SyQic Plc - Pay TV on the GOallenbycapital.com/research/research-syqic_2_381262997.pdf · SyQic Plc - Pay TV on the GO Initiation note – December 04, 2013 Matt Butlin Research 020-3328-5666

SyQic Plc - Pay TV on the GOInitiation note – December 04, 2013

Matt [email protected]

Myles [email protected]

SyQic – Initiation note

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This document is a marketing communication which has been produced by Allenby Capital Limited. It is non-independent research and has not been prepared in

accordance with legal requirements designed to promote the independence of investment research. Accordingly Allenby Capital Limited is not subject to any

prohibition on dealing ahead of the dissemination of this document.


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Table of Contents

Page

Investment overview 4

Video over the internet – setting the scene 6

Template for success in the video streaming industry 8

SyQic’s history 9

YooMob – SyQic’s first foray into video streaming 10

Yoonic – taking YooMob to the next level 12

Yoonic goes OTT 14

Content is key 16

The target market 18

Pricing - predicated on subscriptions not advertising 19

Strategy 20

Competition 21

Risks 23

Financial summary- profit & loss account 24

Financial summary – cash flow and balance sheet 28

Use of proceeds 31

Valuation 32

Shareholder structure and board member profiles 34

Appendix I – Peer group profiles 36

Amino Technologies Plc 37

Destiny Media Technologies Inc 38

Mobile Streams Plc 39

Netflix Inc 40

One Media iP Group Plc 41

Pace Plc 42

PeerTV Plc 43

Youku Tudou Inc 44

Disclaimer 47

08 Fall


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Investment Overview

SyQic - Online video streaming

Consumption of media over the internet, be it live streaming or video on demand

(“VOD”), is experiencing rapid growth as consumers choose to watch increasing

amounts of media away from the traditional household television set. SyQic operates

in this field and is predominantly focused on the streaming of Asian media (TV and

film) to mobile devices. To be successful in this industry we believe providers need to

have the correct i) Content, ii) Technology and iii) Pricing model.

Profitable business model – even on a restricted audience

SyQic currently delivers its content to customers through distribution relationships

with major Telecom operators (“Telcos”). The Telcos make the service available to

their mobile phone subscribers who, upon subscription, are able to download an App

providing access to SyQic’s content. As such, SyQic’s current potential audience is

somewhat restricted to the client base of the Telco partner. That aside, SyQic has built

a profitable business which is rare for players in this nascent industry. In 2012 the

company made a profit after tax of £625k on revenues of £3.9m.

Blue-sky potential from move to an OTT offering

In late 2013 SyQic will launch a full Over The Top (“OTT”) version of its platform.

An OTT offering means access won’t be restricted to a subscription via a specific

Telco but instead it will be available across all networks and channels of internet

access – essentially to anyone who subscribes via the website. The full OTT offering

will run alongside the Telco delivery model, exponentially expand the potential

customer pool and increase returns as OTT subscription income will not be shared

with the Telcos.

Content - providers want to access SyQic’s distribution platform

Content providers (such as TV broadcasters) want to maximise their viewing audience

as this gives them the opportunity for higher advertising revenues. SyQic’s platform

allows content providers to expand their viewing audience to those wishing to watch

programs over the internet. At the same time these content providers earn a share of

SyQic’s subscription fees. SyQic’s senior management evolved from many years

spent in senior positions in the broadcast industry and hence understand the industry’s

dynamics and how best to maximise relationships with these content owners.

Content – aggregation of multiple channels creates wider customer offering

The ideal scenario for users is that all desired content is available in one place. Whilst

many of SyQic’s competitors are focused on Hollywood or on one International genre

(e.g. Indian or Filipino) SyQic’s platform currently has access to a library of over

20,000 titles of online VOD content and has access to 70 live television channels

featuring content from Malaysia, The Philippines, Bangladesh, Pakistan, India,

Indonesia, Turkey and Eastern Europe with new regional content being added on a

continual basis.

Technology – accessible on inferior networks and to more devices

SyQic uses adaptive bitrate technology that can stream at low bitrates of 80kbps

versus most video content providers which operate at 150kbps upwards. Because of

the ability to stream at low bitrates, SyQic can deliver video in a non-3G environment

thus allowing accessibility in areas served by inferior networks. Given that circa 75%

of Asia (SyQic’s current core area of focus) is still on 2.5G, we see this as key in

driving fast take-up of the product. A further benefit of the low bit rate streaming

technology is that it makes the service accessible to a broad range of mobile devices

such as the more basic feature phones in addition to Smartphones and Tablets.


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Pricing model - predicated on subscriptions, not advertising

If the product is of sufficient high quality (content and delivery) then customers will

pay for access. The alternative model, namely advertising based, is proving

uneconomic for even some of the most popular media producers that have tens of

millions of viewers. We see YouTube’s recent introduction of subscription based

channels as vindication of this. SyQic is not in the competitive ‘Hollywood’ space and

content licensing arrangements are mainly on a revenue share basis thus minimalising

costs. SyQic charges for access to its platform based on period options from daily up

to monthly access with an average per transaction value of approximately 70p. In

September 2013 SyQic experienced approximately 840,000 subscription transactions.

Expected demand from migrant communities in the West

Currently, SyQic’s typical customer is an Asian national living in their home country

and watching local and international content whilst on the move. This is mainly due to

SyQic’s content portfolio and the arrangements in place with Telcos in the region.

However, there are a substantial number of migrants and expatriate communities

living in the Middle East, Europe and the US. In May 2011 the SyQic CEO relocated

to London to set up the UK office to act as a gateway for bringing international

content to migrant audiences in these new regions. Content will not be restricted to

being from Asia and the group is already adding content for Europe’s and the US’

migrant populations – for example by providing Turkish content to Turkey’s large

migrant population in Western Europe.

Core focus on delivery to mobile devices

The SyQic mobile video streaming platform has evolved and the latest platform can

be watched on a greater amount of devices and is also offering more features to help

maintain user retention. The full OTT launch will extend the company’s reach to other

devices such as the latest Tablets, Personal Computers (“PCs”) and Smart TVs. The

Company believes that consumers are more willing to pay for content on mobile

devices and in smaller denominations as opposed to the home space where consumers

have numerous other choices. SyQic has found that the majority of user activity takes

place when out of home and, as such, this supports the belief that mobile functionality

remains key to the Group’s success.

AIM listing to accelerate roll out of the platform, fair value of 130p

SyQic is profitable and is capable of funding a steady expansion through organically

generated cash. However, the market is nascent and there exists a land grab

opportunity and therefore SyQic has listed on AIM and raised £2.5m of new equity.

The funds will be used to accelerate the growth of the business and, in particular, to

finance the launch of the Group’s services in the UK, Continental European and US

markets. The Group is headquartered in the UK, where its key operations and R&D

functions are located and therefore the Company has selected to list on AIM. We feel

the Company should trade on a 2014 P/E Ratio of around 15x which would imply a

fair value of 130p.

Source: Company data, Allenby Capital forecasts

Exhibit 1: Financials and valuation summary based on IPO price of 62p

Y/E Dec. £'000 2010A 2011A 2012A 2013E 2014E 2015E

Revenue 978 2,842 3,911 4,700 7,800 11,000

YoY Growth 190.6% 37.6% 20.2% 66.0% 41.0%

EBITDA 164 458 764 1,132 2,490 4,050

Margin 16.7% 16.1% 19.5% 24.1% 31.9% 36.8%

EPS 3.68 8.68 14.50

Net Margin 2.7% 12.8% 16.3% 18.2% 25.8% 30.6%

P/E Ratio 16.9 7.1 4.3

EV/Sales 2.9 1.8 1.2

EV/EBITDA 12.1 5.5 3.4


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Video over the internet – setting the scene

Driven by better quality internet connections and the increased ownership of

internet ready devices, there is growing demand by consumers for access to video

content over the internet. In particular, the widespread ownership of internet

enabled phones and the rapid roll out of 3G and 4G services is leading to

increasing demand for video whilst on the move. In fact, in some of SyQic’s core

markets in Southeast Asia, more people own internet enabled phones than any

other similar device for accessing the internet such as a desktop PC or a laptop.1

In summary, demand for video over the internet is growing, particularly to

mobile devices and SyQic has positioned itself to take advantage of this trend.

A definition of SyQic’s market place

As of September 2013, SyQic’s media content is accessible on a wide range of

internet accessible devices but only through certain telecom providers. However, the

SyQic platform is on the verge of going fully OTT where essentially the service will

be accessible to anyone who has access to a broadband internet connection be it, for

example, DSL, Cable, WiFi, or mobile broadband (e.g. 2.5G/3G/4G). We note that the

SyQic platform is already OTT enabled and can be accessed via a browser but only

for customers with an activated subscription through a Telco. The ‘full’ OTT service

will be launched in late 2013 when SyQic has completed integration with a payment

service provider (we note that SyQic has recently signed an agreement with AIM

listed Bango plc to process its direct OTT payment capability). As such, when we

discuss SyQic’s market we refer to the OTT industry. Furthermore, when we refer to

content we mean professionally produced content that is usually found on network TV

channels, i.e. not user–generated content (“UGC”) such as typically found on

YouTube.

Large and growing market - greatest demand for use on mobile devices

According to Generator,2 revenues for OTT internet TV services in 2013 will be

around $9.1bn, a figure forecast to increase to $49.8bn by 2017. Within these figures,

paid for services will dominate the revenue mix with advertising only accounting for

18.7% of total service revenues in 2013 and 20.4% in 2017.

The Generator research also explains how in contrast to broadcast television, which is

viewed on a television set, OTT internet TV is accessible through four main delivery

routes:

I. Connected TVs. e.g. through the use of a Set top box (“STB”), Smart TV or

Games Console

II. Personal Computers. At home, office or for example connecting a notebook

to a TV set using an HDMI cable

III. Media Tablets. Such as iPads

IV. Smartphones. Such as iPhones and Android Smartphones

Exhibit 2 illustrates how PCs currently represent the main means of accessing OTT

internet TV services. However, between now and 2017 the market share held by PCs

is expected to decline, predominantly at the expense of access via Tablets and

Smartphones. Tablets and Smartphones are rising in popularity for content viewing,

partly as both enable users to view content privately without disturbing others nearby

i.e. ideal for use when in a busy public location, whilst on the move or in a higher than

average household size.

1 Nielson: The digital media habits and attitudes of Southeast Asian consumers, October 2011 2 Generator Research Ltd: Over the Top (OTT) Internet Television, Detailed Worldwide Analysis & Forecasts, July 2013

Exhibit 2: OTT internet TV access (viewing time)

Source: Generator Research Ltd

2013 2017

Connected TV 6.00% 14.0%

PCs 76.0% 48.0%

Media Tablets 8.00% 22.0%

Smartphones 10.0% 16.0%

100.0% 100.0%


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Further evidence illustrating the increasing demand for viewing video content over

mobile devices is illustrated by recent data on the BBC iPlayer – the BBC’s OTT

internet TV product. The BBC iPlayer had around 171 million requests in June 2013,

representing 38% growth on the prior year. In the 12 month period to June 2013,

requests from tablets as a % of all requests grew from 10% to 21% and from mobile

devices from 11% to 18%. In contrast, over the same 12-month period, access by PCs

fell from 54% to 37% of all requests.

Finally, according to Cisco Systems, two-thirds of the world's mobile data traffic will

be video by 2017. Cisco estimates that mobile video will increase 16-fold between

2012 and 2017, equivalent to a CAGR of 75% over the period, the highest growth rate

of any mobile application category that the company forecasts.3

Considering these points we think it is clear that demand for video over the internet is

growing strongly and that it is critical that any player in the video streaming market

has a strong mobile delivery presence. Hence we concur with SyQic’s strategy of

initially focusing on content delivery to mobile devices. That said, we note that with

the fully OTT roll out of the SyQic platform, the offering will become available on a

wider range of devices in addition to being accessible to a much wider audience.

3 Cisco Visual Networking Index: Global Mobile Data Traffic Forecast Update, 2012–2017, February 2013, www.cisco.com

Exhibit 3: BBC iPlayer TV requests by device type (June 2012 – June 2013)

Source: BBC iStats

0

50

100

150

200

Jun

-12

Jul-1

2

Au

g-1

2

Sep

-12

Oct-1

2

No

v-1

2

Dec-1

2

Jan

-13

Feb

-13

Mar-1

3

Ap

r-13

May

-13

Jun

-13

Mobile Devices

Tablets

Computers

Games Consoles

TV Platform Operators

Internet TV/Connected Devices


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Template for success in the video streaming industry

Although a relatively nascent industry there are already many participants in the

video streaming market, many of which we understand have yet to achieve

profitability. We list below what we believe are the key ingredients for success -

predominantly focused on content, technology and pricing.

i) High demand content is key for attracting viewers

The two basic business models are i) to provide the service for free and subsidise

through advertising, and ii) to charge subscriptions. Without providing high demand

product, it is obvious that advertisers won’t pay and users won’t subscribe. An issue

for many providers is that they do not have access to high demand content.

Broadcasters do not want to give away what they are currently charging customers to

view in their existing business model. Similarly OTT players cannot generally afford

to pay large sums to broadcasters to secure high demand content. Some players have

begun to create their own content, such as Netflix with its House of Cards TV series,

but this requires significant upfront investment. Participants must devise a business

plan that provides end users with access to high demand content at a realistic price.

ii) Need to incentivise content owners to share access

A share of revenues or increased advertising opportunity is not all that appeals to

content providers. It is essential that the content can be delivered over the internet as

seamlessly as possible. Owners want their content delivered in whatever way that

users desire, be it live streaming, VOD or download-to-go. They will want to use a

service that has a wide device reach (and can adapt to future devices), is scalable,

secure and has the same reliability as when delivered over broadcast networks.

iii) Technology – high quality and accessible to multiple devices

Consumers lose patience if the video image is of low quality or continually stops to

buffer. In particular for mobile video providers, where a user on the move may

experience varying levels of bandwidth, it is necessary for service providers to have

technology that allows the picture to remain of high quality regardless of the

bandwidth available. It is also important that the service is accessible on a wide range

of devices to increase the potential target market such as Smart TVs, feature phones,

Smartphones, PCs, Tablets etc.

iv) User experience – increasing expectations of consumers

Consumers of different demographics have varying demands and expectations of

internet video. To increase customer appeal we believe providers must offer a range of

services beyond VOD such as live streaming and/or downloading ability.

Furthermore, increasingly consumers expect websites and Apps to be easy to navigate

and for the product to have features such as links with social media, high quality

audio, HD availability and the ability to pause and fast forward.

v) Pricing

The decision is whether to go for an advertising model, a subscription based model or

a combination of the two. Quite commonplace is a freeview service with adverts but

for a subscription the adverts are removed. For the advertising route the strategy is

clearly to get the right balance between generating revenue and not aggravating

viewers. For a subscription based model we believe it is vital that pricing offers value

for money, is transparent and easy to execute/transact. With many customers using the

technology for the first time we believe that insisting on lengthy minimal contract

periods will be highly detrimental to user sign ups.


