Invigor, WeChat, Tencent form formidable winning combination

Shares in Invigor Group Ltd (ASX:IVO) doubled last Wednesday after the company announced that it had negotiated a deal that will significantly grow its revenue and strengthen its Asian-focused e-commerce operations.

The deal in question involved a Heads of Agreement (HOA) which will see Invigor acquire Australian produce company Sun Asia Group, a company backed by experienced agribusiness and financial services executive Geoff Shannon.

The transaction brings together the technology platform of Invigor in Pricing Insights, Loyalty, and e-payments together with a large WeChat Pay-powered retail distribution footprint in China established by Invigor’s partner Winning Group, with an entrenched supply chain built by Sun Asia.

This combination of technology, supply and distribution will deliver Australian produce from dozens of farms located across Australia under the Sun Asia Group thus creating a seamless farm-to-plate operation.

The transaction complements and significantly expands Invigor’s and Winning Group’s growing WeChat Pay operations in Asia.

It became evident on Thursday that the relationship between Invigor and Winning Group had been further strengthened with the latter concluding a Memorandum of Understanding (MOU) to invest $1.5 million for a 10% shareholding in Invigor with the right to increase its investment to take its holding to 15%.

Discussing the significance of this development, Invigor’s chief executive Gary Cohen said, “Our partnership with Winning Group, which only commenced in September last year, has been a game changer for Invigor and we are delighted that they will potentially soon be a cornerstone investor in the company and contribute to the growth strategy through Board representation.

“In a very short period of time, we have both been able to commence the deployment of our respective technologies in Singapore in order to create a unique and dependable WeChat Pay-enabled ecosystem that is being adopted by many respected retailers and brands.

“This proposed investment will give Invigor the added financial flexibility to scale up the Smart Farm operations in China and Asia and bring our technology.”

The operations will now include the direct sourcing and subsequent sale of quality Australian-grown produce through Winning Group’s established network in China which is forecast to grow to over 5000 EasyGO WeChat Pay and AI (artificial intelligence) enabled, self-service kiosks and over 200 unmanned EasyGo stores by year end.

Invigor to benefit from Shannon’s experience

Under the terms of the agreement, Geoff Shannon will enter into a contract with Invigor to grow and develop Sun Asia and broaden the retail distribution channels in China and Asia together with Winning Group.

Shannon and/or his controlled entities have also thrown some financial backing behind the venture, with a proposed investment of $1 million in Invigor through the issue of 125,000,000 shares at $0.004 and entry into a $500,000 convertible note facility converting at $0.005.

However, it is arguably Shannon’s industry experience and network knowledge that will be most valuable from a strategic perspective.

A champion of the Australian farmer for over the past decade, Shannon has an excellent reputation in the Australian farming and financial services sector.

Not only is he a successful entrepreneur, but his business and philanthropic efforts have seen him nominated for Australian of the Year several times.

Highlighting Shannon’s expertise and industry knowledge, he is often sought after by the leadership teams of many of Australia’s banks and international banks operating in the agribusiness sector.

His experience helped him establish Sun Asia Group which has established contracts and relationships across dozens of farms in Australia.

A perfect fit with Invigor

Invigor also brings plenty to the table with its technological expertise, established Asian presence and a broad retail distribution network, suggesting this is a ‘one plus one makes three’ collaboration.

Through its own internal development and acquisitions, Invigor has established a B2B (business to business) data intelligence operation that turns data analytics into dollars for the retail and service industries.

Invigor’s innovation in owned retail platforms and unique cross-channel data ecosystem allows businesses to have a holistic view of their customers and competitive landscape to not only understand, but effectively engage with today’s physical and digital consumers.

Combined with proprietary data and predictive engines, Invigor provides strategic insights and recommendations that empower businesses to successfully influence future customer strategy and increase long-term profitability.

Examining how this business model and its product offerings have evolved provides a useful insight into management’s achievements, while also providing an understanding of the individual workings of the company’s technologies.

The shift to shopper insights

Invigor’s acquisition of Singapore-based Mobile Engagement and Loyalty platform Sprooki in 2017 acted as a catalyst for the ongoing investment in the innovative Shopper Insights product.

In 2018, management initiated pilots for a major retailer, a shopping centre group and a payments platform.

These programs clearly demonstrated the value of Invigor’s solution to these markets, and the company should continue to build on these successes.

Along the way, Invigor has also divested non-core assets, strengthening its balance sheet and making it a more focused operation.

With a renewed purpose of delivering data-driven, innovative solutions for commerce, management leveraged the value of acquisitions more strategically.

The highlight of this new focus was the partnership secured with Tencent partner Winning Group in September 2018.

