EUR 49.00 For Business Accounts Only

Where has the business model gone? Downgrade to Sell

The half-year report shows that not much has remained of the original core business with which Achiko went public in 2019. Revenues in the first half of 2020 amounted to USD 2.7 million, compared to USD 3.6 million in the same period last year
(-24.6% YoY). While no explanation was given for the drop in sales, Achiko is, according to our estimates, also far from reaching the guidance published only in April 2020, which had envisaged sales of USD 50 million for 2020e and has not been revoked since then. In our view, this not only raises the question if Achiko’s management board has fulfilled its disclosure obligations that must be complied with since listing commenced at the SIX Swiss Exchange, but also whether the payment subdivision, which was a crucial part of the equity story at the time of the IPO, ever had a competitive set-up. Notwithstanding the unsatisfactory earnings performance of the former core business, management has in our view been speculating about expanding the single-product payments business into a "global, multifaceted payments, entertainment, health and community platform" even in its most recent company presentations. However, apart from the extensive use of media buzzwords such as "platform strategy" or "ecosystem for growth", which according to the management are supposed to address a market of 2.6 billion people within the next three years, not much of these expansions plans seem to be left.

In view of what has been achieved so far, we do not give the current management any further credibility that it will succeed in entering a new market with its "telehealth platform". Rather, we consider the aspired entry into the SARS CoV-2 testing ("Gumnuts") and an ecosystem called Teman Sehat, translated "Health Buddy", for which management has not even tried to explain how revenues or profits would be generated, as a further attempt to occupy buzzwords hyped up on the stock exchange and thus artificially generating demand in the share.

Accordingly, we are drastically reducing our earnings estimates, which have so far been described by the management as “dramatically conservative”. Instead of USD 22.5 million, we now expect 2020e revenues of USD 5.9 million (-74.0% vs. our previous estimates). With this, Achiko is far from becoming profitable in the current and the following fiscal year, in our view. After reworking our financial model, we are deriving a price target of CHF 0.03 (previously USD 1.10) from our three-phase discounted cash flow model. Compared to the last closing price of CHF 0.47, this represents an expected price risk of -93.5%. We therefore cut our rating to Sell from Buy.