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SyQic’s history

SyQic’s origins are in the media industry and include the provision of technology

solutions to the Television production industry. This progressed to working with

Telcos where the Company noticed the demand and opportunity for developing

technology to enable the live streaming of television over the internet, specifically

to mobile devices.

The business was founded in 2004 by CEO and major shareholder Jamal Hassim.

Jamal’s prior experience included founding and then selling the Malaysian TV station

‘Channel 9’. Initially SyQic was focused on providing consultancy services to newly

forming TV stations – building on the experiences gained at Channel 9 and other

major regional networks where Jamal was a senior member of the management teams.

An additional early source of revenue was from subtitling work as SyQic had

developed video subtitling software that was used to produce subtitle content for and

on behalf of a number of content companies.

Through working with various TV stations SyQic began to build relationships with

several Telcos that were looking at the provision of TV content over the internet.

Customers at this time included Telekom Malaysia and Philippine Long Distance

Telephone Company (“PLDT”). The original focus of the relationships with the

Telcos was on the in-home audience as SyQic developed technology that enabled TV

content to be viewed on multiple at-home devices such as TV STBs, PCs and laptops.

The solution was a downloadable App which could be used to view programmes,

similar to earlier versions of the BBC iPlayer.

The original product was popular with Telcos looking for their first move into the

online content provision business as it was a straightforward offering that enabled

quick market entry. Essential for efficient use of the product was a strong internet

connection to download content. This was a further attraction for the Telcos as

customers would tend to upgrade their home broadband solutions, which drove an

increase in both Average Revenue Per User (“ARPU”) and client retention.

The drawback with this model for SyQic was that it lacked scalability. SyQic would

get a renewable licence fee from the Telco for the software but received no benefit

from increasing user numbers. Furthermore, the technology that had been developed

enabled users to download whole films (VOD). Anticipating consumers changing

demands, SyQic wanted to build software to enable live streaming of content. SyQic

therefore began to focus its business on the design of a subscriber based platform that

would enable users to access live streaming of video content, specifically to mobile

devices.


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YooMob – SyQic’s first foray into video streaming

The technology developed in the early days for the Malaysian Telcos enabled

users to download whole films or TV shows to PCs. However, SyQic, seeing the

emerging demand for live streaming, wanted to develop technology for the live

streaming of video and in particular on mobile devices. As such, SyQic developed

a completely new technology and delivery platform. In 2011 SyQic launched a

scalable low bitrate mobile video streaming platform called YooMob.

The product was launched in conjunction with the Telcos and SyQic’s first client was

Maxis in Malaysia. Maxis makes the service available to its mobile phone subscribers

who, upon subscription, are able to download the YooMob App and then have access

to the YooMob content. Subscribers pay through their mobile phone bills and are

charged around £1.25 per month depending on the number of channels to which they

subscribe. The fee is then split between SyQic, the Telco and the content provider.

Whilst all three parties benefit financially, the content providers also benefit by

increasing their viewing audience (potential for increased advertising revenues) and

the Telcos benefit by providing an additional service to clients to help increase ARPU

and customer retention.

Proprietary compression technology - Low bit-rate streaming

The YooMob product utilises SyQic’s proprietary compression methodology which

enables media content streaming at a bitrate of 80kbps against most video content

providers which operate at 150kbps upwards. Because of the low bitrate, YooMob can

deliver video in a non 3G environment. It is therefore able to deliver video streaming

on GPRS (2.5G) and EDGE (2.75G) networks. Given that circa 75% of the Southeast

Asia region is still on 2.5G4, we see this as being key behind its success to date.

Furthermore, the way the stream is delivered is device friendly as it reduces the

amount of processing power required and therefore the amount of battery

consumption.

A further benefit of the low bitrate streaming technology is that it makes YooMob

accessible to internet enabled feature phones (more advanced than ‘basic’ mobiles, but

inferior to Smartphones). Competing products at the time of launch were and still are

generally only accessible on high end Smartphones. Targeting such feature phones

(which use legacy operating systems such as Symbian) makes the product available to

the high number of feature phone users in the Southeast Asia region. In Indonesia for

example, nearly four in every five mobile phones sold in the country are still feature

phones due to their greater affordability5. However, targeting the feature phone market

carries the downside that as mobile users upgrade to Smartphones there is a risk that

YooMob customers will be lost.

Cooperation with Telcos further increases viewing performance

Advantages of working in conjunction with the Telcos are that the Telcos take care of

the customer billing side and actively promote the service. A further benefit is that the

Telcos are highly incentivised to aid the user’s viewing experience wherever possible.

One way they can do this is by prioritising bandwidth for YooMob customers. A

Telco is able to track the IP addresses of registered users and, for example, if it detects

that one of its clients is streaming YooMob content it can prioritise the IP address in

order to ensure a better streaming experience. The YooMob user would take priority

over other users consuming bandwidth which does not directly benefit the Telco, for

instance those watching YouTube video clips.

4 https://wirelessintelligence.com/images/analysis/entries/2013-02-25-3g-4g-infographic.png 5 https://www.gfkrt.com/asia/news_events/news/news_single/010345/index.en.html

2G mobile networks, which replaced 1G analogue

mobile networks, are provided over protocols on

the Global System for Mobile Communications

network (“GSM”). Over the GSM network,

traditional mobile services are supplied such as

voice calls and SMS.

The General Packet Radio Service core network

(“GPRS”) is an overlaying extension of GSM,

providing additional services to network users,

including mobile access to the internet, MMS and

WAP services. GPRS is referred to as a 2.5G

network.

The 2.75G environment comes through Enhanced

Data rates for GSM Evolution (“EDGE”), a bolt-

on enhancement for GSM and GPRS networks. In

essence, EDGE improves data transmission rates

for GSM/GPRS networks, increasing capacity and

performance.

Exhibit 4: 1G to 2.75G explained

Source: Company data, Allenby Capital

https://wirelessintelligence.com/images/analysis/entries/2013-02-25-3g-4g-infographic.png


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Expanding the list of partners

From its initial launch with Maxis in Malaysia the group has gone on to launch in

other jurisdictions such as with PLDT and Globe Telecommunications (Philippines)

and PTNP in Indonesia. Increasing the number of partners increases the YooMob

target audience by providing access to their respective customer bases.

The standard contract between SyQic and a Telco is for an initial period of 12 months

and a 60 day notice period for renewal thereafter. The Telcos take responsibility for

distributing the product within their region and produce monthly usage reports for

SyQic. The standard payment terms from the Telco to SyQic range from 60-90 days

although in Indonesia it is around 120 days. SyQic pays the content providers within

around 60-90 days.

Limitations of the YooMob product

YooMob has proven to be extremely successful for SyQic. It has been the key revenue

generator for the group and in 2012 helped SyQic to produce revenues of £3.8m and a

profit after tax of £625k. We view this as impressive given the Company (and the

industry) is still in its early growth stage. That said, YooMob has a number of

shortcomings which will likely restrict its future growth potential:

i) Restricted to the feature phone market

The YooMob product targets the feature phone market. At one end of the

phone spectrum we have basic phones (few or no features beyond dialling or

messaging) and at the other end we have the high end Smartphones

(application rich and generally expensive). In the middle are feature phones

which have additional functions over basic phones such as internet

accessibility but which are priced well below Smartphones. Whilst there

remains a high volume of feature phone users in SyQic’s core market of

Southeast Asia, the general trend is for users to upgrade to Smartphones such

as Apple’s iPhone or those running on Android operating systems.

ii) Relative basic functionality

Whilst YooMob offers users key features such as live streaming and VOD of

a wide array of video content, there are certain features missing which users

increasingly expect. YooMob is not available in High Definition (“HD”) nor

is it linked in with social media sites such as Facebook. Additionally it lacks

adaptive bitrate capability and features such as multi-language functionality.

With these limitations in mind, in 2012 SyQic set about designing a new and

improved version of YooMob that would have a wider appeal and hence drive

increased revenues.


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Yoonic – taking YooMob to the next level

As previously explained, YooMob has proven a success for SyQic and has been

its key revenue generator to date. That said, it has its limitations and in June

2013 SyQic launched a new mobile video streaming platform called Yoonic -

essentially a superior version of YooMob. Yoonic is accessible on a greater

number of handsets, has additional features and supports HD content. YooMob

continues to be available but we feel in time most users, if not all, will migrate

over to Yoonic. The user base is expected to accelerate as Yoonic is launched into

new territories, on more networks and be accessible on a wider range of mobile

devices. Furthermore, in late 2013, a fully OTT version of Yoonic is to be

launched thus further increasing the addressable audience.

Handset coverage – from 25% to 80% of addressable market

The YooMob platform is targeted at the more basic feature phones. With the

increasing prominence of Smartphones we believe the YooMob service is only

available on around 25% of the addressable market.

The new Yoonic offering, on the other hand, possesses the ability to utilise multiple

operating systems, including those used for Smartphones such as Apple’s iOS,

Blackberry’s OS and Google’s Android OS amongst others. Furthermore, it retains the

proprietary compression method present in the YooMob service, meaning that it is

still able to function on the older operating systems designed for feature phones

working on 2G networks, such as the legacy Symbian operating system. Thus, merely

in terms of mobile devices, the introduction of Yoonic will substantially broaden

SyQic’s addressable market.

Additional features improve user experience

Yoonic will shortly have interactive features such as content sharing, commentary and

social networking (links with platforms such as Facebook and Twitter) to create a

more distinctive user experience. Further features such as blogging, chatting, playing

games, online shopping, Catch-up TV and Pause TV will also be made available over

the next few months. Additionally, Yoonic already supports HD content. Other

community building features such as chat forums, virtual cinemas and content sharing

features shall be introduced in phases over the next 12 to 18 months with a view to

building communities of international viewers around the content.

Adaptive bitrate streaming

To ensure an optimal viewing experience, the Yoonic platform includes support for

adaptive bitrate streaming to make sure that the quality of the video content matches

bandwidth availability and that there is a constant video stream. This technology has

been developed by the Group internally utilising open-source and licenced software

and is a proprietary product of the Group. The adaptive bitrate streaming technology

behind Yoonic means that the quality of the video stream can be changed depending

on the network availability. For example, if there is 4G then the user will be able to

watch content in HD; however, if the network switches to 2.5G then the video will

adapt to 80kbps but the video stream will not drop.

New territories for Yoonic, as with YooMob launched in conjunction with Telcos

Yoonic is currently available in three countries (Malaysia, Philippines and Indonesia)

and available from five different Telcos. In addition to these regions, over the next six

months, SyQic is in discussions to roll out in Pakistan, Bangladesh, Myanmar and

Western Europe.

Similar to YooMob, Yoonic is being rolled out in conjunction with Telcos which

promote it as a service to their customers. Customers sign up and pay through their


Page 13 of 48

mobile phone bills based on the amount of content they have subscribed for. The

revenue is shared between the Telco, SyQic and the content provider.

SyQic and the Telco partners work together to profile the subscriber base of the Telco

and then use SMS messaging to target potential subscribers. Customers can then reply

to the SMS to download the App and receive the service. The Telcos also place

promotional banner advertisements on their websites, hold competitions to attract new

users and upsell channels to existing customers.

In summary, Yoonic has taken the product offering from SyQic to a higher level and

increased the potential customer base by being accessible on more devices than its

forerunner YooMob. Although both YooMob and Yoonic are in operation, as the

advertising emphasis is more on Yoonic and given its superior attributes, we expect

Yoonic to be the key revenue driver from Q4 2013 onwards.

Despite the improvements there are still areas where Yoonic lags behind other internet

TV offerings, namely that access requires a Telco contract in the relevant jurisdiction.

Although still providing a huge market opportunity for SyQic it is potentially

excluding a large proportion of customers. To combat this, in late 2013 SyQic intends

to launch a fully OTT offering of the service as detailed in the following pages.


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Yoonic goes fully OTT

Historically, SyQic has focused on the delivery of its service exclusively to mobile

devices and through relationships with Telcos. However, SyQic is now on the

verge of providing a full OTT offering where users will be able to access the

Yoonic platform on additional devices and across all networks i.e. there will be

no need for a Telco contract. The SyQic platform is already OTT enabled and

can be accessed via a browser but only for customers with an activated

subscription through a Telco. Therefore, the missing link for SyQic is the

establishment of its own OTT payment processing system. The Company has

recently signed an agreement with AIM listed Bango to provide such a facility.

The main benefits of going fully OTT are expected to be threefold, namely: i)

potential for improved margins, ii) increased accessibility of the service and iii)

ability for SyQic to get closer to the end customer.

Potential for increased margins

Access to YooMob or Yoonic currently requires users to have an account with a Telco

through which they would subscribe to receive the service and pay additional charges

on their mobile phone bill. The additional fee is subsequently split between the Telco,

SyQic and the content provider. Without a subscription the service is not accessible.

This is set to change when SyQic launches its full OTT service. In simple terms,

customers will be able to access the Yoonic product at www.yoonic.tv. This Business

to Consumer (“B2C”) model will enable SyQic to reach the end user directly and will

allow users to pay direct to SyQic, i.e. not have to go through a Telco. This ability to

accept payments directly from users (albeit through a third party payment partner)

rather than via a commission share with the Telcos will provide the opportunity to

earn enhanced margins.

OTT service targeting high end customers – not cutting out the Telcos

It is expected that the full OTT service will be priced around 25% higher than the

current access price through a Telco and hence there should be minimal

cannibalisation of the existing ‘Telco’ client base. The service will be targeting the

higher spending consumers who will likely want to view the service on Smartphones

or Tablets. We expect that users who have access to payment services such as via a

credit card will likely be of higher spending capability. However, SyQic is keen to

maintain its strong relationships with the Telcos as they remain key to promoting the

‘non-fully OTT’ service and ensuring that increased bandwidth consumption can take

place for customers without any ‘throttling’ of data as described earlier.

The demographics of the two target markets, based on the channel to market, are

summarised in Exhibit 6 below.

Exhibit 6: Channel to market

Over The Top (“OTT”) services are offered to end users by content providers (e.g. BBC

through its iPlayer) or third party providers (e.g.

Hollywood films via Netflix). The service is provided over an ‘open’ network (networks not

managed by a network operator) e.g. Netflix

customers can access the service regardless of the network they subscribe to.

In an OTT environment, the network operator’s sole job is to transport the contents of the

internet protocol (“IP”) packets to the end user:

the operator is unable to control copyrights,

distribution or viewing ability of such contents.

