New partnership with Counter Path to deliver significant upside.

On2 August 2018, Vonex Limited (ASX:VN8) announced that it had secured aone-year, renewable, Cooperative Marketing and Master Partnering Agreement withNASDAQ and TSX-listed Counter Path Corporation.  Vancouver-basedCounter Path owns award-winning and globally recognised Unified Communications(UC) solutions’ including Bria 5 software for soft phone platforms (i.e.,desktop, tablet, mobile), and the Stretto Platform (for integratingenterprise-wide communication systems).

The partnership agreement will see both parties collaboratively workingon new customer growth in Australia. VN8 believes that this could open muchlarger opportunities to work with enterprise clients previously not targeted,plus enable the group to expand its offering to existing business, enterprise,and channel customers. Vonex will also white-label selected Counter Pathproducts and sell under its own brand. To this end, VN8 has made an initialorder of 10,000 licenses for the Bria and Stretto products. In turn, existingCounter Path customers, who currently only access software solutions, can now beoffered connection to Vonex’s VoIP solutions. In addition to the jointmarketing activities, the development and engineering divisions of both groupswill engage in a range of collaborative engineering activities.

State One comment: This agreement supports growthtarget.

We see VN8’s marketing and partnering agreement withCounterPath – a well-regarded supplier of softphone technology - as a majorpositive.  Having an official softphone platform expands Vonex’s productoffering, and should, we believe, assist in acquiring new customers andexpanding revenue streams from existing customers.  We anticipate furthersuch announcements to deliver additional upside.

We believe that Vonex Telecom (VN8’s retail arm) istargeting to acquire 300 new customers per month.  Assuming an averagecustomer subscription fee of A$6,000 pa, we calculate this acquisition profilecould lead to an increase in annualised revenue of $21.6m (i.e., A$6,000 x 300x 12).  Note: VN8 recently announced revenues for FY18 of A$8.3m. Thus, we believe that the potential exists for a significant revenue upliftover the next 12-18 months. Our indicative NPV₁₀ (after-tax)valuation for VN8’s Retail business is A$105m (48c per fully diluted share).Including the wholesale business and a deeply-discounted risk-weightedvaluation for VN8’s Oper8tor communications application, we calculate a groupsum-of-the-parts valuation closer to A$150m (A$68c per fully diluted share). Atcurrent share price levels, we suggest that VN8 offers significant upsidepotential for speculative investors as the group grows its footprint in theAustralian telecommunications sector. Risks to our revenue and target priceforecasts include but are not limited to: new customer acquisition growthprofile, price competition from existing and new telecom players targetingsmall to medium businesses in Australia, government regulation, timing ofOper8tor launch and subsequent uptake.