LiNiu Technology Group (NASDAQ: LINU) recently launched the LiNiu Network, a Business to Customer (“B2C”), Customer to Customer (“C2C”) and Online to Offline (“O2O”) electronic trading platform focused on the Chinese agricultural industry. The Company also currently participates in the promotion of VIP gaming at the Altira Macau.
The company recently announced that it had signed a three-year strategic cooperation agreement with The Peoples Insurance Company of China Limited’s (“PICC”) Guangzhou branch. Through the agreement, the companies will work together to develop new insurance products tailored for farmers, rural residents and the agricultural industry that would help in solving the Rural Issues.
Guangzhou LiNiu will also prioritize the promotion of PICC’s insurance products to customers of its LiNiuYang trading platform, while PICC, in turn, will promote LiNiuYang’s products, services, and platform to its customers through brochures or booths in its branch offices.
Before this, the company announced that it had signed a strategic cooperation agreement with Shou Guang Agriculture Logistic Park (“SGALP”), one of the largest vegetable distribution, pricing, information exchanges and logistic centers in China and throughout Asia.
Through the agreement, the companies will cooperate in connection with, among other things, product offerings, information resources, consumers, and management of the logistic park. Overall, LINU expects, through the cooperative agreement, that SGALP will increase its annual trading amount, while Guangzhou LiNiu will earn additional commission income though the increase in daily traffic on its platform.
With these developments, LINU continues its transformation toward its new strategy of using technology to create solutions for the vast Chinese agricultural industry. The company is actively focusing on spreading greater awareness of the LiNiu Network and its ability to more efficiently improve Chinese agriculture in the months ahead.
Therefore, the longer-term valuation of the company is dependent on LiNiu’s technology and its ability to grow as an effective and preferred commercial platform for the Chinese agricultural market.
We already see rapid transformation in the company’s business and operational profile as the farmers and businesses/individuals are buying agro-based products and even livestock, from one another in this marketplace platform. LiNiu takes a commission on sales, and that’s how it generates revenues through the platform.
In fact, right after this platform was launched in April; the site has seen increasing traffic of visitors on a daily basis, with growing number of supplier registrations and products sold through the platform. Therefore, the upcoming financial results are one of the major triggers for its stock as there’s a good chance that LINU would be reporting revenue from its platform operations.
With an expectation that company will exhibit positive results over the near to medium term, it is available at a discount at current levels. The company currently has an average rating of “Buy” and an average near-term price target of $2.75.
About the Company: LINU is a Cayman Islands exempted company that was incorporated on September 24, 2007, to acquire one or more operating businesses that had principal operations located in the People’s Republic of China (including Hong Kong and Macau) and became a public company in July 2010.
On April 26, 2017, Iao Kun Group Holding Company Limited officially changed its name to LiNiu Technology Group and subsequently began trading on NASDAQ under its new ticker symbol of LINU.
LINU launched the LiNiu Network, its electronic B2C, C2C and O2O trading platform focused on the Chinese agricultural industry, in April 2017. The platform can be accessed at its new website www.liniuyang.com, and via the app on the Android mobile operating system. The Company also currently participates in the promotion of a VIP gaming room at the City of Dreams Macau in Cotai.
Three Rural Issues: The Chinese government has recently focused on encouraging farmers and the rural community to enhance their businesses through new opportunities and investment to solve the Three Rural Issues – areas of rural development that require improvement.
The Three Rural Issues are:
- Agriculture – how to industrialize agriculture, stabilize prices, achieve economies of scale for production and operation, and to help to guarantee food security in China
- Rural – disparity of economic and cultural development between urban and rural areas
- Farmers – aiding farmers in improving their overall quality of life with respect to rights, culture and improving income
The LiNiu Network platform is uniquely positioned to create a more efficient way for individual farmers and Chinese agricultural suppliers to conduct business with their customers.
- 900 million, or over 62%, of the Chinese population, is tied to agriculture,
- Vast, but currently inefficient, market regarding bringing together businesses with customers,
- In the next few years, the overall transaction amount through the application of e-commerce in China is expected to maintain a high growth rate and to reach RMB32.7 trillion by 2019.
- It is forecasted that by 2020, the online retail trade amount in China will exceed RMB7 trillion, which would account for more than 15% of total retail sales.
- The largest potential future e-commerce development is via the rural areas.
- Advertising income: There are advertising areas in the platform to let suppliers promote their product.
- Commission fee income: LINU receive commission fee income through transactions in the platform. The commission rate ranges from 1% to 10% depending on product category.
- Management fee income: LINU receive management fee income annually from the suppliers/farmers when they open their shops in the platform.
- Interest income on guarantee deposit: The Company receives interest income on guarantee deposit.
Other recent news:
Noncompliance notice from NASDAQ: During July, LINU received a notice from the Listing Qualifications department of The NASDAQ Stock Market (“Nasdaq”) indicating that LINU is not in compliance with the audit committee requirements set forth in Nasdaq Listing Rule 5605. As a result of the resignation of So Hin Lung from the Board on June 16, 2017, LINU’s Audit Committee currently consists of only two members.
LINU has been provided a 180-day period in which to regain compliance. The Board intends to appoint a third independent director with accounting or related financial management expertise to the Board and Audit Committee as soon as practicable.
Reverse Split: During August, LINU announced that its shareholders had approved a one-for-six reverse share split of LINU’s issued and outstanding shares, and the split became effective on, August 29, 2017. The reverse split is intended to increase the per share trading price of LINU’s common stock to enable the Company to satisfy the minimum bid price requirement for continued listing on the NASDAQ Capital Market.
First quarter financial results:
- After the Company closed four VIP gaming rooms at the Sands Cotai Central Casino, Galaxy Macau, StarWorld and Le Royal Arc in Macau in 2016, LINU maintained minimal operations and temporarily relocated the Macau VIP gaming operation to Altira Complex, which provides remuneration at a predetermined fixed rate commission.
- Net loss attributable to ordinary shareholders of $0.4 million for the three months ended March 31, 2017, improved compared to net loss of $3.5 million for the same period of 2016, primarily due to a significant decrease in commission to junket agents as a result of minimal revenue in the first quarter of 2017. The lower selling, general and administrative expenses for the three months ended March 31, 2017, was primarily due to no longer paying management fees to Pak Si and lower salaries due to the closure of four VIP rooms in 2016.
Key risk factors and potential stock drivers:
- The company’s ability to ramp up production and achieve profitability.
- Performances of the recent co-operation agreements signed by the Co.
- Performance of LiNiu’s technology and its ability to grow as an efficient and preferred commercial platform for the Chinese agricultural market.
- The company’s near-term stock movement is also dependent on its upcoming quarterly result, any significant adversities (i.e., weaker than expected performance) could impinge the stock performance.
- Company’s ability to maintain liquidity and or obtain incremental funding promptly.
- On Friday, October 27th, 2017, LINU closed at $1.83 (-6.15%) on volume of 2.52 million shares exchanging hands. Market capitalization is $22.86 million. The current RSI is 50.91
- In the past 52 weeks, shares of LINU have traded as low as $0.97 and as high as $5.33
- At $1.83, shares of LINU are trading above its 50-day moving average (MA) at $1.56 and above its 200-day MA at $1.80
- The present support and resistance levels for the stock are at $1.70 & $1.95 respectively.
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