Tax losses carried forward
Based on the information available, we do not identify any activatable tax loss carry-forwards that could constitute a valuable asset.
Performance risks
As the project is at the start-up stage, the general risks are very high, with the financing of the ramp-up phase requiring a significant and lasting injection of funds. The support of the reference shareholder (OTT Group from now on) is therefore essential and decisive. In the event of failure (insufficient profitability not allowing continued operation under acceptable risk conditions), MHM will have consumed several tens of millions of euros in pure losses over 2022-25.
We are not in a position to measure the technical execution risk related to MHM’s IT team. This risk is partly linked to the financial resources deployed or to be deployed. At first sight (AV estimate, not validated by MHM), the deployment of MHM up to its hardware proof of concept (approaching operational break-even point) could require about €50m of investment.
The matching concept is based on the rapid creation of a multiplier effect between supply and demand. Insufficient supply (hotels) will prevent the development of the matching community. The development of supply must therefore precede the development of demand, otherwise the latter cannot be satisfied, with the corollary of the exhaustion of the concept. In this respect, MHM will have to inject significant costs before launching its full commercialisation/marketing phase.
MHM will seek a viral development rather than a mainstream advertising phase. This strategy minimises the risk of large-scale cash burn with mainstream budgets of typically €20-50m per campaign. In contrast, the viral effect is by nature uncontrollable. It is essentially based on fashion effects or knock-on effects whose origin cannot be controlled.
Sustainability of the competitive advantage
A success that required a cash burn of €50m does not give MHM an unassailable competitive advantage in the face of the size of very powerful peers. In other words, Booking.com or Tripadvisor have the means to evolve their model, or to create spin-offs based on the same idea as that developed by MHM, while using existing technological (IT teams) or informational (customer database) bricks.
The evolution of human dating models (match.com, meetic, etc.) have demonstrated the low probability of remaining a profitable independent player in this type of segment. As the idea is not patentable by nature, and therefore not intellectually protected, the risk of international copying is to be envisaged (search for a premium for the first local entrant by a competitor). To counter this serious risk, the strategy generally used by the leaders is a simultaneous “global” deployment (such as Uber) regardless of the level of losses incurred. This strategy is not within the reach of MHM in the foreseeable future. For this reason, the maximum market value of MHM in the event of a transaction could be reached on the eve of an international deployment, once the functioning and relevance of the model in France have been validated (2024-26?).
At this stage, given the maturity of the project and the forecast resources allocated, our opinion is that MHM has the opportunity to open up a niche on a national level (France) or even in certain European countries with large numbers of visitors (Spain/Italy) without being able to establish or defend a competitive advantage on a global scale in the long term. This strategy would require an immediate injection of €150-200m to absorb start-up losses in 5-10 countries at the same time. Given the size of the addressable sub-markets, and in the short term, we do not anticipate the emergence of strong specific competition beyond the possibility of seeing the leaders models evolve in the medium term.
Distribution of capital
As at 22 April 2022 (source: AMF), following the exercise of ORAs during 2021 and early 2022, the capital was divided between the OTT Group (28%), FIPP (Alain DUMENIL, 16%), GLOBALTECH (14%) and Mr Bernard GAUTHIER (9%). The free float was, by deduction, 34%. As at 22 April 2022, the residual number of outstanding NRS as well as the number of warrants remaining to be exercised was not precisely known. The share capital consisted of 218m shares (116m at end 2020). The fully diluted capital at the end of 2023 remains 578m shares compared to 83m at the end of 2018.
Presentation of accounts and 2022 AGM
At the end of 2021, MHM did not have any subsidiaries to our knowledge and was only required to publish corporate accounts. As at 08 June 2022, the 2021 accounts were not available. The Annual General Meeting to approve the 2021 accounts will be held before 29 July 2022.
With the acquisition of MyAgency in 2022, the group will probably publish consolidated accounts from 2022 onwards.