Invigor was granted the rights to distribute and expand WeChat Pay services in South East Asia, starting with 3 key markets, Singapore, Hong Kong and Japan.

This provided a strong growth platform for 2019 and beyond.

Loyalty solutions integrated into WeChat payment platform

Invigor launched its first payment partnership with Tencent partner, Winning Group, paving the way for its Loyalty solution to be integrated into the WeChat payments platform.

WeChat Pay has over 1 billion users mainly in China and South-East Asia.

This step has been a game-changing catalyst, allowing the company to achieve scale from its solutions and to generate revenue from transactions.

Importantly, the broadened scope of the HOA with Winning provided security of tenure and resulted in the significant expansion of Invigor’s footprint into three very large markets and two of the most visited destinations by Chinese tourists, a large percentage of which use WeChat Pay for their purchases.

The future geographical expansion into Japan and the increase in scope is reflective of the demand and global appeal of Invigor’s Loyalty offering for financial and payment providers, as well as being an endorsement of the technology in delivering sophisticated loyalty capabilities for both merchants and shoppers.

Payment partners like WeChat Pay are helping accelerate the adoption of Invigor’s core Loyalty solution and introduce new scalable transaction-based revenue streams to the business.

Microsoft partnership gains further traction

The binding Memorandum of Understanding (MOU) signed in December 2017 with Microsoft came into full effect in 2018.

Under the MoU, Microsoft and Invigor collaborated to drive digital transformation in the retail industry, a key strategic vertical focus for both organisations.

The partnership with Microsoft initiated a separate MOU signed with Neal Analytics, a specialised data analytics company, Microsoft Global Partner of the Year for Business Analytics’ for 2017.

A joint case study was published by Microsoft in June which examined how Invigor’s products helped retailers become more data-driven by understanding the market, their competitors and their customers in order to make better business decisions that improve sales volume, margin and long-term profitability.

In November, Invigor received Co-Sell status from Microsoft, allowing it to actively work with Microsoft and its channel sales team to sell the company’s solutions to Microsoft’s extensive customer base, as well as its wide network of partners globally.

The Co-Sell status greatly expands the potential business opportunities for Invigor and opens further opportunities internationally, and extremely important factor for the company at a time when accelerated geographic expansion is on the horizon.

Revenue growth of 84% in 2018

Invigor’s corporate success and management’s ability to build strategic relationships is being reflected in the company’s financial performance with revenues growing 84% to $3.4 million in the 12 months to December 31, 2018.

Revenue from sales, licence fees and services from the core Loyalty and Pricing divisions were up 74% to approximately $1.25 million.

Annualised recurring revenue (ARR) strengthened significantly off the back of major contract wins for its Pricing and Loyalty solutions, including Carlton & United Breweries (CUB), a subsidiary of AB InBev, the world’s largest brewer.

Balance sheet strengthened

Importantly, the company was also able to strengthen its balance sheet along the way as it also benefited from the proceeds of divestments.

During the year the company sold its German service-based business Condat for approximately $2.8 million.

In a separate transaction, Invigor spun out the TillerStack Field Force Management business, while in February 2019 it also secured a two-year contract renewal with leading European telecommunications company, Unitymedia (parent company Vodafone) valued at over $1 million.

Convertible Notes conversions also reduced Invigor’s debt by $3.7 million, and with proceeds from the sale of the Condat business, the company was able to reduce net debt by 35%, or $3.9 million during the year, to approximately $7.2 million.

How the technologies mesh

By using a mix of artificial intelligence and technology combined with industry knowledge, Invigor’s cloud-based solutions demonstrate significant uplift in margin, sales, productivity and profitability.

Innovative solutions such as competitive pricing and promotion, loyalty and personalised engagement and field force management empower customers to become data-driven and make the best business decisions based on real-time accurate data and actionable insights.

Invigor’s client diversification and broad geographic reach are compelling aspects of its investment proposition as it isn’t heavily reliant on any one sector or region.

Retail clients span the liquor, consumer electronics and e-commerce market segments and the company also generates revenues from services provided to shopping centres and financial services and payments companies. Invigor’s customer footprint continues to expand globally.

Invigor’s Loyalty solution uses complex data sets such as transaction and customer data as well as competitive pricing, promotion data and artificial intelligence to provide strategic insights and loyalty solutions to commerce based business.

This data assists clients in driving sales, profit and customer value, as well as fostering repeat business.

Loyalty has a range of products that help B2C (business to consumer) businesses understand their customers, optimising spending and longevity of support.

Products that come under the Loyalty banner such as Visitor, Campaign and Rewards, Shopper Insights and Payment Partnerships represent a value-added premium service for Invigor’s clients.