Exhibit 5: OTT explained



Via Telco OTT

Device Feature phones or Smartphones Feature phones, Smartphones and Tablets

Network 2.5G & 3G 2.5G, 3G & 4G

Data Typically without high-end data plans Typically with high-end data plans and/or Wi-

Fi enabled capability

Income Lower income group Medium and higher income groups

Regions Urban and Rural Urban and Rural


Page 15 of 48

Increased accessibility of the service

Yoonic OTT will allow for direct access by users via Apps or browser based access

(we compare this with when Sky TV in the UK launched Sky Now which made parts

of the Sky TV service available to anyone with internet access, regardless of whether

they were an existing Sky customer or not). As such the fully OTT launch will

exponentially expand the potential customer pool.

As well as being accessible to a wider audience, the Yoonic fully OTT offering will

allow for access on a significantly broader range of devices. Whereas currently the

Yoonic platform can be accessed on mobile devices including feature phones and

smartphones, tablets and computers, the OTT service will in time be available on

Smart TV's and game consoles.

Yoonic OTT will bring SyQic closer to its customers

The current delivery model is very much B2B2C – SyQic deals with the Telcos and

the Telcos deal with the consumer. SyQic has no direct contact with the consumer.

Although SyQic can track which content is being viewed and when, it knows little

about the end consumer demographics. With Yoonic going fully OTT, SyQic will be

better able to engage directly with the end users through the Yoonic storefront. The

Yoonic platform incorporates a powerful database that will enable SyQic to track user

profiles more efficiently. This will provide SyQic with essential customer profile data

from which it will be able to better tailor its products and services.

Full OTT offering will make the video viewing network agnostic

As with the service through the Telco networks, the full OTT service will take

advantage of SyQic’s technology to allow adaptive bitrate streaming which ensures

the quality of the video content matches bandwidth availability. For example, in the

OTT environment a viewer could watch uninterrupted video while the device switches

between WIFI, 3G, GPRS etc., depending on the strongest signal available.

Marketing responsibility with SyQic

When delivered in conjunction with a Telco partner the marketing is predominantly

done through SMS blast messaging and WAP push marketing. When Yoonic goes

fully OTT, the Company intends to market the product through the strategic

placement of content on YouTube, viral promotions via social networking sites,

utilisation of location based advertisement engines such as Facebook and MSN

Messenger and the creation of adwords and mobile admobs (for words such as “Ethnic

Movies” and “Live TV”) for advertising through Google.

In addition, the Group is seeking to engage with local business representatives in each

new territory to pursue partnerships including: media partners (such as TV stations for

barter deals to exchange air time); exploring marketing partnerships for special live

events; marketing partnerships with content providers; and using specific targeted

marketing channels (such as neighbourhood flyers to specific ethnic areas and local

daily newspapers).


Page 16 of 48

Content is key

It is an obvious assumption that without providing high demand content,

companies such as SyQic will struggle to build a customer base. Whilst many of

SyQic’s competitors are focused on Hollywood or on one international genre (e.g.

Indian or Filipino) SyQic’s content range is both expansive and diverse. The

range includes TV channels, Films, Cartoons, Documentaries, TV Series, Variety

shows, Music, Sport and User Generated Content. It has access to over 20,000

titles of VOD content, 70 ‘live’ television channels and features content from

Malaysia, The Philippines, Bangladesh, Pakistan, India, Indonesia, Turkey and

Eastern Europe. New regional content continues to be added which serves to

increase the potential audience.

The Group was founded by a group of broadcasting executives and SyQic’s guiding

principle has always been to secure relevant and in-demand content for the service

that it delivers. Indeed, many of the key content relationships have been in place with

the Group’s senior management team for a number of years.

SyQic’s content team collaborates with some of the biggest international content

providers and aggregators. In addition to the in-house content team, in a number of

cases SyQic also deploys content agents "on the ground" in specific countries such as

the Philippines, Indonesia and Pakistan to build even deeper relationships with the

content partners.

Aggregators facilitate access to content

SyQic typically secures the online distribution rights to most of its content through the

use of content aggregators such as JJJ Media in Singapore rather than going direct to

rights holders such as the BBC. Content aggregators tend to serve not just SyQic and

other online platforms but also parties such as DVD distributors in the region and as

such have better bargaining power. Furthermore, it would be time consuming for

SyQic to negotiate directly with all the various rights holders in the regions. The

content aggregator obtains the rights from the regional rights holder and SyQic

licenses from the content aggregator, typically on a non-exclusive basis.

Longer term, once SyQic has developed a longer track record of proven results and

has increased resources in its content team, the Company will look to negotiate and

work directly with the rights holders to improve margins. With regional content such

as Turkish content and Indonesian content, the Company deals direct with the main

rights holders who are typically locally based and do not have international

distributors of their content.

The contracts with content providers tend to run for between two and three years at a

time and have historically been renewed at the end of their terms. The content team

negotiates licences to distribute the content online and the licenses tend to be for a

specified geographical region and on a revenue sharing basis. SyQic’s model of

revenue sharing means that SyQic does not need to pay large upfront costs for

securing access to the content thus de-risks the business model. The content list from a

content provider is regularly updated with new titles and once the titles are made

available to SyQic for distribution, it has access until the term of the agreement

expires.

The Group’s services are designed to be attractive to content providers since they only

need to send the content in digital format to the Group and the Group then reformats

this (which is predominately an automated process) for use on mobile devices.


Page 17 of 48

Production of own content

Some industry participants have begun to create their own content, such as Netflix

with its House of Cards TV series. Whilst incurring an upfront cost, the returns can

clearly be huge if the content proves successful. The vast majority of SyQic’s content

is made by third parties but recently the Company started producing content

internally.

The Company has established an internal content team to develop "templates" and

"case studies" of short, interesting and localised content to spur its viewers to also

generate and place content on Yoonic for sale. Over time this will help Yoonic

differentiate itself even more from other available video content offerings in the

market.

Exhibit 7 below lists some of the channels currently available on the Yoonic platform,

their genre and some of the content titles.

Exhibit 7:Sample of available content

Channel Name Genre Example Content Title

Channel News Asia News English language Asian TV News channel

RT News Russian English-language news channel

Fashion TV Lifestyle Fashion, beauty & lifestyle programs

Indo TV General entertainment (Indonesian) My Blackberry Girlfriend series, Ratu Kostmopolitan (Movie) 2010

Mens TV Lifestyle TopGear series

Fight TV Sports WWE Friday Night Smackdown, UFC series

Hollywood TV General entertainment (Hollywood) CSI Miami series, Walking Dead series

Bollywood TV General entertainment (Bollywood)3 Idiots (Movie) 2009, Kuch Kuch Hota Hai (Movie) 1998, Dabangg (Movie)

2010

Football TV Sports Matches and clips from top leagues around the world

Laugh TV General entertainment (humour) Mr Bean Series, Just for Laughs Gags

Mistik TV Documentaries (supernatural) UFO Hunters series, Ghost Hunters series

YooMusic Music videos Latest popular music videos

Clubbing TV Music videos Clubbing music videos

ZonKu General entertainment (Malaysian) Kau Yang Terindah (Series) 2012

Korea TV General entertainment (Korean) 풀하우스 - Full House (Series) 2004, 도둑들 - The Thieves (Movie) 2012

Japan TV General entertainment (Japanese)Watashi ga Renai Dekinai Riyuu - The Reason I Can't Find My Love (Series)

2011, KARASIA 2013 Happy New Year in Tokyo Dome Concert

Dragons TV General entertainment (Chinese) JayChou - Incomparable Concert Live 2004, Ip Man (Series) 2013

Source: Company data


Page 18 of 48

The Target market

SyQic predominantly targets customers that have a desire to watch Asian media

(TV and film) on mobile devices. Customers may be based in their home country

but the content also appeals to Asians living in other jurisdictions who have a

desire to view home country media. The service is currently accessible in Asia but

the service is shortly to launch in Europe, the Middle East and the Americas and

the roll out of the fully OTT service will make the service potentially accessible to

a global audience.

SyQic currently delivers its products to users through agreements with Telcos.

Therefore the potential customer pool is limited to that of the Telcos. At the end of

2012 the service was available with five Telcos in three regions namely Malaysia, the

Philippines and Indonesia. We estimate that the customer base of the five Telcos

engaged with SyQic in these regions totalled around 200m. By the end of 2013 SyQic

estimates that it will have rolled its products out with a further two Telcos in the

Southeast Asia region adding an estimated 50m users to the potential target audience.

Roll out of service outside of Asia to further increase potential customer base

With the content on the SyQic platform predominantly of Asian origin it is a logical

progression for the Group to target customers with a desire for Asian content but that

are living outside of the region. The Group’s strategy is to target promising territories

for Asian migrant communities which SyQic believes are to be found in Europe, the

Middle East and North America.

For example, one target market of particular interest is Qatar which has a population

of 1.9 million of which 80% are foreign born. A further breakdown of the Qatari

population reveals that 11% are Filipinos, 24% Indian, 5% Bangladeshi and 4%

Pakistani – all nationalities for which SyQic has home country content readily

available to stream. Indeed, the Group currently has content available in nine

languages, including Urdu.

Similarly in the UK, 20% of the population is either foreign born or of foreign

nationality with migrant and expatriate communities from Southeast Asia making up

approximately 4% (or around 2.5m people) of the UK population. The strategy with

regards to the Middle East, UK and Continental Europe is at the outset to roll out the

product in these regions via the OTT offering without Telco partnerships.

The OTT market size potential, adding of non-Asian content

When Yoonic goes fully OTT the addressable market will become, in theory, anyone,

anywhere with an internet connection – the customer base will no longer be restricted

to that of the partnering Telco. The typical customer will initially likely be someone

with an interest in Asian content.

However, management appreciates the desire for individuals (not just those from

Asia) to access home country content when overseas. As such, content will not be

restricted to being from Asia and the group is already adding content for Europe’s and

the US’ migrant populations – for example by providing Turkish content to Turkey’s

large migrant population in Western Europe.


Page 19 of 48

Pricing - predicated on subscriptions, not advertising

The overriding pricing strategy is to put paid premium content within the reach

of the masses who cannot or do not want to access more expensive and

conventional pay TV content. The Group operates a subscription rather than an

advertising based model. For the Telco distribution model the subscriptions are

shared between Syqic, the Telcos and the content providers. For the full OTT

service SyQic will bill the users through a payment service provider and share

the fees with only the content providers. The Group remains committed to its

subscription based model although it is currently exploring the possibility of

offering a ‘freemium’ version of its products to increase awareness which would

be subsidised by advertising.

Subscription over advertising

SyQic’s belief has always been that if the product is of sufficient high quality (content

and delivery) then customers will pay for access. The alternative model, namely

advertising based, is proving uneconomic for even some of the most popular media

producers. We view examples of print media that have gone online, initially for free

but then having to migrate to a subscription model, as evidence that it is hard for

media providers to succeed with an advertising based model. Of more relevance to

SyQic we view YouTube’s recent introduction of subscription based channels as

vindication that the advertising based model is proving uneconomic for even some of

the most popular media producers that have tens of millions of viewers.

YooMob and Yoonic - subscriptions through Telcos

The current services are offered through relationships with Telcos. For example a

Maxis Malaysia customer can register for the service and download the YooMob or

Yoonic App on their phone. The user can then access the service and in return will be

charged around £1.25 per month direct to their mobile phone bill. The fee is then

shared between SyQic, the Telco and the content provider. The monthly fees in the

different regions reflect the purchasing power of customers from the jurisdiction. In

general, SyQic’s customers have been at the low end of the purchasing power scale

and so subscriptions are seen as affordable for the mass market.

The amount of £1.25 quoted above for access to the service is an average price for

subscription to a package of channels for one month. However, the subscriptions taken

by customers vary widely as it is very much an ‘a la carte’ offering. Fixed bundles of

packages are available but customers tend to select their own blend of channels and

decide the length of the time that they desire access be it daily, weekly or monthly.

Full OTT service to expand reach beyond what Telcos can provide

The full OTT offering will be available to more users (anyone with access to the

internet) and hence will greatly expand the reach of SyQic’s offering. It is envisaged

that the OTT service will be charged at an average 20% premium to the Telco model.

The reasoning behind this is two-fold. Firstly, SyQic does not want to cannibalise the

existing Telco model which works well and has led to the establishment of good

working relationships between the company and the Telcos. Secondly, the target

market for the OTT business is higher earners who will likely access the service on

higher price point products such as Tablets and therefore who will tend to have greater

purchasing power.


Page 20 of 48

Strategy

In order to drive revenue and profitability over the next few years the Company

intends to execute the following strategies:

i) Further launches of the Telco channel model in Asia. Yoonic was

launched at the end of June 2013 in Malaysia followed by launches in the

Philippines in July 2013 and Indonesia in August 2013 - providing a reach to

a potential customer base of c. 150m throughout the three countries. The

Group plans to continue to work with further Telco partners to provide users

with low cost access to an extensive range of live and VOD media content.

By end 2014 SyQic intends to have launched the platform with a total of 9

Telcos and for the service to also be available in Pakistan, Bangladesh and

Myanmar.

ii) Expand Yoonic into Western markets. In addition to, and in conjunction

with, rolling out the product with more Telco operators in Asia, the Company

intends to expand its geographical footprint westward. Specifically the

Company intends to roll out the service to higher ARPU countries such as in

Europe, North America and Australia.

In Q4 2013 the service will be rolled out in the EU starting with the UK. In

Europe the strategy is, in addition to the full OTT offering, to work with

second-tier Telcos, catering to the migrant markets such as Lycamobile and

Lebara. This will enable the Group to target the migrant community more

effectively since the first-tier Telcos in the EU are more focused on premium

content which is seen as a more competitive and hence less lucrative market.

The Company intends to adopt the same strategy in relation to a launch of the

Group’s service in the US in the second half of 2014.

iii) Roll-out of the Yoonic OTT platform. The Company expects to launch the

Yoonic full OTT model in late 2013. This will have the opportunity to

exponentially expand the potential customer pool as access will no longer be

restricted to a subscription via a specific Telco as users will be able to pay via

payment platforms that are not Telco based. Additionally, it will allow the

content to be viewed on more devices thus further increasing its attraction.

The service is already OTT ready and it is just the implementation of an

independent payment processing partner system that is required ahead of the

OTT launch. SyQic recently signed an agreement with AIM listed Bango to

provide this system.

iv) Further international diversification of content. The content currently

available on the SyQic platform has a high Asian focus. However, in the last

twelve months content has been added from Turkey and other Eastern

European countries. By adding content from other regions the attraction of

the service will naturally increase due to its appeal to consumers’ demand for

access to home country content when overseas. For example, adding the

Turkish content is not necessarily to target Turkish nationals living in their

homeland but instead some of the 5m Turks estimated to be working

overseas6.

