Argus Research: Society Pass – Building a Loyalty-Driven E-Commerce Platform in Southeast Asia

Society Pass Inc. ("SoPa"), founded in 2018 and based in Singapore, operates e-commerce platforms in Southeast Asia ("SEA"). SoPa focuses on the fast-growing markets of Vietnam, Indonesia, Philippines, Singapore, and Thailand, which together account for more than 80% of the Southeast Asian population. SoPa's vertical markets include Lifestyle, Grocery and Food Delivery, Mobile Telecommunications, Loyalty, Travel, and Digital Media. Society Pass completed an initial public offering and began trading on the Nasdaq under the ticker SOPA in November 2021. SOPA shares were added to the Russell 2000 index in December 2021.

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SoPa’s business model is based upon acquiring smaller e-commerce companies with high growth potential at a relatively low cost and expanding its user base across a robust product and service ecosystem. SoPa plans to integrate these diverse businesses by attracting and retaining customers through a loyalty program called Society Points, which has entered beta testing and is expected to launch broadly in the beginning of 2023. Loyalty program members will be able to redeem points to make purchases directly from Society Pass or from affiliated merchants. They will also receive personalized promotions and discounts based on the company’s data capabilities and understanding of consumer shopping behaviour. Argus Research believes that this open-loop loyalty program differentiates Society Pass from other regional competitors.

As of August 2022, SoPa has amassed more than 3.3 million registered consumers and over 205,700 affiliated merchants and brands. Second-quarter 2022 revenues of approximately $500,000 reflect the nascent stage of its platform rollout.

Argus Research has a favourable view of SoPa’s target markets given its still limited e-commerce capabilities and strong projected growth. Vietnam, Indonesia, Philippines, Singapore, and Thailand all have young, rapidly-growing populations with a median age of 25-32, compared to an estimated 42 in China, a much more mature market. SEA economies are also growing at a faster-than-average rate. According to the International Monetary Fund, since 2010, SEA has averaged 4.6% GDP growth, compared to 0.7% in Japan, 0.8% in the EU, and 1.7% in the US.

Argus Research forecasts 2022 revenues of $7 million and 2023 revenue of $30 million, primarily driven by Leflair and supported by Pushkart, Handycart, and other recently completed acquisitions. Argus Research expects the broad launch of the Society Points programs to accelerate the revenue growth trajectory, and Argus Research forecasts a revenue run rate of approximately $40 million by the end of 2023 (for entities whose acquisition have already closed).

SoPa’s recent market cap near $50 million is close to one-time 2023 year-end revenue run-rate forecast of $40 million, and well below the average multiple of four-to-five times for a basket of comparable e-commerce peers. Argus Research believes the current valuation does not seem to reflect adequately SoPa’s growth prospects, driven by acquisitions, the loyalty points program, and continued economic recovery in SEA. Further, Argus Research thinks that the restructuring of Leflair to a separate entity that can eventually support its own public listing can unlock shareholder value for SoPa, with an attractive return on capital, under a holding company model.

To value Society Pass, Argus Research applies a six-times multiple to a year-end 2023 revenue run-rate forecast of $40 million, discounted back one period at 10%. Argus Research then adjusts based on its outlook for $15 million in cash and share count of 30 million at the end of 2022, and arrive at a fair value estimate for SOPA of $8 per share, well above current levels.

In Argus Research’s view, a premium to the peer average is warranted, given the early stage of Society Pass’ revenue-growth trajectory. Argus Research notes that its revenue assumptions could change significantly, as the company continues its M&A strategy and integrates new companies into its product and service ecosystem.

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