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Family Zone (ASX:FZO)

Vodafone India agreement expands Telco addressable market past 700M potential users

1 Video - May 18

Family Zone Cyber Safety (ASX:FZO) has issued two key announcements relating to the company’s ongoing expansion into international markets, as well as cost reductions. Highlights of those announcements include the following.

  • Family Zone is positioned to become the leading provider of cyber safety solutions in India, having signed an agreement with Vodafone India (430 million subscribers) and Micromax, that country’s second largest manufacturer of mobile phones and tablet devices.
  • Vodafone India has agreed to resell Family Zone’s services across its pre- and post-paid segments, while Micromax will embed Family Zone’s mobile app on its devices and promote it through its 125,000 retail outlets in India.
  • The target commercial launch for both is 4Q18.
  • Netsweeper will be rolled out across all Family Zone offerings, including schools and telco carriers worldwide (Netsweeper provides enterprise-filtering services – it categorises tens of billions of web addresses, has +500 million registered devices in its platforms and is used by telecommunications groups in 60 countries).

Analyst comment: Australia remains Family Zone’s major market for revenue generation in the short to medium term; however, the above mentioned announcements highlight the company’s aggressive global expansion strategy as it lays the groundwork for becoming a globally recognised brand.

Family Zone’s agreement with Vodafone India increases the former’s total addressable telecommunications market in Asia to more than 720 million potential users; indeed, it’s unlikely any other parental control technology can claim this reach. With further, similar agreements likely in the future, we would not be surprised if this potential addressable market exceeds a billion users during the next 12 months.

With Family Zone’s global footprint now well and truly established, the next step is to commercialise this vast opportunity. We believe Family Zone’s agreement with Telcomsel – its most advance telecommunication agreement at this stage – could be the first to ramp up to revenue generation, with other markets, most probably in India, following suit later this year. However, we should highlight that TSI-forecast revenue generation from Family Zone’s Asian telco strategy won’t commence until 2019.

That said, once revenue from this strategy does hit the bottom line in a meaningful way, the company is likely to attract the attention of larger parental-control organisations seeking quick access this potential market.

Family Zone’s collaboration with Netsweeper should not be overlooked, as we believe it will have benefits in both the short and long term.

In the short term, costs for Family Zone will be reduced, as it has switched to wholesale terms rather than its previous standard services agreement. In the long term, meanwhile, such a collaboration will no doubt open countless doors to new opportunities as Family Zone continues to extend its reach globally, particularly in view of Netsweeper’s  strong presence in North America.

The information in this email should not be the only trigger for your investment decision. We strongly recommend you seek professional financial advice whenever making financial investment decisions.

Valuation:  we increased our valuation for Family Zone to $1.49 /share (previously $1.36/share). the driver for this being the increase in the addressable market for India as a result of the Vodafone announcement, as well as slightly adjusting our operating costs due to the Netsweeper announcement. This, however, is slightly offset by the slower ramp-up in revenue generation for the company’s telecommunications strategy, forecast by us to occur from 2019 onwards.

Significant increase in sales drives highly productive quarter

1 Video - Apr 18

Family Zone Cyber Safety (ASX:FZO) has issued a number of announcements relating to the ongoing expansion of their cyber safety platform, as well this quarter’s sales performance. Highlights include the following.

  • March quarter sales (unaudited) – $1.72 million (December quarter – $0.6 million).
  • Commercial agreements entered into with 180C Limited, a Hong Kong based edu-tech company that offers the innovative ‘eSchoolPad’ device management and classroom tool (deployed in over 500 schools, it supports both Chinese and English).
  • These software licensing/collaboration agreements will see Family Zone services interface with eSchoolPad to form an integrated solution for eSchoolPad users in Asia, as well as new and existing Family Zone customers.
  • Alcatel, Australia’s third most-popular mobile phone brand, will pre-load Family Zone technology onto its devices.
  • Alcatel will launch in Australia and New Zealand in late 2018, with a global rollout thereafter.

Analyst comment: there has been no slowdown in news flow for Family Zone in the past month, with the company continuing its push to become the leading parental control platform in both Australia and New Zealand.

Recent announcements, coupled with the company’s telecommunications strategy, further highlight Family Zone’s plans to become a major player beyond our shores, particularly in the Asian region.

Revenue: Family Zone announced a significant increase in customer billings for the March quarter ($1.72 million – unaudited), a 190% rise compared to the previous quarter. While a seasonal factor is probably at work (viz: commencement of the school year in Australia and New Zealand), we believe most of that growth relates to the number of additional subscriptions during the quarter (+40,000 compared to 30,000 in December 2017).

As Family Zone advances its school partnering program, and with the need for parental control continuing to make headlines (for all the wrong reasons), we expect this trend of increasing numbers of subscribers to persist for the foreseeable future.

Alactel transaction: in addition to the aforementioned market awareness techniques, we believe that the deal with Alactel – which will see Family Zone technology pre-loaded onto new mobile devices later in the year – could be a significant step-change up for Family Zone in the longer term, in that it will further enhance the company’s subscriber base. For more information, click on the Alcatel transaction link above.

eSchoolPad: this agreement benefits Family Zone on two levels: aside from being deployed immediately in 500 schools in Hong Kong, as with the Linewise transaction last year (Linewise being New Zealand based) it also raises Family Zone’s profile in Hong Kong, a country well known for its early adoption of technology and strong emphasis on education and learning.

Further, introduction of the eSchoolPad technology to Family Zone’s existing markets will bolster the company’s current school technology offering, in that it will allow teachers to both monitor and control what students do within classrooms. For more information on this agreement, click on the link above.

Valuation:  we maintain our valuation of Family Zone at $1.36 /share (current share price $0.51/share). For full details of our valuation analysis, click on the link below.

