SINGAPORE (Aug 2): DBS Vickers Securities is maintaining its “buy” call on Catalist-listed Y Ventures Group with an unchanged target price of 77 cents, which is based on 20 times FY19F EV/EBITA and at a 15% discount to larger peers’ 23 times due to the group’s smaller scale.

This comes after news of Y Ventures’ Tuesday launch of its US$50 million ($68.3 million) initial coin offering (ICO) of AORA Coin tokens via Luminore 8 – the group’s joint venture (JV) with Arke Blockchain Engineering – to raise funds for the development and roll-out of Luminore 8’s AORA platform.

To recap, Y Ventures says it intends for the platform to be the world’s first blockchain-enabled global buying platform that allows consumers to purchase real-world products from any online store and marketplace using cryptocurrencies. 

The ICO will end on 30 Nov with the AORA platform to launch in 1H19.

In a Thursday report, DBS analyst Carmen Tay opines that Y Ventures could see significant long-term potential should the ICO and launch of its AORA platform be successful, as this would make the group the first e-commerce platform to service the cryptocurrency community.

The research house has yet to factor such a possibility into its projections due to limited visibility, but nonetheless believes the ICO will help to raise visibility for the AORA platform while providing Y Ventures with “valuable screen-time” with its intended audience of cryptocurrency enthusiasts.

“While unorthodox, we believe that the merits of Y Ventures’ ICO initiative and longer-term prospects for the AORA platform should not be ignored,” says Tay.

She further highlights Y Ventures for its price discount advantage from its brand partners, unlike traditional distributors and e-commerce platforms.

“The launch of private labels in areas where Y Ventures is confident of achieving strong sell-through rates based on analytics, as in the case of JustNile and Faire Leather Co, further augments margins,” notes the analyst.

Considering Y Ventures’ recent on-boarding of new publishers and an exclusive online distributorship for Disney products in the region, Tay reiterates her base case assumption of about 77% and 49% y-o-y sales growth for FY18F and FY19F, respectively.

In her bear-case scenario where she assumes lower inventory turnover and imputes lower growth from upfront purchase requirements inherent in the group’s inventory-taking model, she believes revenue growth would be more modest at 55% and 45% for FY18F and FY19F, respectively.

This results in a bear-case valuation of 47 cents, which Tay still considers as an attractive risk-reward ratio at the group’s last traded share price of 50 cents as at Aug 1.

“Unlike secondary placements or rights issues, an attractive attribute of Y Ventures’ proposed ICO lies in the ability to obtain funding without dilution of benefits to existing holders… Compared to smaller, unregulated ICO aspirants, we would argue that the degree of information asymmetry and thus risk of litigation for Y Ventures’ is significantly reduced given its public listing,” concludes the analyst.

As at 3:33pm, shares in Y Ventures are trading 1% lower at 50 cents or 10 times FY18F book.