IGEN can make a mark in the
usage-based auto insurance space through its patented technology
for measuring and scoring driver performance and behavior.
June 30, 2020 -- InvestorsHub NewsWire -- via EmergingGrowth.com -- Auto stocks are back in
focus, thanks to the momentum in names such as Nikola Corp
(NASDAQ: NKLA), Hertz Global (NYSE: HTZ) and Tesla (NASDAQ: TSLA). iGEN Network
Corporation (OTCMKTS: IGEN) has been on a tear in the
past few weeks in sympathy with the high flying auto stocks but
also has a few tricks up its sleeve. IGEN has an IoT
application that monitors auto consumer’s behaviors that provides
real time updates, analysis of driver behavior, and stolen vehicle
protection. The overall IoT market is projected to
reach $82.8 billion by 2020
with a CAGR of 26.7%. The connected car market is
projected to reach $212.7 billion by 2027 and growing at a 22.3%
CAGR. These trends in the marketplace are driving
innovation forward at an accelerated pace. The carmakers
all want more apps to distinguish themselves from the
competition. IGEN is uniquely positioned to ride the
wave of 3 hyper growing markets yet remain recession
proof.
Electric Car Market – Hypergrowth
TSLA is a no brainer. Although valuation does seem frothy, over
the long-term investors are more likely to make money betting for
and not against TSLA. NKLA, however, is a bit dicey. The electric
car maker, which focuses on tractor-trailer, has been widely
popular largely as a result of the CEO’s upbeat messaging. The
CEO Trevor Milton has warned Ford he’s looking to outsell its
popular F-150 pickups. However, once reality sets in, the
shorts could make a lot of money on NKLA, which seems to have
gotten ahead of itself. The same applies to HTZ. Its bankrupt and
the balance sheet is controlled by creditors, meaning investors who
stake their money for the long-term are likely to get
burned.
Connected Car – Insurance Apps
Usage based auto insurance is where insurance quotes are
generated based on recent driving history rather than demographics,
age and location. The insurance company installs a tracking device
on the car or provides a smartphone app that monitors the driver’s
behavior (for example noting if the driver engages in hard braking,
sharp turns and flooring the gas pedal). The data that is collected
is used to generate a quote that gives a fairer representation of
the risk. This can translate to lower premiums and other discounts,
assuming the driver’s behavior merits this.
More insurance companies are embracing this model, including the
larger ones, because an insurance quote based on recent driving
history is both good for the insurance company and the policy
holder. Users get a discount, but insurers get policy renewals. In
insurance, the big money is in the renewals, since a user is less
likely to shift to another insurer if they renew their original
policy at a price point they see as a bargain.
Progressive Corp (NYSE: PGR), one the largest insurers in
the U.S., offers its customers discounts based on their driving
through “Snapshot,” an app that tracks users driving and offers
discounts to safe drivers. The app works in the background of your
smartphone.
Root Insurance, a privately held auto insurer, uses technology in
smartphones to measure driving behavior such as braking, speed of
turns, driving times, and route regularity. Root determines who is
a safe driver and who isn’t. By only insuring safe drivers, Root
can offer more affordable rates. In a CNBC feature, Root says
that its customers can get rates up to 52 per cent lower than
previous insurers thanks to the usage-based insurance model.
Tellingly, though private, Root Insurance is now valued at
$3.65 billion after a $350 million funding round last year,
the largest single venture capital
round ever in the State of Ohio at the time. The
4-year-old auto insurer has raised a cumulative $523 million in VC
and another $100 million in debt, underlining the investment
appetite in the usage-based auto insurance space.
Importance of IoT
IoT, in its most basic definition, simply refers to a computer
ecosystem with devices that can transfer data over networks to
other devices without the need for human-to-human or
human-to-computer interaction. One way of looking at IoT is as
a type of Internet where, instead of two or more humans sitting on
either side of a laptop or phone sending and receiving information,
it is machines doing that to each other via other machines.
In many ways, IoT is the precursor to prevailing currents of
thought in high-tech areas like Artificial Intelligence and Machine
Learning, where the size of the opportunity in monetary terms could
be as much as ten times Microsoft (MSFT), according to Bill Gates as quoted on Forbes
magazine .
“If you invent a breakthrough in artificial intelligence,
so machines can learn, that is worth 10 Microsofts.” — Bill Gates,
as quoted on Forbes.
IoT continues to witness spectacular growth.
Researchandmarkets.com, in its just released Global Internet of
Things Market Insights Report 2020, notes that the sector worldwide
could post a 31.4% compounded annual
growth rate, growing by $876.5 billion.
