Feature article on Multiactive at Stockhouse
stockhouse.ca
Multiactive Software: Big Asian Investment Partners; Stock Needs "Discovering"
Since being profiled by StockHouse last December, Multiactive Software has continued to benefit
from a November 1999 "Best of Comdex" award for its Entice! e-commerce software. The share
price has picked up from the late 1999 52-week high of C$3.89, trading up to a high of $5.95. The new
52-week high of $5.95 was smashed February 28 on much heavier than usual volume. Multiactive
shares are on the verge of staging a breakout that could be sustained by recent business
developments, medium-term prospects for accelerated growth, and the link to major partners in
Asia.
Toronto, ONT, February 29 /SHfn/ -- A pick-up in trading volume that started the week of February 21, continues to gain momentum. Multiactive Software Inc. [T.E]
shares have been gaining with the increased volume, setting a new 52-week high of $7.25 February 28, and look like they will be staging a strong breakout.
As noted in a previous StockHouse report, Multiactive's Entice! software product integrates customer relationship management with a complete Web-based storefront. The
aim being to allow mid- to-large size companies quick set-up for e-commerce.
While Q1 results may not in fact be as strong as the market is looking for, Q2 results should be very good. Combined with good momentum building potential from its
Asian subsidiary and the possibility of a NASDAQ listing within the next year, the medium-term outlook for Multiactive shares is good. If this stock were to be "discovered,"
the potential could be similar to its American competitors: irrationally crazy.
Medium-term, Multiactive's Q2'00 results look set to be quite strong. Brent Halverson, the company's CEO, says that Multiactive has spent the last two quarters building up
its support capability for Entice! Entice! has so far been limited to direct sales. In Halverson's words, "You can't sell something through the indirect channel when you can't
yet support indirect sales. We've been building up our capability to [product] support Entice! sales, and these efforts are going to position us really well going forward. The
Comdex award is really something to dangle in front of potential partners but, the internal capacity [for product support] also has to be there."
Halverson, an engineer by education and training, has risen rapidly through the ranks at Multiactive, starting as a software developer, so he speaks from a strong technical
base. His approach may be conservative but it is the right approach for solid long-term sales growth.
As Multiactive ramps up indirect distribution for its hot Entice! product line, there should be a positive impact on top-line revenues growth. Further aiding top-line results will
be forthcoming back-end Oracle database support. These two factors should start kicking in during Q2'00.
Multiactive's Q1 '00 closes at the end of February. The Q1 results are likely to show good improvement over the year ago numbers, and may also look good compared to
relatively weak Q4 '99 numbers. Multiactive's Q4'99 closed too early to have experienced a positive influence from the "Best of Comdex" win, and was also hurt by a large
inventory return charge.
Although such charges are cause for concern, in Multiactive's case it looks unrelated to future revenues momentum. The inventory return
charge was for the company's ecBuilder software, a low cost ($99) shrink-wrap website building package. Although ecBuilder is great stuff -
it was given PC Computing's highest possible rating of 4 stars - it seems that Multiactive does not have the push to shove this particular
product through the retail channel.
Multiactive management has realized as much, deciding to instead concentrate on getting ecBuilder bundled with PC shipments. Halverson
is adamant that there will not be a recurrence of the Q4'99 inventory return charge.
During February, Multiactive strengthened its Asian direct sales presence and forged a meaningful partnership with powerful Hong Kong
market players. On February 1, Multiactive announced that its Asian subsidiary, Multiactive Pacific, will acquire privately held Hong Kong
company ABC Data & Telecom Ltd., a Multiactive distributor and developer of trading software.
The family of Multiactive's chairman, Terence Hui, a prominent Chinese-Canadian property developer, is taking a 23% direct holding in Multiactive Pacific. On February 16,
ITC Corporation Ltd. and Hutchison Whampoa Ltd. were added to the roster of big-name Hong Kong Chinese linked to Multiactive's Asian subsidiary, when it was
announced that Hanny Holdings Ltd. will purchase a 9% holding in Multiactive Pacific.
ITC chairman Charles Chan himself contributed to the announcement, stating: "The Asian market is just starting to discover the opportunity offered by e-business, and the
growth potential for e-business solutions offered in this market will be tremendous."
ITC and Hutchison Whampoa are Hanny Holdings shareholders. Hanny Holdings recently raised new capital of $300 million for venture capital activities.
Given the prominence of the players involved, there is a very strong possibility that Multiactive Pacific will be able to launch successful private, and eventually public
financings on the Hong Kong market. The Hanny Holdings investment considerably strengthens Multiactive Pacific's top-line potential through access to expansion capital
and creating all important "guangxi," or, connections.
Future developments at Multiactive Pacific are likely to support upwards share price momentum for the Canadian parent company.
"People tell me I must be happy with the stock price going from $0.75 to $4.50-5.00 bucks. I tell them it's really nice but there's still lots to
be done," said CEO Halverson while being interviewed by StockHouse. Yet he refuses to give out either revenues or profit projections,
preferring to instead say: "We're positioning ourselves well, and when the results show, then we'll get what we deserve."
This is the kind of conservative management that is not good for running up stock price, but is good for creating a solid base of market
confidence in an executive team.
Multiactive's most prominent competitor, US firm BroadVision Inc. [BVSN], had market capitalization of US$19.4 billion on February 25, on
which day its stock hit a new 52-week high of $243 1/8. BroadVision's stock is almost too hot to touch, resulting in outlandish valuation
ratios such as market cap / sales of 168:1 and P/E of 1,113.
Smaller US firms in the same product area enjoy similarly high market cap. Art Technology Group, Inc. [ARTG] has 12-month trailing revenues of $32.1 million
(compared to $115.5 million for BroadVision) and a market cap of $4.5 billion (February 25).
Halverson will not publicly put up these market cap figures as a goal for Multiactive but does hint at what he thinks is possible in the future by stating, "As our market cap
moves upwards, to the $600 million range, we fully expect that we will be gaining greater analyst coverage." At the moment Multiactive barely has any coverage in Canada,
never mind the States. Halverson leaves the conclusion - that greater analyst coverage comes with and can drive positive share price momentum - up to someone else to
make. Multiactive is reporting on US GAAP but Halverson denies that this has anything to do with a potential NASDAQ listing. "We have conservative accounting, and US
GAAP is more conservative than Canadian GAAP." It already looks like the market is starting to bid up Multiactive looking for positive quarterly results, a NASDAQ listing
and momentum creating news out of its Asian subsidiary. |
