Aladdin’s maiden interim results reflect the early-stage nature of the business. As anticipated, the company did not generate revenues in the first half, and incurred operating expenses of €2.8m, which fell through to the bottom line. Of this sum, the vast majority (€2.1m) was related to the reverse takeover process in March: the listed entity, Aladdin Blockchain Technologies SE (the holding company), was deemed to have been acquired by the operating company, Aladdin Blockchain Technologies Ltd, as a result of the issue of 10m shares in the holding company in return for 100% of the shares in the operating company. As a result, we see this figure as non-recurring. Other costs will include the element of R&D (ie fees paid to Elemental Concept, the outsourced developer of Aladdin’s technology) that was not capitalised, as well as costs related to data storage, rent and general admin expenses.
We note the probability that the exiting monthly opex run rate was higher than the average cost over the half. As such, we would expect the opex not related to the takeover (c €700k) to increase going forward as the company increases headcount – either through direct employees or via Elemental.
Exhibit 1: P&L highlights
€ |
|
H118 |
Revenue |
|
0 |
Listing expenses and reverse takeover-related costs |
|
2,101,900 |
Depreciation |
|
700 |
Staff costs |
|
105,000 |
Other costs |
|
596,282 |
Operating expenses |
|
2,803,882 |
Operating loss |
|
(2,803,882) |
Finance income |
|
7,288 |
Finance expense |
|
(19,473) |
Net finance costs |
|
(12,185) |
Loss before tax |
|
(2,816,067) |
Tax |
|
0 |
Net loss |
|
(2,816,067) |
Loss per share |
|
0.26 |
Source: Company accounts, Edison Investment Research. Note: No comparatives are available as the operating company did not exist in H117.
Exhibit 2: Balance sheet and cash flow
€ |
FY17 |
H118 |
Non-current assets |
974,150 |
4,043,768 |
PP&E |
2,356 |
3,492 |
Intangible assets |
971,794 |
1,734,146 |
Investment |
0 |
113,030 |
Other non-current financial assets |
0 |
2,193,100 |
Current assets |
9,776 |
1,194,484 |
Trade and other receivables |
9,776 |
444,491 |
Cash and cash equivalents |
0 |
749,993 |
Current liabilities |
1,031,198 |
273,859 |
Trade and other payables |
534,747 |
265,204 |
Shareholder loan |
496,451 |
0 |
Other current provisions |
0 |
8,655 |
Net assets |
(47,272) |
4,964,393 |
Cash from operations |
|
(2,004,645) |
Cash from investing |
|
1,215,934 |
Cash from financing |
|
1,538,704 |
Net cash flow |
- |
749,993 |
Cash at period end |
0 |
749,993 |
Source: Company accounts, Edison Investment Research
The FY17 numbers are largely irrelevant to Aladdin, as the company did not trade in a material way before the end of 2017. The funds raised by the holding company of c €6.1m in H217 have been substantially invested over the half. Of the €2.2m non-current financial assets, €1.5m is a convertible loan to the Hong Kong JV, and the remainder was owed to the company by Aladdin Intelligent Data (a company owned by Wade Menpes-Smith) and has since been repaid. We also note that c €0.8m of development costs related to blockchain and machine learning have been capitalised over the period.
The balance sheet showed a cash position of €750k at the end of H118, and will have been boosted by the €716k loan repaid to the company post period end. As set out in the uplisting prospectus, Aladdin is generating cash costs of c €250k per month. As a result, we maintain our view that the company will seek additional equity during H2 to fund the company through its current development phase.
Further to our note published on 21 August, Aladdin has continued to make progress with the development of its suite of healthcare technology applications. Most notably, the company continues to add electronic health records to its data platform, with an estimated quarter of a million records added by the period end. In September, Aladdin released updated figures on the progress of its Indian operation. Since August, the company uploaded an additional 55,000 anonymised EHRs to the platform, bringing the total of Indian records to 80,000. Aladdin expects this number to rise to c 0.5m over the course of H218, reaching up to 5m by the end of 2020.
