An Opportunity to Invest in an Innovative Venture Builder Showing Strong Profitability
MeeW A/S consists of a group of independent subsidiaries and brands with a common focus on being a venture builder within technology, digitalization and automation, where the main businesses of the Company are focused on SaaS development, IT consultancy and IT investments. The revenues created are mainly used to organically develop and launch new technological brands for the group, create new services for clients, and to invest in tech pioneers. MeeW is strategically structured as a group to ensure a manageable and dynamic company, where the revenue generating businesses facilitates each brand to go to the market independently and with the ability to scale – creating both financial synergies and synergies in terms of know how.
Analyst Group’s Investment Thesis for MeeW
Analyst Groups consider that the subsidiaries MeeW STUDIOS, MeeW INVEST and MeeW Inc. currently form the core of the investment thesis, and the substance of the valuation, where the remaining subsidiaries and brands can be seen as an extra value option in the future. MeeW STUDIOS represent the main business of the group and has experienced a strong growth since 2018, with an average annual revenue growth of 337% (CAGR), where revenues amounted to approximately DKK 20m in 2022. Considering that MeeW STUDIOS stood for ~99% of the group’s revenue in 2022, we think that it is a reasonable assumption that the group’s operating margin of 19% during 2022 is close to equal to MeeW STUDIOS operating margin. To purely illustrate what this could mean in terms of a valuation, we can compare with what similar stand-alone IT consulting companies are valued at. Analyst Group considers that NetCompany, a Danish provider of technological solutions and consultancy services, and CombinedX, a Swedish company that delivers consultancy services within digitalization, are two close competitors to MeeW STUDIOS. These two competitors are bigger companies, however, MeeW STUDIOS has delivered a higher growth with a higher profitability. The competitors are currently (LTM) valued at 12-18x the operating profit, and with the assumption that MeeW STUDIOS should be valued in the middle of this range (15x), this indicates a valuation of close to DKK 60m. Worth noting is that this is an illustrative valuation with relatively simple assumptions, however, we believe it gives an indication of what MeeW STUDIOS could be valued at, solely based on historical figures, i.e., not forward-looking. Hence, even without considering the potential for future growth, which we deem to be very likely, this illustrative and conservative valuation approach for MeeW STUDIOS alone is higher than the total group’s pre-money valuation of DKK 40m in conjunction to the IPO. Also, this is without considering the values within MeeW INVEST and MeeW Inc. The investments in MeeW INVEST and MeeW Inc. are all valued according to the latest investment round, which took place in June to October 2022.
Given a conservative assumption that these valuation levels would still remain, even though the investment sentiment was quite bad during that period, and MeeW INVEST’s expected ownership after completed development in the various investment cases, the valuation of MeeW INVEST and MeeW Inc. would be approximately DKK 19m. This valuation, in combination with the illustrative value of MeeW STUDIOS, sums up to a total valuation of the group of approximately DKK 79m, where the remaining subsidiaries and brands are not even included in this illustrative valuation. With that said, this clearly implies that an investor receives a good risk/reward by participating in MeeW’s IPO.
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