6 http://www.mfa.gov.tr/the-expatriate-turkish-citizens.en.mfa

http://www.mfa.gov.tr/the-expatriate-turkish-citizens.en.mfa


Page 21 of 48

Competition

Although a relatively nascent industry there is already a multitude of players in

the market place with a variety of business models. Some are content owners

looking to distribute their own content to a wider audience (e.g. BBC iPlayer,

ESPN Player), others, like SyQic, take third party generated content and make it

available on-line (e.g. LOVEFiLM, YouTube). Finally, some are a combination of

the two such as Netflix which now produces its own content in addition to

streaming third party product.

In exhibit 8 below we summarise the activities of some of the larger and better known

players in the media streaming industry. However, in addition to these household

names there are numerous smaller players operating in the Asian content space that

compete more closely with SyQic.

Examples of some of the smaller players include WatchIndia TV, StarHub Mobile

TV, Maaduu and Viki (recently sold to Japan’s Rakuten for $200m). WatchIndia

provides live streaming of over 70 Indian channels as well as Indian video-on-demand

across multiple devices (including iOS and Android devices). StarHub Mobile TV

provides access to a wide range of content (Asian and Western) on multiple devices

however access is restricted to StarHub (Singaporean info-communications provider –

broadband, TV, Phone, Mobile) customers. Maaduu provides Korean content to

Indonesia, Singapore and Malaysia, and Viki provides Korean content in Southeast

Asia.

Despite numerous competitors the Directors believe that there is no single direct

competitor to SyQic in terms of breadth of content for multiple nationalities.

However, SyQic is fully aware that competition is highly likely to emerge and it is

essential that the Company continues to build on its key strengths (as listed below) in

order to maintain and build its customer base:

i. the ability to stream at low bandwidths (down to 80kbps);

ii. products offering a compelling and simple user experience;

iii. innovative R&D with the capability to add new features rapidly (including

the planned upcoming content discovery applications via recommendations

and search functions to enable users to quickly find their desired content);

iv. an affordable cost of service;

v. content provider relationships which enables access to the best ethnic

content;

vi. multi device delivery via one subscription – easy and flexible; and

vii. a fully operating mobile service.


Page 22 of 48

Exhibit 8: Competitive landscape

Source: Generator Research Ltd, Company data, Allenby Capital

Name Overview Content Devices Cost

Amazon

(Amazon

Instant Video)

The service was launched in 2006 and has an

estimated customer base of around 10m.

Currently only available in the United States.

c. 145k movie & TV shows for rental or purchase. Deals with

Warner Bros., Turner Broadcasting, CBS, BBC and others. Some

deals on an exclusive basis. Also features original programming

developed by Amazon Studios (educational and comedy).

Accessible on a range of devices including connected TV

sets, Blu-ray players, STBs, games consoles. Mobile

devices: Includes Kindle Fire, iPad and iPhone. Android

devices not currently supported. Streaming or downloading

option, downloads to a PC require the Amazon Unbox Video

Player to be installed.

A la carte payment - users pay for each view. Amazon

Prime Instant Video ($79 pa, free unlimited streaming of

a limited range of content portfolio) also includes free

postage on purchases from Amazon.com and Kindle

eBook loans.

Apple TVApple TV was launched in 2007 and has an

estimated customer base of 5m.

c. 15k movies and 90k TV episodes from the iTunes store in addition

to content available from Netflix, YouTube, and several news and

sports channels (some require individual subscription).

Product consists of a Wi-Fi media streaming box that works

in combination with a PC or Mac and allows users to play

movies and TV shows on their TV.

Box costs $99 but key revenue comes from sales of

content from the iTunes store.

BBC iPlayer

Launched in 2007 the service is available to UK

users only and currently averages around 2.5m

users per day.

Access to practically all television and radio content broadcast by the

BBC for the last 7 days (some for longer).

Available on PCs, Mobile devices, Tablets, Games Consoles,

Connected TVs. Live streaming and many programmes can

be downloaded but these remain captive within the service.

Fee to UK TV licence payers, currently being trialled

internationally at $60 pa.

CBS

(CBS.com)

Launched in 2006 the service served 630k online

video adverts in March 2013, +50% on march

2012.

CBS TV Network content available within 24 hours, primetime

programmes availble 8 days after broadcast. TV episodes and films

are available for purchase via partners, iTunes, Amazon Instant

Video and Vudu. CBS also distributes its own content via licensing

agreements with OTT TV service providers, Netflix, Amazon Instant

Vido and Hulu.

Available on Apple devices, similar Apps for Android and

Windows 8 devices are expected later in 2013.

Ad supported VOD streaming service. CBSSports.com

$17.95 pm (live streaming of US college sports).

CNNThe sevice was launched in 2005 and had 101m

video streams in Jan 2013.

Free access to VOD content across news, business, sport, culture,

travel and the environment. Live streamming of full CNN content is

reserved for CNN pay-TV subscribers.

Aceess online and via mobile devices. Apps available for

Android, iOS, Nokia and Windows. Tablet Apps available

for Android tablets, Kindle Fire, Ipad and Nook. Available in

the US on selected smart TVs and Blu-ray players.

Advertising based, subscription service abandoned in

2007.

ESPN PlayerESPN Player is ESPN's primary OTT internet

TV platform and is directed at European users.Offers live and on-demand access to a wide range of sports video.

Access via PC and Apple devices and selected Android

devices, Xbox gaming platform, connected tvs.$6-$8 for 24-hour or weekly access.

Hulu

Launched in 2007, Hulu is a jointly owned by

NBC Universal, Fox Entertainment Group and

Disney-ABC Television Group. The service is

currently available in the US & Japan and had 4m

subscribers by Q1 2013.

Includes more than 60k TV episodes, 2.3k TV series and 50K hours

of video on Hulu and Hulu Plus from 430 content partners.

Range of devices including PCs, Smart TVs, Blu-ray

players, gaming consoles, Smartphones and Tablets.

Offered free on an ad-supported basis to PC users or

under a subscription , Hulu Plus, which provides access

to more content on a wider selection of devices for $7.99

per month.

LOVEFiLM

Web based DVD and online movie rental service

available in the UK, Germany, Denmark, Sweden

& Norway. The business was acquired by

Amazon in Jan 2011 for $317m and has over 2m

users.

Over 70k titles available acrosss Blu-ray, DVDs and video games. In

2009 the company introduced LOVEFILM Instant , which is an OTT

streaming service , accessible using a range of connected devices.

The service is available on over 175 Internet-enabled

devices including: PCs, Macs, notebooks, Kindle Fire HD,

iPad, gaming machines and connected TVs. In Feb 2012,

LOVEFiLM announced that streaming views overtook

physical rentals for the first time.

LOVEFiLM Instant costs $7.90 a month for unlimited

streaming, also provides a pay-per-view service,

LOVEFiLM Box Office.

Netflix

Nasdaq quoted Netflix was launched in 1997, the

service now has an estimated 36m users, it is

available in 40 countries but c.80% of subscribers

are in the US.

Netflix has some exclusive content agreements such as US

distribution for selected Walt Disney action and animated feature film

debuts. Also makes original content such as House of Cards series, a

drama released in Feb 2013.

Online streaming was launched in Jan 2008 and Netflix is

now one of the world's leading OTT TV service providers. It

now derives over 75% of its revenues from online streaming.

Netflix's original DVD 'rental-by-mail' business is only

available in the US: all international businesses are

focussed on the company's online streaming service.

Sky (NOW

TV)

Sky is the UK's leading pay TV provider and has

penetrated around 40% of UK households. In

2006 Sky launched Sky Player (rebranded Sky

Go) which allows existing Sky TV subscribers to

access programme content online.

Sky GO effectively repackages content already sold to Sky's regular

pay-TV customers. In 2012 Sky launched Pay As You Go internet

TV service NOW TV which is available to non-Sky subscribers . The

USP for NOW TV is that it can offer movies 12 months earlier than

rivals such as LOVEFilm and Netflix.

Accessible on Laptops, PCs, Macs, Smartphones, Tablets,

Androids, iPhones, Connected TVs and gaming consoles.

Sky Go to non Sky TV subscribers ranges from $24-$63

pm. NOW TV - Sky movie pass ($24 pm) - all 600 sky

movies. Sky sports day pass $16 pd 24 hours all 6 sky

sports channels.

Youku Tudou

Inc.

Youku Tudou ("YT") is the leading OTT service

in China in terms of revenue and is estimated to

have c.400m unique viewers every month, the

vast majority of which are in China. YT is listed

on the NYSE.

The original focus was on user generated content ("UGC") but now

streams licensed professional content and also self produced content.

By Nov 2012 YT had signed deals with all the major hollywood

studios and content includes more than 4.5k movies, 2.7k TV titles,

900 variety shows and 33 popular american TV dramas and variety

shows.

Accessible on PCs, Andrid, iOS, Windows phones,

Blackberry Smartphones, Android and iOS tablets and STBs

using Android operating system.

Income is primarily generated through online advertisng

and to a limited extent from subscription or pay per view

based online video services. Streaming or download of

ad supported UGC, Films and TV programmes is free.

Subscription access to ad-free content $2.38 pm, single

movie rentals from $0.79.

Google

(YouTube)

YouTube is the world's leading video-sharing

website. It was launched in 2005 and acquired by

Google in 2006. it currently has around 1bn

uniques users per month.

Although best known for its UGC, YouTube now offers movies and

TV shows . Over 50 YouTube channels are now available with

content including British programming, children's entertainment and

sports. Additonally over 6000 movies are available for rental as

YouTube has deals with ABC, NBC and Sony.

Available on PCs, Tablets, Smartphones, Games consoles,

Smart TVs and via certain satelite and Cable TV services.

Although primarily an ad-supported service, YouTube

also derives income from transactional fees to rent

movies and shows on offer. This business model was

developed in May 2013 and includes 54 monthly channel

subscriptions, with YouTube retaining 45%

of these subscription fees. Subscriptions start from

$0.99pm.


Page 23 of 48

Risks We see the following as the key risks to the SyQic business model:

i) Loss of access to content

The Group provides content that it licenses from third parties. The success of the

service depends largely upon the volume and quality of content. The Group currently

licenses from content aggregators as well as directly from media companies. The

Group may not be able to renew these licences on terms that are favourable to it, or at

all. However, the fact that the Group has had long-standing relationships with its

existing major suppliers, its senior executives are experienced broadcast executives

with good ties in the industry and SyQic is focused on niche ethnic content (which

reduces competition) helps mitigate this risk.

ii) Move to OTT model has negative impact on Telco relationships

SyQic currently has strong distribution relationships with a number of Telcos

throughout Asia. The launch of the full OTT model will enable customers to pay

SyQic direct and thus reduce revenue for the Telcos. This could potentially lead to

Telcos cutting the service for any remaining customers and hence a negative financial

impact for SyQic. To mitigate this, the full OTT offering will be priced higher than

the Telco offering and marketing will be targeting ‘non-Telco’ regions. SyQic will

also continue to collaborate with the Telcos for the full OTT service in terms of traffic

prioritisation for the Yoonic service on various networks. These collaborations will

work to maintain partnerships between SyQic and the Telcos albeit on a smaller level

than before.

iii) Technological evolution

The market for mobile media services is characterised by rapid technological change,

evolving industry standards, frequent device and service introductions and short life

cycles. The Group’s success depends upon its ability to enhance its current solutions

and to develop and introduce new solutions. The Group’s inability to keep up to date

with technological advances could harm its operating results or could result in its

services becoming obsolete. We view it as essential that the Group maintains a

technically skilled R&D team and adapts to technological changes and advances in the

industry, including providing for the continued compatibility of its technology

platform with evolving industry standards and protocols.

iv) Competition and market development

The market for mobile video solutions is rapidly evolving and the Group expects

competition to intensify in the future. This market is characterised by rapidly changing

technologies and an abundance of potential market participants. As the market,

technologies and industry evolve and as the Group introduces additional technical

solutions, the Directors expect to face significantly increased competition from other

companies in the broader Internet media market, including wireless carriers, cable and

satellite operators, and other television service providers with in-house developed

solutions, including those with whom the Group currently has business relationships.

Such increased competition could harm its revenue and operations.

v) Failure to recover certain trade receivables

As detailed later in the document, SyQic ended 2012 with an outstanding trade

receivable of £2.4m. The receivable is now under a repayment plan and the Company

has taken receipt of the first scheduled monthly payments totalling around £300k by

end September 2013. There is a risk that this receivable may not be paid back in full

which would negatively impact future profitability and cash flows. We take comfort

that the Company’s auditors have visited the counterparty in Indonesia and believe

that the debt will be settled in accordance with the terms of the repayment plan.


Page 24 of 48

Financial summary – profit & loss account

Historically, SyQic’s revenues were derived from the provision of consultancy

services and the sale of licences for the use of its technology. In 2011 the revenue

model changed with the launch of YooMob and SyQic commenced revenue share

agreements with Telcos. At that point, revenues became more directly linked to

user activity levels. The revenue model will be adjusted further in late 2013 when

the Company goes fully OTT and SyQic will be able to bill users directly. SyQic

does not pay upfront costs for the content it distributes but instead shares the

revenue with the content providers. Whilst this revenue share model somewhat

caps the earnings upside, it also limits the downside and we see it as one of the

key reasons that SyQic has been able to move into profitability so early in its

development.

Exhibit 9: SyQic summary financials

SyQic no longer earns consultancy and license fee income but instead the driver of

revenues has become end-user subscriber numbers and the levels of their transactions.

The revenue model is quite simple in that the customer pays a fee to the Telco to

allow access to an amount of video (e.g. four channels for two weeks) and this

revenue is then shared as per a pre agreed formula with SyQic and the content

provider. In late 2013, the Company intends to go fully OTT where users will have the

opportunity to subscribe direct with SyQic (albeit through a third party payment

processing partner) rather than via a Telco.

Revenue growth has been driven by an increasing customer base and as the product

has been rolled out with more Telcos. From the initial launch with PLDT in the

Philippines in 2010 (which was essentially a white labeling of the SyQic product

under the ‘Watchpad’ brand) the service, as of September 2013, is now available from

six different Telcos in three different countries. Further launches are planned over the

next twelve months thus further increasing the potential client base. By end 2014 we

estimate that the product will be launched with at least nine Telcos and a potential

customer base of 230m users.

Volume of transactions drive revenues

As described earlier, in late 2013 SyQic plans to go fully OTT, i.e. the service will be

available to users regardless of their Telecoms service provider. In a fully OTT

scenario a user will pay SyQic directly through a web based payment system. SyQic’s

operations have had OTT capability from launch but it has been a strategic initiative to

firstly partner with Telcos to leverage off their distribution capability.

Whether users access via a Telco or OTT, key to revenue generation will be the

number of transactions and the cost per transaction. SyQic’s model is a ‘pay as you

go/a la carte’ model: a typical user will pay for access to a set group of channels for

say one month (one transaction) but then may add, for example, a sports channel for

one week (another transaction) or a music channel (another transaction) for one week.

The average access fee is 20p for one day’s access, 40p for one week and £1 for one

month’s access. Approximately fifty five per cent of transactions are for one week

with the rest mainly for one month.