Agreements signed with Hong Kong based edutech

1 Video - Apr 18

Interview with Tim Levy to discuss the agreement signed with Edutech.

Alcatel transaction – management update

1 Video - Mar 18

Family Zone has announced a deal with  alacatel.  Alcatel is a major global provider of mobile devices and has been the 3rd most sold mobile phone brand in Australia by volume for the last two years.

We discuss the announcement with management in further detail as well as the benefits for FZO both in the short and long term.

Valuation Update

1 Video - Mar 18
  • Due to FZO continued expansion of their schools and Asian carriers strategy, we have reviewed our assumptions which has resulted in our valuation increasing to $1.36/share.
  • This video details our key assumptions and future drivers.

Corporate & business strategy update

1 Video - Feb 18

We discuss the current growth of Family Zone and the business strategy moving forward with Managing Director, Tim Levy.

Telecommunication update

1 Video - Feb 18

Interview with Managing Director Tim Levy to provide an update on Family Zones telecommunication strategy.  Topics discussed include.

  • Why Family Zone has expanded into India?
  • Why Asia been targeted for the telecommunication strategy.
  • An an update on the partnership with Telcomsel.

Flash note – Strong quarter as client base grows

1 Video - Jan 18

Family Zone Cyber Safety (ASX:FZO) is the first company to develop and implement an ecosystem approach to parental control and cyber safety for children at home, at school and on mobile devices. The company has released a positive quarterly report, highlights of which include the following.

  • Revenue $2.1 million  (62% increase QoQ  – includes $1.6 million in grants)
  • Paying subscriptions 30,000 (100% increase QoQ)
  • International subscriptions 5,000 (+400% increase QoQ)
  • Partner schools 120 (90% increase QoQ)
  • Contracted schools 582 (98% increase QoQ)
  • School Zone networks 574 (91% increase QoQ)
  • Cash balance $7.8 million as at 31 December 2017

Analyst comment: the focus for Family Zone during the past year has been continued expansion and adoption of its respective platforms, both domestically and abroad.

We see the most critical aspect to measuring this success as growth in the number of paying clients/users; in recent years we have witnessed numerous other companies in the technology sector having what appeared to be great ideas and a large number of users or downloads, this did not translate into clients, which typically resulted in these companies’ undoing.

Pleasingly, Family Zone has surpassed expectations, with the number of paying accounts exceeding 30,000 during the past quarter. This exceptional result has translated into growth of 114% compared to the previous quarter (September quarter – 14,000 accounts) and 172% growth (June quarter –11,000 accounts) since Family Zone’s initiation just over six months ago. We expect this rapid growth to continue in the coming year as the company continues its growth here and overseas.

Looking to the quarter ahead, we anticipate further growth from the number of paying accounts, as well as an expansion in the number of partnering schools (currently 120) as the new school year commences in Australia and New Zealand.

We also anticipate an update with respect to Family Zone’s telecommunications strategy, particularly with the launch of its white-labelled ‘Family Protect’ product in partnership with Telcomsel, one of the world’s largest telecommunication providers. And, while we do not forecast significant revenue from Family Zone’s telecommunication partnerships during the next several years, we do see this area as especially important to the company’s long-term success and growth strategy, in overseas markets in particular.

The information in this email should not be the only trigger for your investment decision. We strongly recommend you seek professional financial advice whenever making financial investment decisions.

Valuation: we have reduced our valuation for Family Zone to $1.24/share (previously $1.33/share), due to increased dilution from the recently completed $5 million capital raising.

Quarterly Update

1 Video - Oct 17

Interview with management on the September quarterly results.

Valuation update

1 Video - Oct 17

we have increased our valuation for Family Zone to $1.33 /share (previously $0.84/share).The major drivers for this were reducing our discount rate to 13.3% (previously 18.5%) and increasing our revenue assumption (1% LT uptake – 2022) for the Asian telecommunication carriers only (the previous assumption being nil revenue for telecommunication carriers). We will reassess this again as the Telkomsel partnership matures.

Linewize acquisition – Management update

1 Video - Oct 17

Family Zone has announced it has signed a Share Sale Agreement to acquire 100% of the shares of Linewize Services Limited.  We discuss this transaction and the benefits for FZO shareholders with Managing Director, Tim Levy.

Management Update

1 Video - Aug 17

Interview with management to discuss activities during the past quarter.  Key topics discussed include:

  • Financial and sales results;
  • New partnerships;
  • Recent capital raising; and
  • Targets for the upcoming quarter.

Initiation Report

10 Videos - Jun 17

Family Zone is an ASX listed company that has developed a comprehensive cyber safety platform that has been rolled out in schools and in family homes across Australia.  This report includes:

  • Valuation, investment and risk analysis;
  • A number of management interviews, which discuss the company’s business model and the role of the cyber experts; and
  • A review of the parental control industry, highlighting key online risks to children, the size of the industry and future growth potential, as well as comparing Family Zone’s ecosystem solution to other products.

Valuation Analysis

1 Video - Jun 17

Valuation Analysis for Family Zone of $0.87/ share.  This video discusses the key assumptions used to determine our valuation.

Business Model

1 Video - Jun 17

Discuss with Managing Director, Tim Levy, to explain the company’s business model in further detail.

What is a Cyber Expert?

1 Video - Jun 17

Family Zones sets itself apart from it’s competition with their team of cyber-experts.  We talk to one of Family Zone’s cyber experts, Jordan Foster, what is a cyber expert and why does Family Zone have a variety of cyber experts to chose from.

Parental control industry – Current products

3 Videos - Jun 17

The parental control market is quite fragmented with vastly different products offered by different providers. This video reviews the current offerings and identify’s how FZO ecosystem approach addresses many of the industry’s shortcomings.