YPBs Motif Micro opens up large global markets

Product authentication and consumer engagement solutions provider YPB Group Ltd (ASX:YPB) has signed a supply agreement to sell its breakthrough Motif Micro 1 (MM1) smartphone authentication technology to China’s leading security label supplier PanPass Inc. in the first commercial adoption of the solution.

This development builds on recent strong news flow that has seen the company’s shares increase 50% September, and given this agreement’s potential to materially impact revenues, further share price upside may be imminent.

PanPass will be the first commercial client for YPB’s MM1 authentication solution, delivering a substantial boost to the group’s addressable market.

The agreement marks the delivery and commercialisation of this technology in the December half of 2019, as previously foreshadowed.

As a backdrop, YPB's proprietary smartphone enabled technology suite allows consumers to confirm product authenticity and, for brands, that triggers consumers’ engagement.

The combination of YPB’s smartphone authentication solutions and its SaaS Connect platform, creates ‘smart’ product packaging, opening cost-effective, digital and direct marketing channels between brands and their consumers.

Connect gathers actionable data on consumer preferences, facilitating tailored marketing campaigns directly back to the scanning smartphone.

Motif Micro 1 represents a genuine technical and commercial breakthrough in creating a high security, smartphone readable, product authentication solution for mass consumer goods markets.

China represents large market

PanPass prints approximately 15 billion security documents annually which includes in the order of 3 billion product security labels per annum predominantly with “QR” codes to its customers in China.

The group initially intends to use YPB’s solution to protect its own product security QR codes from counterfeit.

QR codes are omnipresent in China but fake QR codes are a growing and therefore major problem as they are easily copied, spoofed and substituted with consequences from fake product substitution to identity theft, bank account fraud and malware intrusion.

Under the supply agreement, PanPass, as YPB’s first “initial adopter” has agreed to use YPB’s solution to protect its security labels for a six-month initial program.

The supply agreement contemplates a further minimum two year licence agreement either at the end of the initial program or at PanPass’ request including an upfront license fee, a supply fee and a minimum order quantity.

Given the present fluid nature of its plans, it is not possible to determine the likely annual revenues from the contract at this stage.

However, the size and reach of PanPass Inc. underlines the importance of this agreement.

The group was established in 1996 and it has six service centres and 48 branches in China.

Further, it is China's largest product data identity management service provider, and its market share exceeds the total of the second to fourth companies combined.

PanPass adoption represents product endorsement

Highlighting the significance of this agreement in terms of executing on YPB’s strategic repositioning, executive chairman John Houston said, “I can’t over-emphasise how much our smartphone authentication breakthrough can transform YPB.

‘’It greatly expands our addressable market by shifting from our historical B2B (business to business) sales to a B2C (business to consumer) consumer marketing sales.

‘’YPB’s technology will provide brands with a direct, personal, low-cost channel to a willingly engaged consumer which can be extremely valuable to brands, and this is reflected in discussions between ourselves, our channel partners and brands.

‘’Increasingly, we will be selling engagement powered by authentication with much higher probability of sales success compared with our earlier anti-counterfeit offer.

‘’Having a product security label provider of PanPass’ stature adopt our solution is testament to its quality and value, making it a true breakthrough.

‘’We look forward to working with the PanPass team in an immediate rollout.”