Date : 26/01/2021

MyFiziq Limited

ASX :

MYQ

Market Cap : $160.48 Million

Buy

52 Week Range : $0.065 - $1.495

Share Price : $1.22

A speculative "Buy" for a stock with high growth potential and a very large total addressable market.

Company Analysis

MyFiziq Limited (ASX: MYQ) is an early stage ASX technology company that has developed a patented dimensioning software which can be used by their partners to accurately measure body dimensions only with the use of their smartphones. Data Analysis is everything going forward. MSQ’s technology can be embedded within smartphone apps and can be used to accurately measure the human body within 60 seconds. The data from the image is then used to provide various insights based on the use case scenario.

MyFiziq does not directly sell to the end consumer. They work with various partners and leverage their software for a royalty payment. They have quite a broad target market as the health revolution is surging ahead. The company reports that their measurement techniques are over 97% accurate and their artificial intelligence capabilities have the power to reduce the human error from other traditional measurement techniques. MyFiziq is targeting 5 main business vertical to sell their software to potential partners:

  • Health & Fitness
    This is one of the fastest growing segments that has an overall market size of US$672 billion. MYQ already works with 7 clients and 1 partner in this vertical and these firms have integrated MYQ’s software within their apps to provide their clients a way to measure their changes, track their progress and transformation.
  • Wellness
    The wellness segment is fast growing as well. Corporations are now spending top dollar to provide their employees with a system to better manage their physical and mental health. This offering is turning out to be a cornerstone when it comes to employee retention, reduction of leaves and increasing RIO. The overall market size is $84.9 billion and MYQ already has several clients and partners they are working with.
  • Apparel
    Our members know how we feel about the revolution in retail that is currently on-going. E Commerce has grown and will continue to do so at an alarming rate. The total market size of $1.4 trillion. MYQ’s software will come in very handy as more retailers have shifted to online retail and are improving their customer journey roadmaps in order to better serve the right customers. MYQ’s software has the potential to be integrated with heavyweights such as Amazon, Nike, etc and have customers try on products virtually before they buy.
  • Telehealth
    One of the eventualities of the pandemic has been the acceleration towards telehealth. In order to provide precise medicine and care, a lot more software tools and enhancements are required. MYQ already has a few clients that they work with and the potential here is quite large as well.
  • Life & Insurance
    Body composition and chronic disease detection requires predictive software that has the capacity to analyse and deliver insights in real-time. In a world where body composition analysis can be done remotely, the life and health insurance industry will greatly benefit as it significantly reduces costs of having to manage fixed assets such as diagnosis and test centres.

We have witnessed the benefits that the likes of Fitbit and the Apple Watch provide in the health and wellness segments. Apps are running the show as far as these segments are concerned, and MYQ’s software is showing early signs of seamless integration.

Company Updates


Source: Tradingview.com

MyFiziq offers its technology as a Software-as-a-Service solution to their partners. These partners integrate MYQ’s software within their application, and kick-back some of the money they charge their users. All the business segments are so far consumer heavy segments. This means that the average price MYQ’s partners charge per user is around $2.5 a month, and a small percentage of that reflects in MYQ’s revenues. In a nutshell, this is an extremely thin margin business that will require a very large number of customers to generate earnings.

Since MyFiziq’s integration with Apple Healthkit, the share price has skyrocketed. Complete Scan enables MYQ to scan and measure dimensions of their user’s face, body, and skin. In September 2020, the company entered in a binding agreement with WellteQ to integrate Complete Scan into the digital wellness sector. The revenues from this deal have a breakdown based on slabs of users. Think of it like you tax slabs.

The agreement has been initially entered into for a period of 12 months where WellteQ is targeting to deliver 250,000 users. Translating to just over $1 million in revenues upon successfully integrating 250,000 active users every month. Similar deals have been struck with different partners by MYQ and all of these deals have a target user base that the partners will be trying to deliver.

While this seems lucrative, the catch here is if users of partner firms will pay the premium every month in order to use MYQ’s technology.

Another lucrative deal was unveiled on the 22nd of January as MYQ entered into a joint marketing expansion agreement to target 1 million monthly active users. MYQ will fund Bearn with 4 trances of payment that will be worth a combined US$500,000 to initiate a direct onboarding campaign to attract the users from Bearn’s 56 million pre-registered users. This agreement shows that MYQ is going to have to spend money in order to get users.

Investment Thesis

Monthly active users will be the single most important metric that MyFiziq’s revenues will depend on once it starts to generate revenues.


Source: MYQ

The above picture shows MYQ’s current partner network and potential revenue streams on offer. The average price from these agreements is $2.3 per user. At a full capacity of all the targeted users, that is, 4.7 million. A simple equation shows that with the successful integration of all 4.7 million users from these channels, and with at least 50% of these users paying, the revenues have a potential of $5 million every month – translating to about $60 million in annual revenues. This bullish case scenario looks to have been priced in by the market and further catalysts to look out for are:

  • Potential New Partners
  • Strength in user acquisition metrics from existing partners

This growth via partnerships is a highly scalable strategy. The risk here is that MYQ’s adoption and revenues will depend on the firm picking the right partner, a partner whose revenues and user base is stable enough to provide constant sustainable revenues.

MYQ is in its very early stage and there is no historical evidence to suggest how sustainable their business model is. The potential for scalability is very high, however, the risks associated are:

  • Drop-off in monthly active users
  • Failure of apps of partner firms
  • Not meeting target users

As of FY2020, the firm has reported net loss of $3.3 million. While the revenues are expected to kick-in, the road to profitability is still far away. We expect MYQ to raise money in the future as well in order to fund investments and growth projects.

MyFiziq is under preparation to list on the NASDAQ in the USA. Given the market and partners they are working with, significant investor attention is estimated for the IPO. After the $5m placement offer that was completed in October 2020, the cash at bank during the time was $6.5 million. This puts the company’s balance sheet in a position of strength. The total debt on the balance sheet as of FY2020 was just shy of $1.5 million.

Recommendation

MyFiziq is targeting 5 very large business segments that have been witness to a lot of innovation. The firm has shown promising signs when it has come to signing up partners. With sky high target users set for 2021, and a potential listing on the NASDAQ upcoming, MYQ will have to deliver revenues soon. We issue a speculative “Buy” for investors willing to take on the risks associated.

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