Charge Enterprises crge
January 28, 2021 - 2:42pm EST by
SwissBear
2021 2022
Price: 2.30 EPS 0 0
Shares Out. (in M): 140 P/E 0 0
Market Cap (in $M): 322 P/FCF 0 0
Net Debt (in $M): -10 EBIT 0 0
TEV ($): 312 TEV/EBIT 0 0

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Description

Chargeworld (CRGE), formerly known as Transworld (TRWO) is structured as a mini-holding company with 4 different businesses: Last-mile delivery, PTGI (Communications), Naki Power, GetCharged and last mile delivery. The portfolio generates cash and has nice optionality. The stock is currently listed on the OTC markets; however, the company is in the process of becoming SEC compliant and listing on the Nasdaq. The listing on the Nasdaq should occur by the end of the summer. This should help shed some light on the company, which is building an interesting position in the e-scooter infrastructure and last-mile delivery industries. The company is certainly under the radar.
 
The Chairman of the company, Ken Orr, is a value investor who acquired a public shell last summer with the idea of buying distressed assets, including local FedEx routes, which can be purchased for 3-4x EBITDA. The business generates nice margins (35% EBITDA margins); however, the business is dependent on FDX to grow the business. The thesis was that with the difficult conditions resulting from COVID-19 and a change in rules facing FDX route contractors that it would be a good time to put money to work rolling up routes. FDX contractors are now required to merge Home Delivery with Ground routes; previous contracts allowed home delivery and ground routes within a single territory to operate separately. This change has caused many small operators to look to exit the business as most operators are mom and pop operations.
 
It is worth noting that the company has not closed on its acquisitions yet. The end goal with the Fedex routes is to create a last-mile delivery network. The closing of the Fedex acquisitions is not as crucial to the future of the company. Rather, the company will entrench itself with e-bike and e-scooter companies under the GetCharged business. These relationships could ultimately enable the company to carve out an interesting niche in the evolving urban delivery market.
 
PTGI specializes in international call termination. There are a couple of other companies that compete with PTGI but there is no pure-play competitor. The company generates over $500 million in revenue, yet only a few million in cash flow. TRWO acquired the business from HC2, a small holding company. The business brings a full support staff (accounting, HR, operations) that could be leveraged across TRWO's portfolio. PTGI has contracts with 200 carriers globally and offices in 19 countries. The strategic vision is to buy or partner with companies that have innovative products or services (i.e. texting, technology, and payment services) that can be distributed to these carriers and their customers. If the company is successful with its strategy, it could create a UCaaS (Unified Communications as a Service) and CpaaS (Communication Platform as a Service) platform. The management of PTGI brought into the strategic vision of TRWO management and this helped acquire the company at a favorable price. If the company is successful with its strategy, it could expand the margins into the high single-digit range on its current $500 million of revenue
 
Recently, the company announced an investment and exclusive rights to North America with Naki Power, the largest power-sharing system in Europe.  Naki Power operates in five countries with 1,500 active power stations where consumers can rent portable chargers.  Naki Power has solidified itself in the European market as a viable means to charge the many different electronics used in today’s world, including cell phones, wearables, or other products such as portable speakers. TransWorld has secured a deal with Naki Power to bring more power-sharing options to its customers by launching stations in North America, with plans to install stations in North America with service beginning in the third quarter of 2021. Essentially, a customer will pay $1.50 for a charge and if they forget to return the charger, they will be charged $30 (the cost of the charger). The company estimates that it can roll out 5,000 units and generate $5 million in cash flow by the end of 2021. In 2022, the company should have in excess of 10,000 units, which would generate $10 million in cash flow. The company is currently speaking with small chains that have as many as 2,000 locations.
 
The crown jewel of the portfolio is GetCharged, the largest global network of patented micro-mobility (e-scooters and e-bikes) charging and parking stations. There are operators in over 150 cities and over 1 million scooters have been deployed globally. This has become an area gaining more focus given it is a green, socially distanced solution to traffic congestion. Typically scooters have been discarded on sidewalks and the collection and charging costs represent 60% of the scooter company's cost base. Charge's patented solutions are designed to benefit cities, scooter operators and riders by providing a safe infrastructure and fully charged vehicles. The business is run by Andrew Fox, who was an early investor in Lime Scooters. He became cognizant that a lack of infrastructure was the Achilles heel to the profitability of the e-scooter industry. The economics of the infrastructure buildout is compelling as payback has been in the 7-10 month range. The growth of the business will be funded by cash on hand and the cash generated from the other businesses. Furthermore, various partnerships and funding options are being explored with scooter manufacturers and city governments. As the business model continues to be proven out, eventually leasing companies could provide upfront capital. 
 
GetCharged's edge isn't on the technology for the stations. The company is very early to the land grab game. The company has been operating in Paris for a few months and recently won an exclusive 12-month trial of its charging stations in Liverpool. In the US, the company is operating in Los Angeles and Atlanta and it will enter New York later this year. The company is getting inbound calls from cities all over the world. The company will only roll out to cities where they are offering the right economic model/incentives. By the end of 2021, the company should have approximately 1,000 stations. Each station generates $1,000 per month in profits. This means that exiting 2021, the company could be generating $10 million in cashflow. This is a business that could scale up rather quickly and no outside capital will be needed.
 
Between Naki Power and GetCharged, it is not difficult to envision the company generating north of $30 million in cash flow exiting 2022. If GetCharged continues to enter new cities and establish relationships with e-scooter and e-bike companies, GetCharged could become a very valuable asset base. Although it is difficult to diligence if the company will be successful with its PTGI growth strategy, it should be considered a free option. If management is successful, the stock could be a home run. 
 
There are 140 million shares outstanding and there is $7.5 million of convertible debt and $20 million of cash on the balance sheet. The enterprise value at $2.20 per share is $295.5 million. 70% of the shares are held by insiders and management. They are all locked up for more than a year.
I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise do not hold a material investment in the issuer's securities.

Catalyst

SEC Filings

Listing on the Nasdaq

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