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Beaufort on MySquar - is this the worst broker note of the year?

By Tom Winnifrith, The Sheriff of AIM | Wednesday 11 October 2017

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Clearly no-one told Belfort Securities that its star client in the fraud sector, MySquar (MYSQ) was going to have a disastrous lack of profits warning today which exposed how it had massively misled investors for months. Because yesterday it urged its clients to fill their boots at 4.02p with a 21p target. At least this shows that at Belfort the Chinese walls between research and broking have no chinks in them. The shares are now 2.98p and are worth 0p. Over to Belfort....

MySQUAR (MYSQ.L, 4.02p) – Speculative Buy

The Myanmar-language social media, entertainment and payments platform whose principal activity is to design, develop and commercialise Myanmar-focused internet-based mobile applications, yesterday announced it has signed a Memorandum of Understanding (‘MoU’) with Sealand Capital Galaxy Limited . It has entered a partnership for the mobile games of MySQUAR to be distributed under Sealand’s (through its subsidiaries) licence agreement on the Huawei inTouch platform and for Sealand’s mobile games to be distributed in Myanmar through the MySQUAR platform.
Huawei is the third largest smartphone provider in the Myanmar market which is the fastest growing in Asia. Details of the partnership shall be finalised within the next 60 days. Sealand makes investments and acquisitions in the information technology and social media sectors in the APAC (Asia-Pacific) region, with a particular focus on mobile gaming and mobile payment companies.

Sealand, through its subsidiaries, has agreements in place with Huawei to distribute mobile games in Asia and with WeChat Pay to provide mobile payment services to the messaging app platform in Hong Kong. Sealand recently acquired a majority stake in Rightyoo, a mobile game development company. Sealand and MySQUAR are in discussions to distribute Rightyoo games through the MySQUAR gaming platform in Myanmar. “Sealand actively monitors opportunities in Southeast Asia and we are eager to enter the fastest growing market in the region, Myanmar, for mobile gaming and payments,” said Nelson Law, Chairman of Sealand Capital Galaxy Limited. “We hope to leverage MySQUAR’s first place position in the Myanmar mobile gaming market with millions of downloads and its partnership with MyPay Limited, to offer RightYoo’s gaming content through MySQUAR in Myanmar.”

Our View: That’s the beauty of the social media platform MySQUAR has created. Having attracted a rapidly expanding and loyal customer base and facilitated a broad range of services to complement and monetise it, deals like the one just struck with Sealand, cost little to implement and can be rapidly moved onto its platform. Already populated by eager users, MySQUAR’s leading position in Myanmar mobile gaming together with its MyPay partnership, should ensure RightYoo’s content quickly generates a new stream of revenue, a good share of which should then fall directly to the bottom line. MySQUAR management is doing all the right things and its momentum continues to build! In fact, based on expected progress, Beaufort now considers MySQUAR has the potential to produce its first net earnings for shareholders as early as its financial year-ended June 2019, by which time its branded social media and entertainments platform will indeed have secured deep foundations in Myanmar.

This all suggests the shares still have a long way to go from their currently depressed levels notwithstanding, of course, the opportunity for a predatory approach from one of the acquisitive online hubs which remain hungry to add new virgin territories to their international portfolios. Indeed, whether the ambitious, deal-hungry Sealand that has already declared its desire to capture more of Myanmar’s rapid growth actually has deeper designs on MySQUAR remains to be seen. Whatever, they will not be the only one to recognise its exceptional long-term opportunity, in recognition of which Beaufort retains its target price of 21p/share on MySQUAR along with a Speculative Buy recommendation.


Cynical Bear explains why this note is 100% bollocks HERE

Methinks that those forecasts of profitability will b e er...scaled back. In fact when this company runs out of cash in early 2018 (or earlier) the forecasts will be academic. Our stance SELL - target price 0p.

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