Pitt Street Research forecasts strong growth for MyFiziq’s 3D fitness app
Link copied to
Independent Research House, Pitt Street Research, has just released a new report MyFiziq (ASX: MYQ), a health & fitness technology company based in Perth.
Analyst Stuart Roberts calculated a valuation target range of $0.91 to $1.08 for MYQ — a premium of four times its current share price.
MyFiziq’s patented technology allows users to accurately capture a 3D image of their individual body shape and load the data onto a smartphone app.
Users can then track changes in their body shape and monitor overall body-fat levels in real time, whether they’re performing routine activities or completing a training session at the gym.
The company has had an active year so far in 2019, highlighted by a successful $6 million capital raise in February, via a placement issued to Asia Cornerstone Asset Management.
Under the terms of the agreement, MyFiziq agreed to receive the funds in five tranches. Two tranches have already been received totalling $2.2m.
“MyFiziq seems to have cracked the puzzle of how to generate accurate body measurements with ease on a smartphone,” Roberts said.
“Given how most of us use that kind of information every day, that’s a pretty value suite of intellectual property that this innovative Perth company is siting on.”
In April, the company entered into a strategic partnership with Evolt360, whereby the MyFiziq technology will be integrated into Evolt’s body scanning platform — a network that has over 500,000 users globally.
Earlier this month, the company also launched its application via a partnership agreement with Toll Logistics.
The deal marks MyFiziq’s first commercial revenue stream, with the receipt of $5 per user per month for 2,400 Toll employees. Over the next 12 months the application will be offered to the rest of Toll’s 12,000-strong workforce.
Both agreements form part of MyFiziq’s strategy to collaborate with different companies and build its reach through multiple partner apps.
Pitt Street Research highlighted four key market segments the company is targeting as it looks to build its subscription-based revenue model.
Health & Fitness – The company’s deals in this sector have been focused largely on the North American market. It includes the Evolt360 agreement, where Evolt expects around 100,000 users to sign up for the MyFiziq product. Pitt Street’s Roberts said the deal is expected to commercialise in July 2019.
Corporate wellness: MyFiziq has gained exposure to this sector — including the Toll deal — via its binding agreement with WellteQ, an Australian-based corporate wellness platform. The first stage of the Toll deal will provide MyFiziq with an initial $12,000 in monthly app revenue.
Medical & Insurance: The company’s move into the medical & insurance market began in June 2017 when it signed a $5m deal with Gold Quay Capital, a Singapore-based financial services company which was looking to fund the development of a tool that would help insurance companies efficiently track the health of their policy holders.
In March this year, MyFiziq signed a collaboration agreement with WeSure – the insurance arm of Chinese e-commerce giant Tencent Holdings.
Apparel: For the global apparel market, MyFiziq is looking to leverage its technology to partner with online retail chains. The company says its proprietary technology can be used to capture various sizes.
The Pitt Street Research valuation is based on a discounted cash-flow (DCF) model factoring in assumptions around user growth. Future cashflows are sourced from two income streams — subscription revenue and licensing & development agreements.
Roberts highlighted that the company currently has five B2B partnership agreements, including the deals with Evolt360 and TellteQ. Based on the user growth generated from those deals, Pitt Street estimates that MyFiziq’s client base will grow to 1.3m users by the end of 2020, increasing to 2.4m by 2025.
Subscription revenue is expected to form the majority of MyFiziq’s income, with licensing agreements contributing around 11 percent of total revenue over the period from 2020 to 2025.
As user growth increases to 1.3m by December 2020, Pitt Street Research forecast MyFiziq’s break-even point at 153,000 users. In discounting future cashflows, the analyst assessed MyFiziq as a “high-risk” company which gave rise to an increased market risk premium of 9.5 percent.
The calculations resulted in an indicative DCF valuation for MyFiziq of 91 cents per share. In a more bullish scenario Pitt Street valued the company is high as $1.08 per share, resulting in an implied mid-point valuation of 99 cents.
The views, information, or opinions expressed in the interviews in this article are solely those of the interviewees and do not represent the views of Stockhead. Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.