Exhibit 10: 2013 transaction volumes


Y/E Dec. £'000 2010A 2011A 2012A 2013E 2014E 2015E

Revenue 978 2,842 3,911 4,700 7,800 11,000

YoY Growth 190.6% 37.6% 20.2% 66.0% 41.0%

Gross profit 899 1,695 2,242 2,632 4,290 6,050

Margin 91.9% 59.6% 57.3% 56.0% 55.0% 55.0%

EBIT 64 336 635 882 2,190 3,750

Margin 6.5% 11.8% 16.2% 18.8% 28.1% 34.1%

Profit after tax ("PAT") 64 366 625 854 2,015 3,363

Margin 7.1% 21.6% 27.9% 32.4% 47.0% 55.6%

PAT Growth 471.9% 70.8% 36.6% 136.0% 66.9%

78 70 70 80120

147

344

483

840

1,040

0

200

400

600

800

1,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct

Yoonic launch June 2013

(K)


Page 25 of 48

In the first six months of 2013, an average of 94k transactions were executed every

month. This figure rose to 550k per month in Q3 as Yoonic was launched. In October

2013 the figure was approximately 1.04m.

2013 revenue growth impressive but could have been higher

We forecast full year revenues for 2013 of £4.7m. Although this is an impressive 20%

growth on 2012, the true growth of the business is being masked due a reduction in

the business generated in Indonesia through PT Nextnation Prisma (“PTNP”).

In 2012, SyQic’s Indonesian operations generated revenues of around £2m. However,

as detailed in the section on the balance sheet (page 28), at the end of the 2012 there

was a large unpaid trade receivable due from PTNP. In the first four months of 2013,

whilst the repayment terms of this receivable were being negotiated, SyQic did

minimal promotion of the product in Indonesia. Consequently, a nominal amount of

revenues were achieved.

In May 2013, once repayment of the receivable had commenced, the business was

reactivated. In total we forecast 2013 revenues of £0.75m from Indonesia, a drop of

£1.25m on 2012. Had this issue not occurred and revenues from the region had been

in line with 2012 (£2m) then the overall revenue forecast for 2013 would instead be

£5.95m, a rise of 52% on 2012.

Confidence in 2013 forecasts based on strength of Q3

Given the issues described above with PTNP it is not surprising that the 1H 2013

numbers were weak. Furthermore, as the Company prepared for the launch of Yoonic,

promotion on YooMob was reduced which also negatively impacted revenues. The

end result was that in 1H 2013 SyQic recorded revenues of just £0.9m, equivalent to

22% of revenues achieved in the whole of 2012 and 18% of our full year 2013

revenue forecast. We do note however that despite these low revenue numbers the

Company, due to its flexible business model, still recorded a net profit, albeit small, of

£35k.

The issue with PTNP has now been resolved and PTNP is both paying back the

receivable and also trading again with SyQic. More importantly, in June 2013 Yoonic

was launched. The impact on revenues has been dramatic. After £0.9m of revenues in

the whole of 1H 2013, revenues have been recorded of £0.32m, £0.35m, £0.65m and

£0.76m in July, August, September and October respectively. Management is

confident of continued month on month growth and hence we forecast full year

revenues of £4.7m.

For 2014, we have taken the September 2013 revenue figure of £0.65m and

annualised it to give us £7.8m, growth of 66% on 2013. These numbers should prove

conservative given that monthly revenue figures of greater than £0.65m have already

been achieved in October 2013. Assuming that SyQic achieves half of our 2014

forecast in 1H 2014, i.e. £3.9m then the Company would be announcing 1H 2014

revenues showing year on year growth of over 300%, albeit from a low base.


Exhibit 11: 2013 monthly revenue and forecasts (£k)


Exhibit 12: SyQic revenue forecasts through 2015 (£k)

978

2,842

3,911

4,700

7,800

11,000

0

2,000

4,000

6,000

8,000

10,000

12,000

2010A 2011A 2012A 2013E 2014E 2015E

93 87 87

195 196 217

315352

651

760

825

921

0

250

500

750

1,000

1,250

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec


Page 26 of 48

Relative predictability of gross margins

Revenues are stated by SyQic gross of any revenue sharing. The pay away to the

Telcos and content providers is treated as a cost of sale. Given that the revenue

generation and cost of sales base is rather formulaic, margins are relatively

predictable. This model differs to many others operating in the internet TV space who

often pay for content upfront or indeed produce their own content. Whilst these

alternative models offer greater upside due to the content cost being a fixed amount,

they also carry greater risk if the demand for the content does not materialise. We

believe that SyQic’s choice of business model has been key to it being able to move

into profitability early in its life cycle.

Although the gross margins were significantly higher in 2010 than in 2011 and 2012,

we note that the business model was different in 2010. In 2010 revenues were

generated predominantly by the provision of licensing, maintenance and support

services where direct costs were much lower and accordingly margins were higher. It

was in 2011 that SyQic launched the current B2B2C model with revenues being

shared with the Telcos and content providers. Gross margins have thus declined,

although an increase in revenues has more than compensated for this, with overall

gross profits having increased.

Given the revenue share agreements by which SyQic operates, we expect relative

gross margin stability in 2013 in the core business with the small contraction at the

Group level caused by the continued reduction in the high margin consultancy and

licence fee business. Going into 2014 and 2015 we conservatively forecast relatively

stable margins despite the potential for increased margins from OTT revenues which

will not require a revenue share with Telcos.

Operating and administrative expenses

Research expenditure is recognised as an expense when it is incurred. Development

expenditure is capitalised if such expenditure is expected to generate future economic

benefits. The development expenditure is amortised on a straight-line method over

three years. All of the capitalised expenditure on YooMob has now been amortised

and the amortisation of the capitalised development expenditure in relation to Yoonic

has now begun.

Administrative expenses predominantly comprise salaries and consultancy costs. The

Group employs 32 persons comprising of 28 full time staff and 4 consultants.

Geographically, the employees (staff and consultants) are located as follows: UK – 7;

Malaysia - 17; Philippines - 4; Singapore 3 and Indonesia – 1. Although the cost base

is increasing as the company expands we expect the cost base relative to the levels of

sales to fall to around 21% in 2015 from close to 50% in 2011.

Multimedia Super Corridor (“MSC”) designated company

SyQic’s principal operating company is domiciled and incorporated in Malaysia and is

a qualifying company for MSC Pioneer status. This provides 100% exemption from

income tax on qualifying income. Pioneer status is granted by the Malaysian

Investment Development Authority and runs for an initial period of five years which

has been extended for a further five years.

SyQic was initially awarded Pioneer status in January 2007 and the status was

renewed for a further five years from January 2012. As such, we expect the Company

to maintain a low tax rate for the foreseeable future although taxes will be paid on

profits generated outside of Malaysia.

Exhibit 13: Gross Margin analysis


Exhibit 14: Gross Margin Revenue contribution (£k)


Exhibit 15: Expenses profile


835

1,375

1,620 1,750

2,100

2,300

85.4%

48.4%

41.4%37.2%

26.9%

20.9%

20%

30%

40%

50%

60%

70%

80%

90%

100%

200

700

1,200

1,700

2,200

2010A 2011A 2012A 2013E 2014E 2015E

£k

Operating & Admin expenses as a % of sales

91.9%

59.6%57.3% 56.0% 55.0% 55.0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2010A 2011A 2012A 2013E 2014E 2015E

899

1,695

2,2422,632

4,290

6,050

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2010A 2011A 2012A 2013E 2014E 2015E


Page 27 of 48

Exhibit 16: Profit & loss statement


Profit & Loss £k £k £k £k £k £k Comments

Year End December FY 2010A FY 2011A FY 2012A FY 2013E FY 2014E FY 2015E

Turnover 978 2,842 3,911 4,700 7,800 11,000

Growth na 190.6% 37.6% 20.2% 66.0% 41.0%

Cost of Sales (79) (1,147) (1,669) (2,068) (3,510) (4,950)

Gross Profit 899 1,695 2,242 2,632 4,290 6,050

Margin 91.9% 59.6% 57.3% 56.0% 55.0% 55.0%

Other Income - 16 13 - - -

Admin and other Operating Expenses (835) (1,375) (1,620) (1,750) (2,100) (2,300)

as a % of sales 85.4% 48.4% 41.4% 37.2% 26.9% 20.9%

EBIT 64 336 635 882 2,190 3,750 Predominatly comprises salaries and consultants' fees.

Margin 6.5% 11.8% 16.2% 18.8% 28.1% 34.1%

Net Finance Expense (11) (11) (10) (11) (12) (13)

Profit Before Tax 53 325 625 871 2,178 3,737

Tax 11 41 - (17) (163) (374)

Tax Rate -20.8% -12.6% 0.0% 2.0% 7.5% 10.0%

Profit After Tax 64 366 625 854 2,015 3,363

Margin 6.5% 12.9% 16.0% 18.2% 25.8% 30.6%

FX translation differences (38) (2) 13 - - -

Net Profit 26 364 638 854 2,015 3,363

Margin 2.7% 12.8% 16.3% 18.2% 25.8% 30.6%

Growth 1300% 75% 34% 136% 67%

Attributable to:

Equity holders of SyQic 26 364 640 854 2,015 3,363

Non-controlling interest - - (2) - - -

Exceptional item - IPO expenses - - - (600) - -

Comprehensive income/(loss) for the year 26 364 638 254 2,015 3,363

EPS (Pre exceptional items)

Basic (p) 3.7 8.7 14.5

Diluted (p) 3.7 8.7 14.5

Shares

Basic (m) 23.2 23.2 23.2

Diluted (m) 23.2 23.2 23.2

EBITDA 164 458 764 1,132 2,490 4,050

Margin 16.72% 16.10% 19.52% 24.09% 31.92% 36.82%

Despite the set back in Indonesia in 1H 2013 we still forecast

over 20% growth in 2013. Growth in 2014 and 2015 will be

driven by a continuation of the strong demand seen for Yoonic

in 2H 2013 and the launch of the full OTT offering.

Turnover reported Gross, CoS mainly pay aways to Telcos and

content providers.

Earlier revenues were mainly generated by the provision of high

margin consultancy and licensing. In 2011 SyQic launched the

current B2B2C model with revenues being shared with the

Telcos and content providers. Gross margins are lower but

offset by greater revenues.

MSC status through 2017 will lead to minimal tax charged on

Malaysian generated profits. Profits generated outside of

Malaysia will be taxed at local rates.


Page 28 of 48

Financial Summary – Cash Flow & Balance Sheet

SyQic has a strong record of profitability and with the business having relatively

low capital requirements there is an opportunity for strong cashflow generation.

However, a build up in trade receivables with one customer in particular has

held back cashflow generation. The aforementioned trade receivable is now

subject to a repayment plan and prior financing facilities (convertible bonds and

preference shares) have been converted into new ordinary shares at the IPO.

Combined with the gross £2.45m IPO proceeds the Company is in a strong

position to take advantage of a fast growing market.

Increase in trade receivables has held back cashflow generation

At the end of December 2012 trade receivables stood at £2.55m, £2.4 million of which

was due from PT Nextnation Prisma (“PTNP”). PTNP operates the SyQic licensing

agreement in Indonesia providing marketing and support of the YooMob service.

In 2011 and 2012 SyQic generated revenues of £3.8m in Indonesia through PTNP but

received cash payments of just £1.4m. This was largely attributable to a regulatory

issue in Indonesia that emerged in late 2011 affecting all mobile service content

providers in the country. The issue was an industry wide investigation by the

Indonesian telecommunications regulator on the sale of add-on services to cellular

end-users in Indonesia. The investigation has since been concluded (without penalty

on either SyQic or PTNP) but it did result in delays in collections of revenue shares

for sales from mobile operators by PTNP.

The Group addressed the matter in early 2013 which included a decision to temporary

suspend services managed by PTNP in order to reduce risk. A payment plan was

agreed in May 2013 for the settlement of the then outstanding £2.45m over a three

year period. In summary the payments to SyQic are due to be £0.5m in 2013, £0.9m in

2014 and £1.05m in 2015. We understand that at the end of September 2013 c.£0.3m

had been received by the Company, as expected, under the repayment plan. Additional

new revenues that are generated with PTNP are expected to be paid within 120 days.

Cash generation supported by issue of convertible bonds and preference shares

Operating cash flow was supplemented in 2011 and 2012 by the issue of £1.3m of

preference shares and £0.3m of convertible bonds (5% coupon). This has enabled the

Company to invest in the development of new products and services (YooMob and

Yoonic). Both the convertible bonds and preference shares converted into ordinary

shares at the IPO.

Financing in 2013 has come in the form of a Directors’ loan (unsecured and interest

free) and an overdraft facility. Amounts due to Directors totaled £590k at end June

2013. In September 2013 the Group obtained a RM500k (c.£100k) overdraft facility

from Malaysian finance institution Maybank Islamic Berhad.

IPO raised gross proceeds of £2.45m to enable further expansion

The receivable from PTNP is now being paid back under a repayment plan and the

Company is expected to show strong levels of profitability in 2013 with a profit after

tax margin of 18%. That said, cashflow generation will remain under pressure for the

time being as SyQic continues to invest for growth. Post IPO we forecast the low

point for cash levels will be end December 2013 when the Company will have an

estimated cash position of £1.35m.


Page 29 of 48

Exhibit 17: Cashflow statement


Cash Flow Statement £k £k £k £k £k £k Comments


Profit for the period before taxation 53 325 625 871 2,178 3,737

Adjustments for:

P,P&E written off - 32 - - - -

Depreciation of P,P&E 97 74 84 100 50 50

Amortisation of intangible assets - 48 47 150 250 250

Bad Debts written off - 178 - - - - Project in Columbia that did not materialise

Waiver of trade payables - (5) - - - -

Gain on disposal of P,P&E - - (4) - - -

Finance costs 3 9 10 11 12 13

Fair value loss on trade receivables - - 177 - - -

Operating cash flows before movements in working capital 153 661 939 1,132 2,490 4,050 Strong cash generation prior to movements in working capital

(Increase)/decrease in trade and other receivables (67) (1,439) (1,101) (2,205) 1,302 (168)

Increase/(decrease) in trade and other payables 63 352 (316) 451 361 360

Amounts from / (paid to) Directors (394) (111) 62 500 (150) (150)

Amounts from / (paid to) shareholders (252) (82) (37) (27) - -

Cash generated from operating activities (497) (619) (453) (149) 4,003 4,092

Income tax (paid)/received (10) - (6) (17) (163) (374)

Interest paid (3) (9) (10) (11) (12) (13)

Net cash generated from operating activities (510) (628) (469) (177) 3,827 3,705

Purchase of P,P&E (20) (30) (18) (100) (100) (100)

Acquisition of intangible assets (183) (155) (290) (350) (150) (150) Build up in expenditure on Yoonic.

