FastForward Innovations

FastForward Innovations (FFWD) is a hi-tech investment incubator, run by some of the smartest minds in the industry. The Board’s objective is to generate substantial value for shareholders, by purchasing both minority and controlling stakes in rapidly expanding, private entities, that each have the potential to realise gains of 8-10x over a 3 year period. 

It is often said that 60% of all acquisitions lose money - a phenomenon known as “buyer’s curse”, whereby over-zealous bidders overpay for strategic assets. Not so FastForward, where we were again encouraged to hear at Tuesday’s interims that all 9 of its investee companies have either maintained or increased their worth. Granted it is still early days, albeit we think this enviable ‘hit rate’ is a credit to the management team, who together possess vast M&A experience and have remained steadfast to the core principles of: 1) only buying stakes in high growth stocks within FFWD’s target verticals (ie technology & life sciences), and 2) “walking away” from deals which are unlikely to generate superior returns commensurate to the risks. 

With regards to the financials, net assets rose 3.3% from £10,270k to £10,614k (7.92p/share) in the 6 months to 30th September, vs 10.6% and 15.0% gains respectively on the FTSE All Share and AIM indices. That said, stripping out plc fees, salaries, due diligence and other corporate overheads (total £671k) – FFWD’s NAV would have actually climbed 9.9% thanks to favourable investment gains and forex (£ devaluation). A decent result, given that the portfolio consists entirely of unquoted startups, most of which under IAS rules, have to be stated at original cost.

CEO Lorne Abony travelled extensively in H1 - evaluating potential new targets and providing support to investee companies – along with building a focused high-performance management team to enhance deal flow, improve due diligence and ensure that (if required) the Board can complete transactions expeditiously. In terms of portfolio specifics, FFWD made two new investments in the period - $3.5m in Leap Gaming (virtual/3D sports) and $500k in Moon Active (casual social games) – as well as adding to its existing stake in Schoold ($700k, student software) and enjoying a nice uplift on Factom (block-chain technology to combat cyber-crime). 

In the Interim statement CEO Lorne Abony concluded:” Our focus will continue to be identifying the best management teams operating high-growth businesses in industries that hold great promise. We will continue to work closely with our investee companies to assist them in leveraging opportunities to build their businesses and, where appropriate, seek exits for our investments when circumstances dictate”. 

Being able to consistently deliver out-sized investment returns, is all about managing risk and finding high quality, growth stocks at the right price. We’ve seen this already in 2016 with many such smallcaps, like Keywords Studios, Fevertree Drinks, Boohoo, GW Pharmaceuticals and Tristel. Another stock that in due course could join this select band, is FastForward Innovations (FFWD - up 100% since mid Oct’15) which invests exclusively in rapidly expanding technology firms. Today FFWD holds non-controlling positions in nine such privately owned businesses, which we understand are all either meeting or exceeding their internal plans. Yesterday the company provided updates in relation to three of them:

Firstly Yooya (15% stake), a Chinese online content streaming platform, is currently generating >1bn monthly video views (vs 700m in August), up 600% YoY – and importantly now offering the scale necessary to attract major international advertisers.

Next Schoold (12.3% owned) - which is already the market leader with regards to the number of US student downloads of its innovative university career counselling App - has just launched its first commercial product (Viewbook) and is gaining significant media exposure. 

Finally it was reported that Moon Active (5.9% stake), an Israeli developer of social multi-player casual games, had almost doubled revenues (YoY) for the 3 months ending Sept’16. What’s more the Board has decided to substantially increase its marketing and personnel to support global expansion, namely in support of its latest and most popular title Coin Master.

Interims are scheduled to be released in December, albeit we estimate that the proforma Net Asset Value (NAV) as per Sept’16 was around £10m, equivalent to 7.5p/share post forex movements, YTD investments and normal cashburn. Whilst this is below today’s price of 11p, the NAV could rise quickly, reflecting the quality of FFWD’s M&A pipeline and the significant headway being made by its exciting investments.

One of FastForward's many attractions is that it provides investors with direct access to some of the most promising, early-stage technologies being developed anywhere on the planet. Additionally because its 9 investee companies are valued at historical cost in the statutory accounts, rather than market prices, then we believe there could be substantial upside hidden in the portfolio - perhaps even multiples of the 7.8p/share net assets figure reported at the 31st March year end.

FastForward Innovations (FFWD) today released a Portfolio company update, including positive news on four of portfolio holdings: Yooya, Leap Gaming, Schoold and SatoshiPay. The company confirmed in the announcement that growth at both Schoold and Yooya was "far beyond our expectations". Today's update included news that:

Schoold's (12.3% owned by FFWD) innovative university career counselling App, which is already the market leader in terms of number of US student downloads, has just surpassed 1.3m user installations. We believe this further validates Schoold's exponential adoption rates, mobile expertise and success in engaging with this tech-savvy, much sought-after and highly influential demographic. 

Yooya (15% stake), the Chinese online content streaming platform, is trading very strongly too - not only receiving >700m video views in July (up 300% YoY), but also managing to double revenues sequentially in Q2'16 vs Q1. Yooya has recently smashed its own stretching target of 11bn lifetime video views, 5 months ahead of schedule. 

Under International Accounting Standards, none of this upside can yet be factored into FFWD's formal net asset value (NAV). Instead all of its 9 investments are stated at historical cost, which we reckon is materially below the actual worth of these stakes on the open market, particularly for Schoold and Yooya. We estimate that the proforma Net Asset Value is around £10.5m, equivalent to 8.0p/share post forex movements, YTD investments and normal cashburn. Granted this is less than today's shareprice of 12.5p, yet equally the NAV could climb quickly, reflecting the quality/scale of FFWD's M&A pipeline and progress being made by its investments.