The report states that the widespread availability of
smartphones, tablets and the declining price of connected devices
rank as some of the key factors driving adoption of IoT. According
to QYResearch, the global IoT market is expected to reach $1
trillion by 2025, with 5G networks expected to play a key role in
unlocking this value.
In view of its healthy growth outlook, the IoT space presents a
great investment opportunity for investors currently looking for
dependable bets in high growth areas within tech.
iGen Core Business – Recession Proof
IGEN, which is a fully reporting company in the U.S. and Canada,
is in the recession proof business of vehicle tracking and fleet
management, serving both businesses and individuals across the U.S.
However, just because the underlying business is recession proof
doesn’t mean it’s not lucrative.
Organizations and individuals that use vehicle tracking and
fleet management services regard them as essential services and
have no problem paying via subscription, putting IGEN in a very
favourable position in terms of the relative ease of generating new
revenue.
The company operates under three distinct brands.
- “Nimbo Tracking” which
focuses on real-time GPS tracking solutions for new and used car
dealerships. Car tracking for an auto dealership is an essential
service, just like insurance, meaning customer retention is strong
in the sector.
- “CU track” which
focuses on tracking solutions for credit unions and other financial
institutions. Today it is normal for financial institutions that
offer auto loans to install a tracker in the vehicle as part of the
loan agreement. Every auto loan that is approved is literally a
sale booked for companies like IGEN, since car tracking is now a
standard requirement for loan approval across the asset finance
industry.
- “Medallion GPS
Pro” which focuses on tracking solutions for commercial
fleet owners. The platform allows fleet owners to also manage their
assets and monitor their drivers to ensure they are behaving in a
way that promotes the security and safety of the assets and their
own personal safety.
In terms of operations IGEN is in a good space. Its customers,
who are largely auto dealers, financial institutions, and
commercial fleet owners, see the services it offers as an essential
service. They pay via subscriptions, with some of them signing
multi-year deals and a good number of them renewing these deals –
car tracking service providers are essentially like lawyers; you
only change them if something has gone terribly wrong.
IGEN’s services are all cloud-based, meaning it is by default a
high margin business. For the year ended Dec 31, 2019, the company
reported a 41% gross profit margin
in its 10-K. This means for every $100 it made in revenue, $41
stayed in the business. However, this impressive gross profit
margin, and the halving of net losses to $479,073 compared to
$1,175,320 in the previous year, were the only positives in last
year’s financials. During the year, revenue was down 40% to
$723,819.
The slump in 2019 may be a point of concern for investors but
there are strong indications that this trend could be reversed this
year. The company is on an ambitious sales drive that could
fundamentally shift its fortunes going forward, underlining the
huge upside potential in the stock.
Strong rebound in sales
CU Trak, the product line focusing on GPS tracking solutions for
credit unions, is off to a strong start having been launched just
last year. IGEN recently signed a sales and marketing agreement
with Michigan Credit Union Service Corporation, a wholly owned
subsidiary of the Michigan Credit Union League, one of the oldest
and most established trade associations for credit unions
in the U.S with roots in the pre- World War II era.
“MCULSC’s partnership with IGEN gives us an exciting opportunity
to continue providing the relevant products and services
Michigan credit unions need to be successful,” said MCUL &
Affiliates CEO Dave Adams in a joint press
release. This deal gives IGEN an opportunity to grow its
CU Trak customer pipeline in Michigan through MCULSC’s network,
which includes all the leading credit unions in the State of
Michigan.
During last year’s launch of CU Trak, the company secured orders
from Puerto Rico based Credit Unions and the Organization of
Americas, suggesting warm reception by the market and the
possibility of similar success in Michigan where the agreement with
MCULSC presents an immense opportunity to access even more credit
unions.
MCUL has over 5.3 million members
represented. CU Trak, which is sold via Sprint’s IOT
factory, is priced at $399, indicating the incredible sales
potential this deal presents. If IGEN converts just 10,000 members,
which realistically shouldn’t be a tall order considering it is
riding on the expansive network and strong influence of MCUL, it
will generate sales of at least $4 million in the course of this
deal. This deal essentially presents a real chance to grow the
business around 10x from 2019 sales. This potential doesn’t seem to
be fully priced into the stock, the current bullish run
notwithstanding.
