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Peak Positioning Technologies Inc. (CSE: PKK), a Canadian IT portfolio management company, recently released its financial forecast for the next three years (click here to download forecasts presentation). NAI sat down with Peak Positioning CEO Johnson Joseph to get a better understanding of the projected numbers and what they mean for the Company going forward.
Peak: People don’t buy penny-stock companies because they’re looking to make a 5% to 10% annual return on their investments. They can buy any bank stock for that and not deal with the inherent risk of investing in a penny-stock company which is considered a “high-risk high-reward” venture. The typical penny-stock investors buy penny-stocks because they’re looking to quickly double, triple and make x-times their investments. They’re usually not long-term investors, but rather opportunists who won’t hesitate to sell one penny-stock position to get into another one if they think there’s a better opportunity for a quick return. I think a lot of the selling pressure on the stock price can be attributed to the fact that many penny-stock investors have been caught up in the marijuana euphoria for the past few months. And that’s something that has affected not just our Company, but other junior tech and resource sector companies as well. Thankfully, we have a solid core of true investors who believe in what we’re building and we’re highly motivated to make sure that they’re rewarded for their continued support.
Peak: In my view, the only logical conclusion is that investors are taking a “let’s wait and see” approach when it comes to our projections.
Peak: ASDS’s forecasted revenues are very achievable. The numbers are based on existing statistics from lenders that are both already on the platform and those expected to join it. These lenders have all been in business for a number of years and the numbers represent only a portion of the loans they currently make on an annual basis. They also expect to be more efficient in their lending activities on the platform, so we’re very confident in what we’re forecasting.
Peak: It’s rather the number of lenders we’re able to attract to the platform that will determine how much revenue we generate as opposed to how many SMEs we attract. There’s no shortage of SMEs looking for credit in China, so our ability to generate revenue will depend on how much money is available to lend to them, so our focus is on recruiting lenders to the platform. Our marketing strategy to recruit lenders involves working with local and provincial governments as well as loan brokers.
Peak: That’s a one-time fee on the gross value of each loan.
Peak: No, not for the time being. We looked at and tested several revenue models for the platform and decided that the best approach would be to have the SMEs join for free. We think that having access to the SMEs’ financial data may prove more profitable than any annual fees we would be collecting from them.
Peak: The platform collects financial data on SMEs to help qualify them for credit, but that data can be used for other purposes. It can be used to gauge economic activity in various industries, which can in turn be used in various business intelligence and predictive modeling applications. We’ve been working with a business intelligence company and believe we have a great opportunity to monetize that data.
Peak: I don’t have the exact numbers, but I believe about 25% of the 40,000 ICBC business clientsare on the platform. The others will continue to be added over time.
Peak: No. All we have to do is comply with the rules and regulations of the country with regards to such matters. For instance, we know that the servers where the data is being accumulated have to be located in China, that the data needs to be anonymized, and that the purposes for which the data is being gathered and used are clearly disclosed.
Peak: Very. We worked together for several months to produce the forecasts and are totally in sync when it comes to the numbers released. Like all Peak shareholders, I think they’re looking forward to seeing what happens as we hit those targets.
Peak: There’s no official relationship between Mr. Wang and the Company other than the fact that he remains a significant shareholder. When we moved away from the materials trading on Gold River to put more emphasis on our own financial services as opposed to referring business to Zhonghai Wanyue, he naturally became less and less involved in the operations of the Company. He is still consulted when it comes to Gold River related activities and could potentially continue to contribute by helping to bring business to that platform.
Peak: Yes, the service might be slightly adjusted based on lender feedback, but we plan to continue to offer it.
Peak: The revenue numbers are 100% of ASFC’s revenues. That includes our 51% stake and the 49% minority interest of our partners. However, the EBITDA values forecasted are only our 51% stake.
Peak: According to the rules and regulations governing financial services companies in China, we’re authorized to leverage up to 100% of our registration capital for lending purposes after 12 months of operations. So we should have at least $60Mat our disposal by 2021.
Peak: There are definitely some large lenders out there, including the big banks. But our research has shown that the lenders with the greatest lending capacities are not necessarily the most active lenders. Our focus will be on working with the more aggressive and active lenders and often times, those happen to be those with smaller lending capacities. But that’s not to say that we don’t plan to work with the big banks or larger lenders. It’s just a longer process, especially from a technological standpoint, to get them signed up and ready to go on the platform.
Peak: I don’t think that will happen for the third quarter statements, but that’s definitely something that we plan to implement in the future.
Peak: That will depend on whether the surplus cash is best used to continue to invest in our operations in China and grow the revenues faster or whether the Board of Directors feels it’s time to pay a dividend to shareholders. It’s too early to respond with any certainty.
Peak: I’ve been talking to a few institutional investors for a while now and I know that it’s going to take some time to get them involved with Peak Positioning. The purpose of that roadshow was to make sure they’re still following the Company. We discussed Peak’s progress and what can be expected in the upcoming quarters now that the financial forecasts had been released. So yes, considering the purpose of the trip, I am satisfied with how it turned out.
Peak: The projections should be interpreted as a reflection of what all of us at Peak, both in Canada and in China, expect the Company to achieve over the next few quarters. I strongly believe that by releasing these projections and showing the market that we’re able to hit them, we’ll be rewarding those shareholders that have continuously supported the Company.
Peak: We would expect that to happen at some point in Q4.
CHF Capital Markets
Phone: 416-868-1079 ext.: 231
Email: [email protected]
President and CEO
Peak Positioning Technologies Inc.
Phone: 514-340-7775 ext.: 501
Email: [email protected]
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