If you are a small- or medium-sized business, how do you get noticed online when megabrands control almost 70% of the U.S. e-commerce market? Small-cap Logiq Inc. (LGIQ:NEO; LGIQ:OTCQX) aims to level the playing field for small and medium-sized businesses by offering access to tools that previously were available only to large companies. And the company is branching out in lucrative niche markets in emerging economies such as Indonesia and Nigeria.
The company has been around since late 2014, with a product now called AppLogiq, a mobile app designed for micro to small businesses to get their offline business to an online format with zero technical expertise. "With no technical expertise, we could build your own mobile website, using a smartphone, and have it published within two hours," Brent Suen, Logiq's executive chairman and president, told Streetwise Reports. "Businesses can take online orders, do promotions, and use up to 70 different functions, from human resources to Quickbooks."
"We ... grew the business from 2014 until about 2019, so in five years we went as high as US$34 million in revenue."
Logiq began in the mobile app space because "in emerging markets, up to 90% of the population has a smartphone, but only 10–20% have desktop or laptop computers," Suen explained. "We used the subscription model and grew the business from 2014 until about 2019, so in five years we went as high as US$34 million in revenue." With about 300,000 micro to small business users, AppLogiq contributes about 30% of revenue.
In 2019, the company looked at how to expand into more developed markets.
Suen noted that e-commerce only captures 20% of all retail sales, so there's lots of room for growth of e-commerce, but within e-commerce itself, 53% of sales are controlled by only five companies, well-known names like Amazon, Walmart, eBay, Target. "That means that the other 1.6 million businesses that are online have to compete against some monster ad budgets. And the tools out there are only available to e-commerce companies that have a minimum of $10 million a month, which basically rules out everyone but the largest brands," he said.
Logiq acquired a company called Push Interactive, based in Minneapolis, that helps find customers for existing online businesses, using lead generation, SEO, digital marketing, etc. "We didn't depart from our core roots, essentially enabling micro to small businesses to get online, but we evolved into helping existing online businesses find new customers," Suen noted.
Logiq's DataLogiq business unit includes the acquisition of Push Interactive and two other acquisitions made in the past year. "Whether it's an ad agency that services small businesses, or the actual small business itself, they now have access to the same types of tools that an Amazon or an eBay or one of the large e-commerce retailers has, whereas before they were priced out of the market. We trying to help small business better compete, find better customers and be more relevant," Suen said.
DataLogiq provides a platform that enables a business of any size with a minimum monthly budget of $10,000 to compete against the ad spend of the larger companies. "Our platform is literally the same as TradeDesk, which makes money by charging between 35% and 45% of the ad spend," Suen explained. "We make money by showing the actual price that we bought the ad for the client and we mark it up by 15%. So not only do we have full transparency, our customers get better pricing." DataLogiq contributes 70% of Logiq's revenue. Initially focused on the North American and European market, Logiq recently expanded Logiq Digital Marketing to the Asia Pacific region.
No stranger to emerging markets, Logiq is now expanding beyond its initial mobile app, and recently signed deals in Indonesia and Nigeria. "We view Indonesia has a huge opportunity; with a population of 270 million people, smartphone penetration is 90%, and a large percentage of the businesses are micro or small," Suen said.
"We have branched out to areas that others are not going after," he explained. The first is microlending; Logiq is working with Indonesia's Social Security Administration, which has 52 million members, and expects to begin a pilot project soon with its 6,000 employees, working in partnership with a bank or financial institution in Indonesia to loan small amounts. "It represents low risk because the Social Security Administration already administers payroll benefits, pension savings and insurance. It's a captive market on one hand; it's a high barrier to entry because we've been chosen as the sole source provider, and so it's a huge opportunity. The lending rates are attractive and the risk is relatively low," Suen said.
"We figure that at a 2% penetration rate, the contract could be worth $2 or $3 million in additional revenue per year."
The banks will charge 16% interest and Logiq will share in part of that. "Even more attractive is access to the data," Suen said. "Once we have the consumer data, we can target those consumers for other products and services." The company expects everything to be fully operating at scale by this time next year.
"We figure that at a 2% penetration rate, the contract could be worth $2 or $3 million in additional revenue per year, and that does not include the value of the data. It's about 80% gross profit margin, so it's very attractive. Plus it scales nicely and could very well eclipse our entire revenue run rate right now," Suen said.
Logiq's second opportunity in Indonesia is psychological testing that is required to receive a driver's license. In the past, one would have to go into a police station and take a written and oral test, but that changed with COVID. The sole source provider in Indonesia is a company named Mentalku, which is Logiq's partner with the Social Security Administration. "As we started moving forward with Mentalku, they asked about creating a completely app-based test that people could take through their phone and pay through their phone. That was the nexus of us partnering with them to do these psychological tests. There's an e-commerce functionality to it: customers can order over-the-counter or prescription pharmaceuticals, wellness products, make epayments using the other functions of the app," Suen explained. The app launces on September 28.
In Nigeria, Logiq has made a preliminary agreement with Novaji Introserve, "a value-added IT and financial services company based in Lagos, to provide home delivery and mobile financial services to millions of unbanked and underbanked people in Nigeria." Joining with Novaji "marks our first foray into emerging markets outside of Indonesia," stated Suen. "Nigeria, with a population of 212 million, is one of the most populous countries in the world, yet most people don't have bank accounts. This creates a major opportunity for our mobile commerce and fintech platforms that have been especially designed for emerging markets. These field-proven solutions can provide much-needed financial services to tens of millions across the region."
"I think we're quite undervalued where we are now."
Logiq has approximately 23 million shares outstanding and 26 million fully diluted. It trades on Canada's NEO exchange under the ticker LGIQ, and in the U.S. on the OTCQX as LGIQ. Logiq is moving ahead to uplist to the New York Stock Exchange.
We asked Suen why should an investor be interested in Logiq. He noted that the average company in its peer space is trading 23 times revenue, while Logiq is trading currently a little bit below two times revenue. "I think we're quite undervalued where we are now. And from an investor perspective, that certainly minimizes risk and maximizes upside," he concluded.
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