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A full assessment of Fitbug with a conclusive price target.
I hereby declare I am not invested in nor will I be investing in Fitbug (LSE:FITB) within the next 48 hours.
Hi all,
Today we will be assessing (LSE:FITB) and will summarize whether FITB deserves a place on the SIB series in its current position.
To start with, we will go right back to the 9/2/10.
FITB had launched the Fitbug Body (a weight management service) into the public sector. This product was seen to be outperforming the competitive programs.
The company also provided information at that time that strong pipeline business prospects had been noticed.
In August 2010 Fitug started what would evidently be a company changing agreement with SCIFIT.
The agreement entailed that SCIFIT would provide the Fitbug personal health and well-being technology for use primarily in military, rehabilitation, medical and education programs in the USA.
The Fitbug technology enabled SCIFIT customers to benefit from a non-gym based exercise component to their programs in which their progress is charted, their physical improvements observed and their lifestyles monitored in general. The result was a great business partnership with both parties taking a great deal from the agreement.
In 2010 the company declared sales growth of £798,000 which was 91% more than the £417,000 in 2009. This was a great start for the company and showed its drive for growth and establishment within the market.
Of course the company was making a loss at this point but the key piece of information that investors must pick up on is that growth was a target and was being achieved.
In April 2011 MR Fergus Kee was appointed as executive chairman.
He was a very good appointment as his extensive experience in the health and retail sectors gave him a good starting position to make a real difference to what, at that point, was a small and financially vulnerable Fitbug. He also had a proven track record of increasing revenue and profit in his previous roles.
Fitbug subsequently moved on to agree a partnership agreement with Discovery Health’s rewards subsidiary medical insurer, and this relationship would see Fitbugs proprietary health and well-being technology marketed to members of the Discovery’s Vitality Group (TVG) rewards program.
Following on from this success, Fitbug started to aim its sights towards the “link sale” market where other companies could offer or resell the Fitbug products to their own customers as part of a service.
Quick note from my experience.
“A good rule of business is that you should always sell the customer what they want not just what they think they want”
Other noteworthy signed agreements included Anxa, a premiere provider of wellness and nutrition products and services in Europe and Asia.
I would like to point out that at this time the fact that Fitbug was well placed in its own right but also easily integrated into other commercial customer’s websites/platforms provided a great platform for further growth.
The launch of the Fitbug Air,Orb and Wow gave the company a real product that the retail community could get excited about. The company now had a real presence in the market and a product that retailers could get behind and sell to a much larger customer base.
Now I have to note a few things at this point. Although growth was never an issue there was one problem that kept popping up throughout my research.
FUNDING!
The company has used placements and loans throughout and has for almost its whole existence had one of the worst balance sheets I have ever seen with assets being dwarfed by the sheer weight of liabilities.
This being said I would like to add that the company is very close to break even now and should the day come soon that the company makes a profit then Fitbug will have a strong argument for rapid growth. Also the BOD have always been willing to provide the cash capital for the companies financial needs. This shows that the management have full faith in the products and company.
The most notable event so far must be Fitbug’s deals with Target Corporation (Target) and J Sainsbury plc (Sainsbury’s) to stock Fitbug products in their wearable ranges as this was the catalyst for the share price rise that got most investors attention. Not only was this huge for the company but also for those invested before the deal the share price increase meant almost 8000% profit!! if the investor had sold at the peek.
This fundamentally shows that Fitbug’s share price has legs for growth even if the likely-hood of a rise like that happening again is very slim to nil based on my chart and event analysis.
The launch of the KiQplan personal lifestyle, fitness and health/nutrition coach in early November 2014 was yet again a clear example of Fitbugs desire to grow in its respected market space. Although I have yet to review the product range the company talks a good talk and is clearly selling the products as sales continue to rise substantially year on year.
Fitbugs agreement for a trial version of KiQplan (Fit+Healthy) was just one more step in solidifying the product range and establishing new sale leads though Samsungs existing customer base.
Also worth noting, the companies support of The Race For Life showed that the Fitbug cared about more than just making money while also giving Fitbug sales leads opportunities through peer feed back and word of mouth.
I would love to go into real depth on all the products and deals (Towers Watson etc) but feel it does nothing for the overall article (I have priced all deals in to my evaluation) so I will state three more points then conclude.
Firstly Fitbugs legal battle with Fitbit is a difficult variable to price in. on one hand we have the legal costs of pursuing the battle with the risk of an adverse conclusion and on the other hand the court could grant the case of infringement and Fitbug would benefit from such a result.
This being said the cost involved will continue to put pressure on the companies fundamental financial position and is, as stated, a hard variable to price into the share value.
the second point is that the company needs to prove a profit! It seems that the cost to build Fitbug into a good service provider has not yet been realized in bottom line profit. I full expect profit within the next year as sales grow and cost to establish the products image are reduced. however there is only so long you can make a loss before the company hits a financial wall.
Third and final point. Fitbug has been nominated for Company of the year, *see link bellow*. Needless to say this is an exceptional honer for such a small growing company.
http://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/12365897.html
To conclude.
I have fully assessed, both fundamentally and prospectively, the company Fitbug (LSE:FITB) and would expect a share price based on the assumption that the legal battle ends within the next 6-12 months of the following.
6-12 month target 12pps (mcap 28million) (should profit be achieved and/or should a considerable new deal be signed)
Please note that my share price targets are always based on situation analysis and what potential situations might arise. In this case I used historic data to find the most likely increase in sales and the subsequent strengthening of the financial position of Fitbug.
I feel based on all the information available, Fitbug is now a SIBseries company.
I hope you all enjoyed this and as always:
All in my opinion and not to be taken as fact nor advice.
Always seek professional advice before investing in any company.
