AEOREMA (LON:AEO) - A 2 minute read investment summary

How the pandemic has transformed this company into a fast growing business with a much larger market

AEOREMA (LON:AEO)  £6.7m market cap and c£5.7m EV at 72p (I HOLD)

Company overview

Aeorema through its events divisions Cheerful Twentyfirst and Eventful, specialises in creating engaging, immersive events, using the latest technologies and interactive platforms to deliver highly innovative events for its clients.  Essentially they put on conferences for companies.

The pandemic was a disaster as previously they had mainly focussed on live events. However, the company has very successfully repositioned into providing virtual online conferences. They also provide consultancy services on communications strategies.  

Their new business model is much more robust in my view because they now can flex between live, virtual and hybrid depending on market demands plus excitingly their Total Addressable Market (TAM) must be far greater as they can host virtual events globally.

Financials

With almost £1m cash their balance sheet is robust.

What particularly excites me is the massive increase in revenues since they pivoted to their new business model. In 2021 they achieved £5.09m revenues for the whole year (ending June 2021).

However for the first half of 2022 they have reported revenue of at least £4.5m and they will be profitable. This is the highest revenue six-month period ever for them. It looks like they could be on for c£10m revenues for year ending June 2022 if growth continues.

At £6.7m mcap with c£1m cash this looks like a valuation anomaly to me. We don’t know how much profit they are making, particularly as they seem to be investing but any profit makes this look very cheap because they are on a growth trajectory.

Growth potential

CEO Steve Quah ‘This is an incredibly exciting time for us as a business developing a global footprint and we are thrilled to be reporting an expected return to profitability for the first half of the financial year, following a period of successful transition to innovative, hybrid solutions tailored to client requirements’

I have noticed on LinkedIn that they have recruited into a fair number of positions recently. Is it beyond the realms of possibility that this business could be significantly bigger in the next few years with the new much larger addressable virtual conference TAM?

Biggest risk

The Directors own c 30% of business which is good news in my view and there is no real institutional ownership which again is fine by me.

The main question mark for me is that options are very high with 21% of the company shares issued to date. Another 400,000 could be issued although there is a cap of 25% set by the company so that would be it. This is extremely high but we already know this and it won’t go above this level. The company says it is important for them to attract, motivate and retain staff and the CEO, MD and Strategy Director all have good options. I guess for new investors this is not so much of an issue as it is a known and also hardly any more options can now be issued.

Conclusion

I think the future looks quite exciting for AEO. It is a very different company now than pre pandemic with exciting new services. I am fairly relaxed about the options and think it means the leadership will be motivated to succeed to make their awarded shares increase in value.