Adjustments arising from acquisition of subsidiary 713 - - - - -

Net cash used in investing activities 510 (185) (308) (450) (250) (250)

Advances from related companies - - 4 - - -

Proceeds from the issue of convertible bonds - 291 - - - -

Proceeds from government grants 36 2 - - - -

Repayment of lease obligations (23) (25) (10) - - -

Proceeds from the issue of preference shares - 666 619 - - -

Net Proceeds from the issue of ordinary shares - - - 1,850 - -

Bank financing - - - 75 - -

Net cash used in financing activities 13 934 613 1,925 - - The Company raised £2.45m Gross/£1.85 net proceeds at IPO.

Net increase/(decrease) in Cash 13 121 (164) 1,298 3,577 3,455

Effect of FX rate changes (41) (5) 3 - - -

Cash and equivalent at beginning of period 127 99 215 54 1,352 4,929

Cash and equivalent at end of period 99 215 54 1,352 4,929 8,384

SyQic has generated steady levels of operating cash flow (pre

working capital movements) in each year of trading. However,

overall cashflow has been held back by a build up in

receivables in 2011 and 2012 in its Indonesian operations. A

repayment plan is now in place which will aid cashflow

generation in 2014 and 2015.

Financing to date has been from the issue of convertible bonds,

preference shares and Directors' loans (see above). Both the

convertible bonds and the preference shares converted into

new Ordinary shares at IPO.


Page 30 of 48

Exhibit 18: Balance sheet


Balance Sheet £k £k £k £k £k £k


ASSETS

Non-current assets

Property, plant & equipment 276 210 144 144 194 244 Capitalised development expenditure in relation to Yoonic.

Intangible assets 183 287 532 732 632 532

Non-current trade receivable 0 0 1,724 1,724 824 0

Deferred tax 11 52 52 52 52 52

470 549 2,452 2,652 1,702 828

Current Assets

Trade receivables 192 1,360 615 2,820 2,418 3,410

Other receivables, deposits and prepayments 59 146 107 107 107 107

Cash 99 215 54 1,352 4,929 8,384

350 1,721 776 4,279 7,454 11,901

Total Assets 820 2,270 3,228 6,931 9,156 12,729

LIABILITIES

Current liabilities

Trade payables 116 294 66 517 878 1,238

Other payables & accruals 301 492 412 412 412 412

Amounts owing to Directors 179 65 127 627 477 327 Amounts owed to Directors are unsecured and interest free.

Amounts owing to shareholders 147 64 27 - - -

Lease obligations 26 16 17 17 17 17

Income tax payables - - - - - -

Bank overdraft - - - 75 75 75

769 931 649 1,648 1,859 2,069

Non-current liabilities

Convertible redeemable bonds - 290 292 - - -

Lease obligations 96 96 80 80 80 80

Other 34 - - - - -

Equity

Share capital 4,997 5,663 6,282 9,024 9,024 9,024

Merger deficit (3,286) (3,286) (3,286) (3,286) (3,286) (3,286)

Translation reserve/(deficit) (9) (11) 1 1 1 1

Minority interest - 2 - - - -

Accumulated profits/(losses) (1,781) (1,415) (790) (536) 1,478 4,842

(79) 953 2,207 5,203 7,217 10,581

Total Equity & Liabilities 820 2,270 3,228 6,931 9,156 12,729

Balance Sheet Ratios FY 2010A FY 2011A FY 2012A FY 2013E FY 2014E FY 2015E

Short term financial debts - 129 154 702 552 402

Long term financial debts - 290 292 - - -

Gross debt - 419 446 702 552 402

Cash and cash equivalents 99 215 54 1,352 4,929 8,384

Net debt / (cash) (99) 204 392 (650) (4,377) (7,982)

Trade receivable days 72 175 57 219 113 113

Trade payable days 536 94 14 91 91 91

Trade receivab le days = clo s ing trade receivab les d ivided by turnover and mult ip lied by 365

Trade payab le days = clo s ing trade payab le days d ivided by cos t o f sales and mult ip lied by 365

Comments

Relates to the non-current element of the PTNP receivable

which stood at £2.4m at end June 2013. The receivable will

be repaid; £0.5m in 2013, £0.9m in 2014 and £1.05m in 2015.

By end September 2013 £0.3m had been received.

The 5% convertible bonds converted into new ordinary

shares at IPO.

The Company has a RM0.5m (c.£100k) facility with

Maybank Islamic Berhad.

Trade receivables days are distorted in 2013 by the

relatively strong operating performance in Q4 2013 leaving

high receivables at the year end.

Includes amounts due to Directors, shareholders and bank

overdraft


Page 31 of 48

Use of proceeds

The company raised gross proceeds of £2.45m on its AIM IPO. The Directors

intend to use these funds, along with its existing cash resources, for business

expansion, in particular to launch the Group’s services in the UK, Continental

European and US markets.

In order to achieve their strategy, the Directors initially intend to focus on the

following areas of business development:

i) Content acquisition (15%)

The Directors consider that content is the key reason why users choose to subscribe

for the Group’s services. The Group remains committed to acquiring relevant, in-

demand content as economically as possible and its primary method of doing so will

continue to be on a revenue share basis. That said, as SyQic continues to license

premium migrant and expatriate content, on occasion these licences may require

partial upfront payments in order to secure the necessary rights. Additionally, funds

will be used for funding the creation of original programming.

ii) Research & development (40%)

The core principle behind the Group’s R&D is centered around the user’s video

experience and keeping the video delivery element of the service as up-to-date as

possible. The Group is continually looking to reduce the bandwidth required by the

Group’s platform, thereby reducing latency and buffering as well as enabling users to

access the platform in areas of poorer connectivity. The Group attributes much of its

past success to the strength of its R&D and the Directors believe that investment in

R&D is of fundamental importance to the Group’s future prospects. The Group’s

R&D function is located in the UK with maintenance and enhancements based in

Malaysia.

iii) Capital expenditure (20%)

Tied-in with the Group’s expansion into new territories, the Group plans to establish

local and regional content distribution hubs in each strategic area starting with the UK.

These hubs will provide a mirror of the content stored on the Group’s primary servers

(located in Tier 3 data centres in Asia) and will have the dual benefit of decreasing

latency and delays as well as providing back-up in the event of the failure of any of

the Group’s other hubs and/or servers.

iv) Sales and marketing (15%)

The Group intends to increase its marketing capabilities including advertising and

promotions via various media outlets. The Directors believe that by investing in these

areas the Group will be able to increase both its market share and its revenues.

v) Working capital (10%)

The Directors currently intend to deploy funds to help finance its day-to-day

operations as it seeks to launch its services in new territories and grow both

organically and by selective acquisition.


Page 32 of 48

Valuation

SyQic’s sector is still in its infancy and hence an established group of listed peers

to provide comparable valuation multiples does not yet exist. Instead, many of

the peers are either private (e.g. WatchIndia or StarHub Mobile) or form a

minority part of a listed company (e.g. Apple TV or the subscription part of

YouTube – itself a part of Google). Those that are listed often tend to be focused

on different genres and target different end clients such as Netflix’s focus on

higher spending customers seeking Hollywood movies.

Listed players in the internet TV value chain

With few, if any, direct listed comparables we have taken a look at some listed players

that are involved elsewhere in the internet TV value chain. Whilst these companies

have different business models to SyQic, they will all benefit from the overall market

growth.

Amino Technologies (AMO.LN), PeerTV (PTV.LN) and Pace (PIC.LN) are

focused on the production of set top boxes and PayTV hardware. Destiny Media

(DSNY.5) is focused on video streaming security and Mobile Streams (MOS.LN)

and One Media (OMIP.LN) are content owners/providers. Finally, Youku Tudou

(YOKU.US) could be described a blend of YouTube and Netflix focused on the

Chinese market. The common theme across these companies is that they are

experiencing growing revenues and are optimistic for further growth. As is common

with early stage growth companies, not all are profitable and many have only just

broken into profitability.

Whilst interesting to monitor the performance of other players in the value chain to get

a feel for industry trends, unfortunately we do not think they are such useful valuation

comparators. The main reason for this is that the business model of SyQic differs

markedly to the players mentioned above. The incremental cost of an additional client

signing up for the SyQic service is essentially the pay away to the Telco and content

providers. We compare this to, for example, the capital intensity of the set top box

manufacturers or the capex required to acquire content.

In summary, we see the SyQic model as relatively unique. It is low risk (no large

upfront payments required for content) and has high operational gearing (each

incremental £1 sale adds around 50p to gross profits and has minimal impact on

administration costs). It is this lightweight business model which has enabled it to

reach profitability at such an early stage.

The closest business model is probably that of Netflix (NFLX.US) in that it similarly

has high earnings gearing relative to its user numbers. That said its target market is

different and its model of acquiring content or producing its own rather than revenue

share differs to SyQic. Outside of the internet TV value chain it is interesting to look

at Bango (BGO.L), SyQic’s payment partner. Bango develops mobile web payment

systems and so, like SyQic, has earnings highly geared to the number of mobile

transactions that take place. Earnings forecasts are not available for Bango but in 1H

2013 it recorded gross revenues of £6.6m (+27% on the prior year) and a loss after tax

of £1.7m. Bango has a current market capitalisation of £63m and a net cash position

of £7.2m. Despite the losses, the market clearly places a premium value on the

operational gearing potential of the business model and the on-going growth in mobile

web payments.


Page 33 of 48

In summary, given the lack of direct comparables with regards to valuation we believe

SyQic should be appraised on its own merits. Despite the one off issue incurred in 1H

2013 (as previously detailed) the Company is still forecast to increase revenues by

more than 20% year on year for the full year. The 2014 revenue forecast of £7.8m

(66% year on year growth) is an annualisation of the revenues achieved in September

2013 of £0.65m i.e. it conservatively assumes no growth from September 2013

onwards which we view as highly unlikely given that month on month growth of 17%

was achieved in October 2013. The business is achieving gross margins in excess of

50% and the cost base is under control so that the Company is delivering growing

levels of profits after tax.

Fair value at 130p

With 10 months of the year complete we are confident in our 2013 forecasts and feel it

is appropriate to look to our 2014 forecasts for a basis of valuing SyQic. That said,

given that the Yoonic product was only launched in June of this year, the Company is

yet to launch the fully OTT version of its products and that the market is experiencing

rapid growth, we feel that there is substantial earnings upside potential in excess of

our current forecasts. We gain further comfort that the revenue share business model

ensures that even in periods of reduced revenues the Company has operated

profitably.

SyQic operates in a nascent but rapidly growing industry but it has established itself as

a potential major player given that it has the key ingredients for success, namely

quality content, delivery technology and an attractive price point for consumers. The

Company is producing steadily increasing profitability and is on the verge of

launching an OTT offering that has the potential for producing blue sky returns. As

such, we think that it is not too demanding to expect the Company to trade on a 2014

PE Ratio of 15x (rather than the current 7.1x). A 15x 2014 valuation would imply a

fair value for SyQic of 130p.

Exhibit 19: Peer group valuation summary

Source: Thomson Reuters, Company data, Allenby Capital forecasts

Company Price TickerMarket

Cap (£m)

2012 2013 2014 2012 2013 2014 2012 2013 2014

Amino Technologies Plc 0.88 AMO.LN 48.4 -18.2 30.2 17.6 14.7 12.6 0.73 0.70 0.68 4.84 4.73 4.30

Destiny Media Technologies Inc 1.96 DSNY.5 63.7 -0.50 63.2 181.9 328.5 58.5 25.39 30.07 18.82 117.50 252.62 43.93

Mobile Streams Plc 0.69 MOS.LN 25.1 -2.80 22.3 32.3 9.6 8.4 1.01 0.41 0.34 12.05 4.64 3.72

Netflix Inc 355.2 NFLX.US 13,080 -68.6 13,012 1,224.8 240.0 104.8 5.77 4.80 4.10 11.88 68.41 43.72

One Media iP Group Plc 0.159 OMIP.LN 10.18 -1.92 8.26 21.7 24.8 15.9 3.95 3.20 2.60 15.01 12.90 8.60

Pace Plc 3.19 PIC.LN 999.1 42.6 1,041.7 27.6 16.4 14.2 0.69 0.68 0.69 5.84 7.12 6.86

PeerTV Plc 0.0188 PTV.LN 1.50 3.70 5.20 -0.3 na na 2.66 na na -1.34 na na

Youku Tudou Inc 27.02 YOKU.US 2,182 -339.8 1,842 -52.0 -67.6 150.1 10.05 5.88 3.98 932.80 -70.60 41.34

Average 181.7 80.9 52.1 6.28 6.54 4.46 137.3 40.0 21.8

Median 24.7 16.4 15.9 3.30 3.20 2.60 11.96 7.12 8.60

£m

SyQic 0.62 SYQ.L 14.38 -0.65 13.73 22.5 16.9 7.1 3.51 2.92 1.76 18.0 12.1 5.5

Net

Debt/(Cash)

(£m)

Enterprise

Value (£m)

Price / Earnings EV / Sales EV / EBITDA


Page 34 of 48

Shareholder structure & Board member profiles

The Company has primarily been funded by the issue of ordinary shares,

preference shares and a convertible bond. Ahead of the AIM IPO the preference

shares and the convertible bond were both exchanged into ordinary shares. The

company raised £2.45m at IPO through the issue of further ordinary shares and

exhibit 20 below sets out the shareholder structure post this fundraise. We also

list below the profiles of the board members.

Exhibit 20: Shareholder structure

William Liu Wei Hai (aged 65), Non-Executive Chairman

William Liu started his career in IT in 1970 after graduating with a degree in

Mechanical Engineering from the University of Manchester and a MSc from Imperial

College. He is currently the Chairman and Managing Partner of Stream Global Pte

Ltd, a Singaporean venture capital firm whose main objective is to invest in and

partner with entrepreneurs and assist them in realising their potential. William is

currently a board member of SISTIC.com Pte Ltd, GreenDot Energy Pte Ltd, Payment

Link Pte Ltd., and was previously a board member of the National Library Board,

Singapore Computer Systems and the National Computer Board. He was also a past

Chairman of the Singapore Federation of the Computer Industry (SFCI) from 1995 to

1998 and a Board member of the Singapore National Computer Research Society of

Singapore. William was inducted into the Singapore Computer Society’s Hall of Fame

in 2007.

Jamal Hassim (aged 48), Chief Executive Officer

After graduating with a Bachelor of Laws degree from the University of Wales,

Aberystwyth in 1990, Jamal gained experience in taxation and corporate finance with

Ernst and Young (Singapore) and Price Waterhouse (Malaysia). In 1995, Jamal joined

ntv7 Malaysia, a terrestrial broadcasting station and his success at ntv7 was the reason

the Malaysian Government later appointed Jamal to help with the operation of TV3

and also the restructuring of its RM800 million debt. In 2000, Jamal was headhunted

to become the Chief Operating Officer of SPH Mediaworks Ltd in Singapore and later

led a project that involved the restructuring, reorganisation and successful sale of

Metrovision, an indebted Malaysian terrestrial television station to the TV3 Media

Group.

