By Lisa Thompson
OTC:PKKFF
READ THE FULL PKKFF RESEARCH REPORT
Q2 was a challenging quarter for anyone with Chinese business dealings and growing at all defied logic. Yet Tenet (OTC:PKKFF) managed to turn in year over year growth of 6% despite having virtually only one month to do it in and with limited capital due to delayed fund raising. Of the $32.4 million it reported, $10.1 million was from the June 618 Shopping Festival. It also participated in the 618 Shopping Festival last year, financing 789 transactions worth approximately $200,000,000 and generated $15 million in sales then. All other verticals declined except for insurance. The company said in Q1 insurance generated $500,000 to revenues and in Q2 it was up 9.8% sequentially, thus about $550,000 and clearly a disappointment. With China shut down to travel, there was no surprise that car insurance would also be hit but that business is ramping slower than expected.
The company is in the final stages of filing a prospectus and uplisting in Canada and listing in London. We expect to possibly see a filing within the next 10 days. Once the capital raise is over, the company should be back on track as it will have cash to fund working capital and not be constrained as it is now. After reporting Q2 that was impacted by China lockdowns and lack of capital, the company still maintained its 2022 guidance of $210 million in revenues and positive EBITDA. We are keeping our estimated where they are for now, but believe that revenues could come in higher than our $45 million Q3 estimate, but would like to see the financing finished before raising numbers.
The company now has CN$15 million on cash on hand. Using a fully diluted share count of 119.2 million puts its US market cap at US$181 million and its enterprise value at US$166 million. Using company guidance of US$161 million for 2022 estimated revenues, the stock is trading at 1.0xs EV to sales versus its peers who now trade at 2.9 times. The valuations for the fintech space have come down hugely from their peak. Given the company needs to raise cash to reach its guidance, and that has not yet happened we are using lower estimates until we see that happen and how it will be achieved. Using a revenue expectation of US$138 million, that yields an EV to Sales of 1.2 times 2022 estimated revenues.
Outside of China, the company is planning a new business model that relies on data and analytics to produce information of value as well as providing a platform for small and medium business to communicate, trade and advertise. We expect it to launch a Canadian hub by year end followed by the US and eventually Europe.
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