OpenDNA Limited (ASX: OPN), based in Subiaco, Australia, provides fully integrated digital marketing and customer acquisition services with a focus on enhancing online sales of products and services for its clients. OpenDNA provides personalised real-time, targeted marketing to the clients using its hyper personalisation and profiling Artificial Intelligence (AI) System, which transforms data into actionable information and knowledge on each individual customer.
Table of Contents:
- Acquisition of China e-commerce Business, QBID
- Acquisition of Blackglass Pty Ltd
- Other Developments Concerning OpenDNA’s China strategy
- Way Forward
- Stock Performance
The company is particularly concentrated on driving sales in Australia and China through the Roolife online e-Commerce marketplace, which helps businesses to directly sell to consumers across China based on their profiles and purchasing behaviours and accept payments via the WeChat and Alipay mobile payment platforms.
Acquisition of China e-commerce Business, QBID
Recently on 16 September 2019, OpenDNA informed the market that the company had entered into an agreement for the acquisition of China market entry and digital marketing company, Quality Brands International Direct (QBID).
Under the agreement, OpenDNA would acquire 100% of the issued equity in QBID and related body corporates, and the acquisition is expected to:
- Deliver immediate additional revenue
- Add complementary and synergistic digital marketing capabilities and
- Provide immediate sales channels for the company’s RooLife customers.
QBID, which was founded and owned (majority) by Mr John Kilborn and Mr George Panagios, has been successfully driving e-commerce sales in China for four (4) years, providing a range of comprehensive multiplatform e-commerce solutions across many major platforms and e-retailers in China. QBID also facilitates traditional B2B distribution for registered imported products in China.
Moreover, QBID’s unaudited financial statements for FY19 suggest that for the full year ended 30 June 2019 (FY19), the revenue amounted to $ 4 million while going forward, QBID has forecast revenue of ~$ 4.5 million for the next year to 30 June 2020 (FY20), of which the company would benefit proportionately from the date of acquisition.
OpenDNA also added that the existing capabilities of QBID are naturally complementary to and enhances the services of OpenDNA’s RooLife business through the addition of:
- Additional marketing translation,
- Trade regulation and
- e-Commerce platform marketing experience.
Besides, OpenDNA and QBID have overlapping customer base and synergistic skill sets that are highly appealing to the shareholders of the two companies. Thus, the acquisition would contribute in significantly increasing OpenDNA’s annualised revenue as the company expands the range of services that would be provided to both the QBID and OpenDNA customer base.
The value consideration for the transaction to be paid by the company for the QBID acquisition is milestone-based and aligned with revenue achievement. Upon completion of the acquisition, OpenDNA would pay around $ 175,000 in cash plus issue $ 491,667 in fully paid ordinary shares to the shareholders of QBID. The shares would be issued under the company’s 15% placement capacity at an issue price based on the VWAP over the 20 days prior to the date of the term sheet.
In addition, further consideration is payable upon achievement of the agreed revenue targets as set out in the figure given below, and all shares issued are subject to voluntary 12-month escrow provisions from the date of issue.
(Source: Company’s Report)
During FY19, the company also developed its e-Commerce AI Recommendation Engine, Daishu, which is used in its RooLife e-Commerce platform. Daishu has been designed to optimise sales by making the most suitable recommendations to online shoppers while providing valuable insights for its customers into consumer preferences and behaviours. This is invaluable to help profile the brand segments and products most suitable and in demand with online consumers. Further, it helps in generating ongoing and recurring purchases.
Acquisition of Blackglass Pty Ltd
The QBID deal follows the acquisition of digital marketing company, Blackglass Pty Ltd from ASX-listed IncentiaPay Limited (ASX: INP) in April 2019.
The addition of Blackglass also enhanced the group’s capability to better cater to the online marketing, customer acquisition and profiling requirements of the RooLife business while allowing OpenDNA’s AI System to gain access into new markets and customers.
Other developments concerning OpenDNA’s China strategy
On 24 June 2019, OpenDNA signed a 12-month binding agreement with Petrus Pharmaceuticals Pty Ltd to exclusively sell its products in China. Petrus Pharmaceuticals, established in 1988 and based in Australia, is engaged in R&D, manufacture, marketing and distribution of pharma products, through pharmacies, medical practitioners and hospitals, that are expected to have a strong market appeal in China with the first sales expected in the current quarter.
In May 2019, OpenDNA appointed Qingdao Edge Technology Company Limited as a dedicated distributor to market and sell its AI platform on a non-exclusive basis in China where online customers generate much of the world’s digital data, a key ingredient in the successful application of AI platforms.
In April 2019, OpenDNA and Novatti Group Limited (ASX: NOV) entered into an agreement for the integration of Novatti’s China Payments Platform with the RooLife portal to enable seamless purchase of products and services from WeChat and Alipay made by Chinese when in Australia, further building on RooLife capability to process payments directly in Australia Dollars.
The company has been making great progress in China. Interestingly, PwC and McKinsey Global Institute have identified China to be well positioned to gain the most from AI technologies that would assist in improving its productivity levels. Besides, the sector has strong government support in China.
The path ahead looks promising for OpenDNA, as the company continues to
- Grow a high-quality customer base for its digital services in Australia;
- Expand its digital services in China;
- Be a channel for an increasing number of Australian businesses to enter the Chinese market, and
- Develop strategic sales partnerships in key verticals including Tourism & Airports, Diagou and Student channels and Online and Retail sales.
OpenDNA’s market capitalisation stands at around AUD 9.56 million with ~ 258.26 million shares outstanding. On 16 September 2019, the OPN stock price settled the day’s trading at AUD 0.040, climbing up 8.108% by AUD 0.003. Besides, OPN stock has delivered a positive return of 5.71% YTD.
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