Jamal’s broadcast career culminated in him becoming the Founder, Managing

Director and owner of Channel 9, at that time Malaysia’s last independent terrestrial

television station. He was also responsible for raising the necessary capital (RM70

million) to launch and operate the station. Jamal created a multi-media platform to

deliver Channel 9’s content via the television, the internet and mobile devices. Jamal

and investors successfully exited their investment in Channel 9 via a trade sale. Jamal

had also invested in and operated Capital FM, a urban themed FM radio station based

Source: Company data

NameNumber of

ordinary shares

% of issued

ordinary shares

Jamal Hassim (CEO) 8,838,940 38.10%

Emanuele Angelidis 2,258,771 9.74%

Stream Global Incubators Private Limited (SGI) 1,752,864 7.56%

Stream Global Pte Ltd 1,365,382 5.89%

Valley View Holdings Ltd 1,364,792 5.88%

Liew Tze Min 1,108,954 4.78%

Dicky Tjokrosaputro (Chairman) 753,755 3.25%

Other 5,755,387 24.81%

Total number of shares 23,198,845 100.0%


Page 35 of 48

in Malaysia. He also successfully exited this investment via a trade sale. In 2004,

following the sale of Channel 9, Jamal founded SyQic.

Steve Elliff (aged 44), Finance director

Steve Elliff is a Chartered Accountant with over 20 years of financial experience. He

started his career in 1990 at KPMG London and his tenure included an 18 month

secondment to KPMG, Kuala Lumpur, Malaysia. In 1996, Steve joined Lex Service

plc as Group Operations Auditor, where he was responsible for managing the

completion accounting exercise as part of its sale to Pendragon Motor Group. In 1998,

he joined Dexion Group and after five years joined Mercedes Benz Retail Group as

Divisional Financial Controller where his responsibilities were, amongst others,

management reporting for the three Mercedes-Benz Retail Corporate Sales operations

in London, Manchester and Birmingham. In 2009, Steve joined Epson UK Limited as

Financial Controller and in November 2013 Steve will join SyQic ahead of the AIM

listing. Steve has a degree in Economics from the University College of Wales,

Aberystwyth and a Certificate in Business Administration from the University of

Warwick.

David Vernon Cotterell (aged 60) Non-Executive Director

David Cotterell has nearly 30 years’ experience in the information technology

software and service sector. He has held senior management roles with firms such as

ACT Financial Systems, DST, Advent and AIM listed SQS Group plc where he was

also responsible for investor relations. This wide ranging experience includes senior

roles in international start-ups, organisations requiring change and mature businesses

with established brands. Mr Cotterell has led and successfully implemented two trade

sales of technology companies. He holds other IT related board level positions

including with AIM listed Incadea and RapidCloud International plc. He is also

Director of Europe for Qualitest services.

Dicky Tjokrosaputro (aged 42), Non-Executive Director

Dicky graduated from the University of Southern California with a degree in Business

Administration in 1992 before commencing his career in the textile manufacturing

business. From 1996 to 2008 he was the CEO of PT. Hanson International Tbk

(Indonesia) a company involved in textile manufacturing. He has been a Director of

PT Power Telecom (Indonesia), a company involved in telecommunication services

from 2004 till present and a Director of Valley View Holding Ltd (Samoa), an

investment holding company with investments in IT businesses from 2009.

Chak Kong Soon (aged 49), Non-Executive Director

Chak Kong Soon started his career in the systems integration division of Andersen

Consulting (now known as Accenture), and is currently a Managing Partner of Stream

Global Pte Ltd. He is the President of the Singapore Computer Society, a professional

body with 27,000-strong membership. Chak has founded and run several companies

and currently serves as a board member on several technology companies in the

Southeast Asia region.


Page 36 of 48

Appendix I – Listed peer group profiles

Although not identical peers to SyQic, the following companies operate within the video

streaming industry and have their equity listed:

I. Amino Technologies Plc (AIM)

II. Destiny Media Technologies Inc (TSX, OTC US)

III. Mobile Streams Plc (AIM)

IV. Netflix Inc (NASDAQ)

V. One Media IP Group Plc (AIM)

VI. Pace Plc (LSE main market)

VII. PeerTV Plc (AIM)

VIII. Youku Toudu Inc (NYSE)


Page 37 of 48

Amino Technologies Plc

Summary Data

Share price (p) 88.00

Reporting currency GBP

Ticker AMO.LN

Exchange London

Market cap (USD m) 77.5

Market cap (GBP m) 48.4

Last reported net debt/(cash) (GBP m) -18.2

Enterprise value (GBP m) 30.2

Share price performance

Source: Thomson Reuters

Key data (Y/E Nov) - (GBP m)

2011A 2012A 2013E 2014E

Revenue 51.82 41.70 43.17 44.77

EBITDA 2.09 6.19 6.40 7.03

EBIT -0.61 2.83 3.17 3.73

Pre Tax Profit -0.62 2.89 4.17 3.77

Net Profit -0.21 2.84 4.25 3.65

EPS 4.00 5.00 6.00 7.00

DPS 2.00 3.00 4.00 4.00

Net Debt/(Cash) -14.12 -17.10 -19.07 -20.50

Margins/Ratios

2011 2012 2013 2014

EBITDA Margin 4.0% 14.8% 14.8% 15.7% Key Shareholders

EBIT Margin -1.2% 6.8% 7.3% 8.3% Schroder Investment Management Ltd 21.1%

Net Profit Margin -0.4% 6.8% 9.8% 8.2% Azini Capital Partners LLP 14.3%

P/E Ratio 22.00 17.60 14.67 12.57 Miton Capital Partners Ltd 11.1%

EV/Sales 0.58 0.73 0.70 0.68 Kestrel Partners LLP 9.1%

EV/EBITDA 14.47 4.89 4.73 4.30 BlackRock Investment Management (UK) Ltd 8.0%

Revenue Growth 17.8% -19.5% 3.5% 3.7% AMO Employee Benefit Trust 5.3%

EPS Growth na 25.0% 20.0% 16.7% Ari Charles Zaphiriou-Zarifi 5.2%

Sources: Thomson Reuters, Allenby Capital

Share price as of 26/11/2013

Amino Technologies is an international provider of digital

entertainment solutions, specifically for Internet Protocol

Television (‘IPTV’), Over The Top services (‘OTT’), and in-

home media distribution. The Company was founded in 1994

and listed on AIM in 2004. Based in Cambridge, its products

are sold to a base of over 850 customers spanning 85

countries, including global corporations such as Ericsson and

Intel. The Group specialises in the area of set top boxes.

Although consequently not a competitor of SyQic, it is

nevertheless a peer in that it operates in the field of PayTV via

IPTV and OTT services.

Amino’s principal product, the high definition set top box

Aminet A140, is regarded as an industry benchmark, owing to

its performance, flexibility and competitive pricing. The Aminet

A540 adds a high performance PVR functionality to the

Aminet range. Amino’s technology allows its customers –

ranging from IPTV service providers to major network

operators – to more efficiently bring their entertainment

services to their own consumers.

Amino is also establishing itself as a player in the pure OTT

market, whereby operators deliver their entertainment services

directly over the open internet. In the past six months,

contracts to supply the Group’s proprietary OTT products

have been secured with KartinaTV (a Russian language TV

service) and Maxcom (a Mexican fibre network operator).

Recent market developments have lifted prospects for both the

IPTV and OTT segment of the business – with regard to

IPTV, the continued rollout of fibre optic networks in an

increasing number of regions gives Amino’s clients a greater

reach for more advanced entertainment services; for OTT,

regulatory changes will further broaden entertainment

providers’ target addressable market.

In October, Amino entered into an agreement with VUDU, an

industry leading subscription-free, video-on-demand movie

service, which allows Amino to offer VUDU's extensive

catalogue of blockbuster films through its IPTV platform.

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Page 38 of 48

Destiny Media Technologies Inc

Summary Data

Share price (USD) 1.96

Reporting currency USD

Ticker DSNY.US

Exchange OTCMKTS



Last reported net debt/(cash) (USD m) -0.8

Enterprise value (USD m) 162.2



Key data (Y/E Aug) - (USD m)

2011A 2012A 2013E 2014E

Revenue 4.01 3.98 3.36 5.37

EBITDA 0.87 0.86 0.40 2.30

EBIT 0.81 0.77 0.33 2.19

Pre Tax Profit 0.81 0.77 0.41 2.26

Net Profit 0.64 0.56 0.31 1.74

EPS 0.01 0.01 0.01 0.03

DPS 0.00 0.00 0.00 0.00

Net Debt/(Cash) -1.24 -1.28 na na

Margins/Ratios

2011 2012 2013 2014

EBITDA Margin 21.7% 21.6% 11.9% 42.8%

EBIT Margin 20.2% 19.3% 9.8% 40.8% Key Shareholders

Net Profit Margin 16.0% 14.1% 9.2% 32.4% Steven E Vestergaard 21.66%

P/E Ratio 159.13 181.86 328.52 58.53 Fidelity Management & Research Company 3.02%

EV/Sales 40.44 40.74 48.26 30.20 Frederick Vandenberg 1.05%

EV/EBITDA 186.38 188.55 405.38 70.50

Revenue Growth 6.4% -0.7% -15.6% 59.8%

EPS Growth na -12.5% -44.6% 461.3%



Destiny is a provider of distribution technology services for

content over the Internet. Specifically, these services are

focused on watermarking and security, and media streaming

technologies. Founded in 1991, the Group was originally a

video game developer, before moving into video streaming

solutions in 1999. 95% of Destiny’s revenues are now

generated by its Play MPE distribution service, which the

recording industry uses to distribute music and video content in

a safe, protected environment. The Company’s shares are

traded on the TSX, the OTCBB and OTCQX, as well as on

several German exchanges. Although not involved in direct

streaming, it a useful peer to analyse for SyQic as it does

operate in the area of transferring media content over the

Internet (albeit not to the end user).

Destiny’s principal product is Play MPE. It is an automated

service used by record label companies in delivering their

music and video content to its customers. The range of the type

of client that Destiny caters to is broad, including radio

stations, film and television studios, DJs, news agencies and

sports stadiums, amongst others. Play MPE’s technology

compresses and encrypts the file, enables a rapid transfer and

download by the recipient, and then locks the content to said

recipient’s computer. The technology possesses a digital

watermark, which acts as forensic trace and corrupts files if

someone attempts to remove it. The technology also allows the

record label companies to monitor the recipient’s use of the

media content. Revenues are generated for Destiny through

charging the record labels for the service.

Destiny is also developing a new technology called Clipstream.

This is an instant play video streaming solution. The USP of

Clipstream is that can be accessed on all browser types on all

computers and internet enable devices without the need for the

plug-ins or streaming servers. The target customer base

includes websites featuring video content and advertisers

looking to run video ads on other sites, amongst others.

Management believes that Clipstream’s novel technology will

be able to challenge the $3 billion content delivery network

industry.

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Page 39 of 48

Mobile Streams Plc

Summary Data



Ticker MOS.LN

Exchange London







Key data (Y/E Jun) - (GBP m)

2011A 2012A 2013E 2014E

Revenue 10.33 22.05 53.94 65.00

EBITDA 0.34 2.01 4.83 6.00

EBIT 0.08 1.64 4.80 5.00

Pre Tax Profit 0.08 1.64 4.78 5.00

Net Profit -0.14 0.77 2.61 3.00

EPS -0.59 2.12 7.13 8.19

DPS 0.00 0.00 0.00 0.00

Net Debt/(Cash) -1.10 -1.76 -2.85 -5.00

Margins/Ratios

2011 2012 2013 2014


EBIT Margin 0.8% 7.4% 8.9% 7.7% Simon David Buckingham 46.44%

Net Profit Margin -1.4% 3.5% 4.8% 4.6% TruePosition Inc 15.59%

P/E Ratio -116.10 32.31 9.61 8.36 Cave & Sons Ltd 2.09%

EV/Sales 2.16 1.01 0.41 0.34 TD Asset Management USA Inc 0.54%

EV/EBITDA 65.56 11.07 4.62 3.72 Roger Parry 0.50%

Revenue Growth 45.3% 113.5% 144.6% 20.5%

EPS Growth na -459.3% 236.2% 14.9%



Mobile Streams (‘MOS’) was founded in 1999. Originally

operating as a mobile ring tones provider, it moved into the

nascent industry of mobile video services in 2005. The Group

listed on AIM in 2006, and soon expanded into games, music,

and wallpaper for mobiles. MOS now operates on a global

scale, with offices in London, New York, Hong Kong and

Singapore.

The Company is essentially a general mobile content provider,

providing apps, games, music, videos and eBooks. MOS

licences and distributes its content through more than one

hundred channels around the world. For videos and pictures, it

provides content to such publishers as National Geographic,

Cellfish Media, and Convisual; music is provided to The

Orchard and Skint, amongst others. Over 200,000 eBooks

are distributed by the Group from more than 600 publishers in

multiple languages.

The Group’s traditional business of providing content to mobile

network operators has been complimented in recent years by

management’s decision to begin also providing content directly

to consumers’ mobile devices. This was due to a decline in the

number of consumers visiting operator channel portals. Despite

the trend, however, MOS has been successful in maintaining

revenue streams from mobile network operators at relatively

stable levels. This segment of the business has witnessed a shift

in revenue origination from music to games and other apps.

The B2C segment has been expanding at a rapid rate, with

mobile internet revenues rising 201% in FY 2013 to £49.6m.

MOS operates this segment through its storefront, Appitalism.

The Company is highly cash generative but as much of the cash

is generated in Argentina it is currently unable to repatriate the

funds due to currency controls. Management is mitigating this

risk by moving into other South American countries in order to

diversify revenue streams.

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Page 40 of 48

Netflix Inc

Summary Data



Ticker NFLX.US

Exchange NASDAQ

Market cap (USD m) 20,928

Market cap (GBP m) 13,080

Last reported net debt/(cash) (USD m) -109.7

Enterprise value (USD m) 20,819



Key data (Y/E Dec) - (USD m)

2011A 2012A 2013E 2014E

Revenue 3,205 3,609 4,336 5,079

EBITDA 1,219 1,753 304 476

EBIT 376.6 50.5 192.5 363.5

Pre Tax Profit 359.5 30.5 146.0 331.8

Net Profit 226.1 17.4 92.6 206.9

EPS 4.26 0.29 1.48 3.39

DPS 0.00 0.00 0.00 0.00

Net Debt/(Cash) -397.8 -109.7 -457.2 -763.3

Margins/Ratios

2011 2012 2013 2014


EBIT Margin 11.8% 1.4% 4.4% 7.2% T. Rowe Price Associates Inc 10.81%

Net Profit Margin 7.1% 0.5% 2.1% 4.1% Icahn Associates Corporation 9.40%

P/E Ratio 83.4 1,224.8 240.0 104.8 Capital Research Global Investors 9.32%

EV/Sales 6.50 5.77 4.80 4.10 The Vanguard Grop Inc 5.87%

EV/EBITDA 17.08 11.88 68.41 43.72 State Street Global Advisors 3.76%

Revenue Growth 48.2% 12.6% 20.1% 17.1% BlackRock Institutional Trust Company 3.41%

EPS Growth 43.9% -93.2% 410.3% 129.1% Technology Crossover Ventures 3.19%



Netflix is the world’s leading online subscription service for

streaming films and TV episodes over the Internet, with over

36 million customers based in 40 countries as at April 2013.