Another deal that could have a huge impact on sales is the
recently signed three-year exclusive partnership
agreement with County Executives of America, which represents
over 700 counties across the U.S. Through the deal, IGEN will offer
Medallion GPS Pro, its fleet tracking and management solution, in
all 700 counties where County Executives of America has
jurisdiction. CEA, on its part, has endorsed Medallion GPS, opening
a path to new business for IGEN in the public sector.
“The Counties and Consolidated City/Counties have some of the
largest fleets of automobiles, trucks, motorized equipment and
school buses in the United States. The care for this equipment is a
very large expense to the taxpayer and it’s our duty to help secure
and maintain these valuable assets,” said Michael Griffin,
Executive Director of the County Executives of America.
According to IGEN CEO Neil Chan, the deal with County Executives of
America presents an opportunity to bring Medallion GPS Pro to an
“estimated 350,000 assets.” This is of course a highly bullish
outlook that assumes IGEN will be able to convert the entire
addressable market presented by this deal, which is
unlikely.
A more reasonable conversion rate would be 50%, which with an
addressable market of 350,000 assets, works out to 175,000 assets.
This is still a good number by any measure, considering the
subscriptions are on annual basis and the deal runs for three
years.
Medallion GPS Pro is particularly promising in view of the fresh
investments by major players in fleet management. Ford
(NYSE: F) is the latest to augment its
offering in the fleet management space. It recently launched
FordTelematics, a web-based software platform and subscription
service designed to grant fleet managers easy access to important
connected vehicle data. This will help commercial vehicle customers
optimize their fleets and make them even more efficient.
Competition is good for IGEN because it shows there is sustained
demand for web-based fleet management services.
IGEN’s sales outlook is highly promising and it is likely that
it will record a strong rebound in sales this year in view of the
strategic partnerships it has in place with CEA and MCUL, as well
as pre-existing plans to broaden its sales channels beyond
telecommunications company Sprint, its main sales partner. IGEN
last year contracted two new distributors (REMCOOP and Wireless
Business Consultants), meaning its customer pipeline will expand
beyond what it had last year. With its high gross profit margins, a
boost in sales will translate into more cash staying in the
business, creating shareholder value and attracting long-term
investors. Long term investors are good for a stock because they
buy and hold more than they sell, creating value for all
stockholders.
Usage based auto insurance
Longer-term, the real opportunity for IGEN appears to be in
usage-based auto insurance. IGEN already has credit unions as its
customers. This vital inroad into the financial services sector may
give it a real opportunity to sign up insurance companies as its
clients. Last year, IGEN took ownership of a patent for measuring
and scoring driver performance and behavior. This patented
technology is useful for fleet owners who want to promote driver
safety. It also competitively positions IGEN in the fast-growing
usage-based auto insurance space.
IGEN can make a mark in the usage-based auto insurance space
through its patented technology for measuring and scoring driver
performance and behavior. Its technology doesn’t need the driver’s
smartphone to work, which is a good selling point considering the
privacy concerns that come with collecting drivers’ data over their
smartphones. The partnerships it has with financial institutions
should provide a good entry point into this promising market.
Investors should look out for news and updates on this patented
technology.
Massive Insider Purchases
The insider buying by the CEO and his VP, as well as the CEO’s
own track record make it a good speculative play. The
CEO, Neil Chan, bought 17 million shares at
0.0025 while his VP, Abel Sierra, bought 10 million shares at the
same price. At current prices the stock is up 72% from the
price the two executives bought it, highlighting the bullish
momentum these big transactions have triggered in the
market. Neil Chan is an ex Motorola Managing Director and
career technologist with over three decades experience. He is
credited with bringing a startup to $400 million in annual revenues
in 3 years.
Some investors see insider buying as a strong buy signal.
Usually, insiders who buy stock must wait at least six months
before selling their stock, making it improbable that a CEO and
other top executives would buy stock in large quantities and submit
necessary regulatory filings without well-founded optimism about
the company’s near-term and longer-term prospects.
Conclusion
IGEN has cleared most of its convertible notes from last year
and is sitting with 717 million shares issued. They are
authorized to issue 1.49 billion shares but it seems like
their need for capital has quieted as they shift toward large
revenue growth. With the threat of dilution diminished
investors have found the courage to step back into this name
following in the footsteps of the insider buying. IGEN’s core
business is recession proof yet it has great prospects with respect
to revenue generation in view of its subscription model, its
innovative products and the strategic sales and marketing
agreements it has signed so far. Its patented technology for
measuring and scoring driver performance and behavior could also
unlock new opportunities in the lucrative usage-based
auto-insurance space in coming years. This stock is being lifted by
three hypergrowth sectors, large insider purchases, and top line
revenue growth.
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