Strengthening corporate credentials
Furthermore, the company has uplisted to the regulated section of the Dusseldorf exchange (from the OTC section). The company expects the improved disclosure and corporate governance regulations to help liquidity and improve the attractiveness of the shares to the capital markets. This will be particularly relevant for the anticipated capital raise in H2.
Secondly, the company announced a new senior hire: Dr Amit Patel will join as lead UK healthcare advisor. Dr Patel is director of New Ventures at Bupa, where his remit is the incubation and scaling of new innovative businesses. At Aladdin, he will be responsible for developing the company’s strategy for data collection and acquisition in the UK.
Maiden revenues expected in H2
In H218, Aladdin expects to generate €0.85m of revenues from the initial licensing contract with the Hong Kong JV. In FY19, the company expects this revenue stream to grow as Aladdin begins to roll out diagnostic and analytical tools. Coupled with this, Aladdin expects to be able to sell datasets to parties including governments and pharmaceutical companies. While this licensing model is most likely, management notes the possibility of charging a fee per transaction on the Aladdin blockchain. One such example would be in insurance, where Aladdin could charge a fee per claim processed by its platform.
■
Completion of blockchain proof of concept, Genesis: this is the blockchain network that will sit on top of the Aladdin big data platform into which the company is currently storing EHRs. The blockchain will create an audit trail of anyone who has accessed and amended data stored in the big data platform.
■
Increasing number of EHRs on the data platforms: spread across China and India (separate platforms for regulatory reasons), Aladdin will continue to add medical records to its systems. Increasing the size of the data pools should improve the accuracy and effectiveness of the company’s AI and machine learning tools, which depend on vast datasets. In China the company is targeting 1m records by end FY18 (c 240,000 as of August), and in India, the company is targeting 0.5m (80,000 as of end September).
■
Launch of optical character recognition (OCR) prototype: an engine designed to process EHRs, and convert images into standardised text. This will be critical to the success of the big data platform (and associated AI and machine learning capabilities), which will depend on being able to compare and analyse data in a single, standardised format.
■
Launch of diabetic retinopathy prototype: further to the announcements made in August, Aladdin plans to launch the first prototype of its diabetic retinopathy tool in H2. While data are early stage, the company reports extremely high accuracy in testing for diabetic retinopathy. Indeed, the accuracy levels of 94.3% announced in August were higher than a recently FDA-approved device (IDx-DR), which reported accuracy of 87%.
■
Capital raise: given the period-end cash balance of €0.75m (exclusive of the €0.716m loan which has been repaid to Aladdin since period end) and ongoing cash costs, we expect the company will seek additional equity funding to finance the ongoing development of its technology suite. We note that absent additional funding and all other things being equal, the company is unlikely to have sufficient cash to maintain its current operations through to YE18.
Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Aladdin Blockchain Technologies and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. 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The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. 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Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Aladdin Blockchain Technologies and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent. |
Frankfurt +49 (0)69 78 8076 960 Schumannstrasse 34b 60325 Frankfurt Germany |
London +44 (0)20 3077 5700 280 High Holborn London, WC1V 7EE United Kingdom |
New York +1 646 653 7026 295 Madison Avenue, 18th Floor 10017, New York US |
Sydney +61 (0)2 8249 8342 Level 4, Office 1205 95 Pitt Street, Sydney NSW 2000, Australia |
Frankfurt +49 (0)69 78 8076 960 Schumannstrasse 34b 60325 Frankfurt Germany |
London +44 (0)20 3077 5700 280 High Holborn London, WC1V 7EE United Kingdom |
New York +1 646 653 7026 295 Madison Avenue, 18th Floor 10017, New York US |
Sydney +61 (0)2 8249 8342 Level 4, Office 1205 95 Pitt Street, Sydney NSW 2000, Australia |
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