29.2m of those customers were US based. The Group also

operates throughout the rest of the Americas, the Caribbean,

the UK, Ireland, Denmark, Sweden, Norway and Finland.

Founded in 1997, the Group listed on NASDAQ in 2002

raising $82.5m in the process.

The Company’s content is obtained from studios via revenue

sharing agreements, fixed-fee licences or simply through direct

purchases. It is then distributed via an OTT service, available

on all Internet enabled devices. Content is typically comprised

of Western entertainment, i.e. American and British films and

TV shows. The Group’s unique selling point is the huge size

and quality of its library (as at end July 2013, the Netflix library

contained over 75,000 films alone).

Netflix offers unlimited content viewing for a flat rate of £5.99

or $7.99 pm. The Group dominates the subscription based

video streaming market, with a market share of 90%. For

exclusively television shows (i.e. not films), which account for

80% of the overall video streaming market, Netflix has an 89%

share. The Group has never altered its model and gone down

the advertising or pay per view route.

In April, the Group revealed plans to roll out a slightly altered

subscription service. Prices are to be hiked to $11.99 pm for a

‘family’ service: the limit for simultaneous streams originating

from one account will be upped from two to four. To curb

piracy, some analysts are also of the opinion that the Group

should limit the number of devices attached to a single account,

or else charge a fee for attaching additional devices.

Nevertheless, CEO Reed Hastings has previously said that the

Group does not plan to alter its current low-end pricing

strategy. Netflix's share price has increased substantially over

the past year, having risen 332.9% in the twelve months to 26

November 2013.

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One Media iP Group Plc

Summary Data



Ticker OMIP.LN

Exchange London







Key data (Y/E Oct) - (GBP m)

2011A 2012A 2013E 2014E

Revenue 1.66 2.09 2.58 3.18

EBITDA 0.43 0.55 0.64 0.96

EBIT 0.33 0.43 0.49 0.74

Pre Tax Profit 0.33 0.43 0.51 0.80

Net Profit 0.25 0.34 0.41 0.64

EPS 0.39 0.73 0.64 1.00

DPS 0.00 0.00 0.00 0.00

Net Debt/(Cash) -0.41 -0.37 na na

Margins/Ratios

2011 2012 2013 2014


EBIT Margin 19.9% 20.6% 19.0% 23.3% Michael Anthony Infante 46.82%

Net Profit Margin 15.1% 16.3% 15.9% 20.1% Cairn Financial Advisers LLP 17.16%

P/E Ratio 40.71 21.75 24.82 15.90 IS Partners Investment Solutions AG 9.70%

EV/Sales 4.97 3.95 3.20 2.60 Hugh Martin Oliver Bett 7.51%

EV/EBITDA 19.20 15.01 12.96 8.58 Roman Poplawski 7.22%

Revenue Growth 14.5% 25.9% 23.4% 23.3% Robin Abeyesinhe 2.75%

EPS Growth na 87.2% -12.4% 56.1% Nigel Smethers 2.46%



One Media iP (‘OMIP’) is a provider of digital music and

video content to over 600 online digital stores such as

Amazon, Youtube, Spotify and iTunes. Although not a direct

peer of SyQic as it does not stream its content to the end

customer, OMIP’s content nevertheless is downloaded or

streamed by retail customers via Internet enabled devices from

the digital stores. OMIP is thus useful to analyse in relation to

SyQic’s own back-end operations, i.e. the library content

segment.

OMIP was founded in 2005 with a strategy to acquire media

content and monetize the industry-wide shift from physical to

digital format. Having previously been listed on the ISDX

market, the Company floated on AIM in April 2013 in order

to both raise its profile and to enhance its fundraising

capabilities. The latter is important as OMIP has an aggressive

growth strategy in place and is set on acquiring more

catalogues (since its founding, the Group has invested £1.7m in

over seventy catalogues). It specialises in content that

management describes as ‘nostalgic music and TV

programmes’.

The Group primarily operates a business-to-business model. It

currently supplies digital stores with over 170,000 music tracks

and 5,000 video programmes. OMIP’s technical team is

responsible for re-compiling, processing and digitally

packaging its acquired content. The Group also creates

artwork for releases, manages digital sales campaigns, and

polices its content.

As it is not a streaming operator, OMIP does not charge

subscription fees but rather generates its revenues from two

sources. The first is in the process of repackaging acquired

content into digital format, ready for the digital distributors to

sell to retail customers. The second revenue stream comes

through licensing music content for TV shows, movies, adverts,

games and websites. Management believes that OMIP sits in

an exciting position as a back-end supplier to the fast growing

online entertainment streaming industry.

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Pace Plc

Summary Data



Ticker PIC.LN

Exchange London

Market cap (USD m) 1,598.6


Last reported net debt/(cash) (GBP m) 42.6

Enterprise value (GBP m) 1,041.7




2011A 2012A 2013E 2014E

Revenue 2,309.3 2,403.4 2,450.0 2,409.9

EBITDA 218.3 285.2 234.0 243.0

EBIT 11,139.0 158.1 159.0 166.0

Pre Tax Profit 54.70 80.10 132.90 157.17

Net Profit 38.80 58.40 99.60 119.58

EPS (p) 8.49 11.56 19.38 22.50

DPS (p) 2.22 3.13 3.13 4.38

Net Debt/(Cash) 322.52 163.30 -7.92 -9.03

Margins/Ratios

2011 2012 2013 2014


EBIT Margin 482.4% 6.6% 6.5% 6.9% M&G Investment Management Ltd 13.29%

Net Profit Margin 1.7% 2.4% 4.1% 5.0% Schroder Investment Management Ltd 12.87%

P/E Ratio 37.53 27.55 16.44 14.16 David Richard Hood 8.39%

EV/Sales 0.45 0.43 0.43 0.43 Norges Bank Investment Management 6.04%

EV/EBITDA 4.77 3.65 4.45 4.29 Henderson Global Investors Ltd 4.80%

Revenue Growth 12.9% 4.1% 1.9% -1.6% Capital Research Global Investors 4.40%

EPS Growth na 36.2% 67.6% 16.1% BlackRock Advisors (UK) Ltd 3.88%



Pace is a developer and supplier of PayTV hardware. The

Group was founded in 1989, originally as a distributor of

Apple software. Having listed on the Main Market of the LSE

in 1996, Pace has since become a world leader in the

development of residential gateways, set top boxes, as well as

software and services for the PayTV and broadband

industries. Pace is not a direct competitor to SyQic in that it

does not develop products that allow the streaming of video

content to mobile handsets. However, it is nevertheless a

relevant peer, as it designs the technologies and products by

which PayTV is streamed to all internet enable devices within

the home, including TVs, laptops and tablets.

Pace has a global customer base, boasting as clients leading

players in the cable, satellite, IPTV and Telco markets.

Examples of these are DirecTV, BT, Sky, and Comcast. The

Group’s core business is in PayTV hardware (Media Servers,

Telco Gateways and set top boxes (‘STB’)). Beyond North

America (the largest of the markets), an increase in demand

for Media Servers is driving growth in this business segment.

GetTV and Liberty Global have both recently begun using

Pace’s Media Server products in their European operations. In

addition, Telefonica has selected Pace to provide services and

products for its IPTV operations in Latin America. The

software segment of the business is also growing strongly. The

User Interface software allows operators to create their own

tailored end user experience, and deliver content to their

customers from multiple sources, ranging from OTT to

broadcast. Management is of the opinion that the concept of

OTT should not be viewed as a ‘killer’ for the PayTV industry.

In fact, the use of OTT services in tandem with STBs is

beneficial to PayTV operators, as it increases the quantity and

quality of accessible media content for their customers.

In October, Pace announced the intended acquisiton of Aurora

Networks Inc., a leading developer and manufacturer of

advanced, next-generation Optical Transport and Access

Network solutions for broadband networks, for a

consideration of $310m, payable entirely in cash.

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PeerTV Plc

Summary Data



Ticker PTV.LN

Exchange London



Last reported net debt/(cash) (GBP m) 3.7




Key data (Y/E Dec) - (GBP m)

2011A 2012A 2013E 2014E

Revenue 5.07 1.96

EBITDA -7.88 -3.88

EBIT -9.33 -4.45

Pre Tax Profit -12.05 -5.85

Net Profit -11.63 -5.17 No available forecasts

EPS -34.10 -6.15

DPS 0.00 0.00

Net Debt/(Cash) 2.95 3.70

Margins/Ratios

2011 2012 2013 2014

EBITDA Margin -155.4% -198.0% Key Shareholders

EBIT Margin -184.0% -227.0% CSS Partners LLP 2.38%

Net Profit Margin -229.4% -263.8% James Helgason Ltd 2.33%

P/E Ratio -0.05 -0.30 Michael David Harrison 2.33%

EV/Sales 1.03 2.66 No available forecasts John Roger Beresford Gould 2.33%

EV/EBITDA -0.66 -1.34 Haim Bechor 2.14%

Revenue Growth -4.3% -61.3% Eatamar Drory 2.14%

EPS Growth -98.6% -99.8% BCTG Ltd 1.83%



PeerTV is a provider of technology solutions for the OTT

market, as well as being a solutions provider to the printed

circuit board (‘PCB’) production industry. It joined AIM in

January 2011 as a pure set top box (‘STB’) provider to end

consumers. In September of the same year, it acquired Digitek

Holdings Ltd in a reverse takeover deal. Digitek was an

outsourced electronics manufacturing business, and had been

assisting PeerTV with production management in China, where

PeerTV’s set top boxes were being manufactured. The two

divisions give the Group a diverse revenue stream, as well as

benefitting from one another through synergistic means.

The Israeli based company’s principal product is currently

eTV, an Android 4.0 based set top box that the Group

launched in March of this year and manufactures through its

subsidiary, Digitek. The product has been designed to maintain

the familiar experience that a traditional television gives, but

also to offer the user the benefits of the Android Operating

System, Android Applications and Internet connectivity. Upon

joining the AIM market PeerTV was focused on developing

products that were designed to bring entertainment services to

particular ethnic communities. Following the completion of

development of eTV in 2012, however, the Group is now

targeting a wider market, notably the larger telecom operator

market, while maintaining its traditional ethnic market customer

base.

PeerTV has a potential pipeline of over 400,000 STBs to be

rolled out over the next two to three years. This would equate

to a market opportunity of over $30m. The Digitek business

has also built up an impressive order flow for 2013, which

should amount to $7 million from three new major accounts. In

November, Digitek asked for its loan note holders to accept a

delay in interest payments, or else accept payment in PeerTV

shares, due to the recent strain it was experiencing on cash

resources. This was caused by improvements in winning orders

which increased working capital requirements.

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Youku Tudou Inc

Summary Data

Share price (USD) 27.02


Ticker YOKU.US

Exchange NYSE

Market cap (USD m) 3,491.3

Market cap (GBP m) 2,182.0


Enterprise value (USD m) 1,842.3




2011A 2012A 2013E 2014E

Revenue 146.65 293.35 501.03 741.00

EBITDA -22.48 3.16 -41.75 71.31

EBIT -29.94 -78.20 -78.36 10.99

Pre Tax Profit -28.12 -69.83 -69.47 22.15

Net Profit -28.12 -69.27 -69.25 20.05

EPS -0.25 -0.52 -0.40 0.18

DPS 0.00 0.00 0.00 0.00

Net Debt/(Cash) -600.70 -269.31 -415.00 -377.00

Margins/Ratios

2011 2012 2013 2014

EBITDA Margin -15.3% 1.1% -8.3% 9.6% Key Shareholders

EBIT Margin -20.4% -26.7% -15.6% 1.5% T. Rowe Price Associates, Inc 7.18%

Net Profit Margin -19.2% -23.6% -13.8% 2.7% Capital Research Global Investors 5.61%

P/E Ratio -108.08 -51.96 -67.55 150.11 Janus Capital Management LLC 5.23%

EV/Sales 12.56 6.28 3.68 2.49 Morgan Stanley Investment Management, Inc (US) 5.21%

EV/EBITDA -81.95 583.00 -44.13 25.83 Brookside Capital Investors LP 4.94%

Revenue Growth 131.9% 100.0% 70.8% 47.9% Platinum Investment Management Ltd 4.39%

EPS Growth na na na na Oppenheimer Funds, Inc 4.02%



Youku Tudou Inc is the leading Internet television company in

the People’s Republic of China (with a market share of well

over 50%), and the second largest in the world, behind only

YouTube. The Group was founded in March 2006, and

launched later that year in December. In December 2010,

Youku listed on the NYSE at a value of over US$3 billion. In

2012 Youku acquired Tudou, the second market leader in

China, in an all stock deal worth over US$1 billion. As well as

offering professionally produced content, Youku also operates

the YouTube model in which users can upload their own

homemade videos. As at end 2012, the Group had 400m

viewers per month. Although not a direct competitor to SyQic,

Youku is a useful peer to analyse as it is a pure internet

television company, and furthermore generates revenues both

via subscriptions and advertising.

Primarily, the Group is a provider of high quality VOD content.

Youku has partnered with over 1,500 content licence holders

such as film and TV production companies, TV stations and

distribution houses. The video library includes films and TV

series of both Asian and Western origin. As at end December

2012, the library amounted to 4,500 films, 2,700 TV episodes

and over 900 variety shows. User-supplied videos only make

up c.15% of the Group’s content library.

Youku’s technology enables customers to stream content via

an OTT service to any internet enabled device. International

viewers are able to watch the Group’s library of content for

free, albeit often with Chinese subtitles built in. This is due to

the fact that Youku predominantly operates via an advertising

model. With only YouTube maintaining higher viewing

numbers, the Group is able to offer a premium advertising

environment that possesses cross media marketing capabilities.

More recognised branded advertisers that have partnered with

Youku include Coca Cola, Samsung and Apple.

In 2010, the Group also launched an add-free, subscription

based service. As at end 2012, Youku had already signed up

2 million paying customers.

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Documents

SyQic Plc - Pay TV on the GOallenbycapital.com/research/research-syqic_2_381262997.pdf · SyQic Plc - Pay TV on the GO Initiation note – December 04, 2013 Matt Butlin Research 020-3328-5666