC on behalf of Moko Social Media, as part of research coverage services. One Equity Research expects to be compensated up to twenty thousand dollars per month and may receive additional compensation for ongoing coverage of Moko. This research note is not an offer or solicitation to buy or sell the securities of the Company. The report is for information purposes only, and is not intended to (and is provided explicitly on the condition that it not) be used as the sole basis to make any investment decision. Investors should make their own determinations whether an investment in any particular security is consistent with their investment objectives, risk tolerance, and financial situation.

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