The Business Model.

The mutual.net plc, the AIM quoted on-line reward company has developed a website to act as a portal for its members to access around 500 online shopping sites. Themutual.net incentivises shoppers by rewarding them with shares in the Company or with points which are redeemable for cash. themutual.net now has over 1.15 million registered members. This Xmas as seen an explosion in online shopping and all indications are that this one as done very well.

Highlights From Last Interim Results 31st Oct 2004.


Membership grown to over 1.15 million

Over 1 million visitors sent per month to advertisers' websites

Share consolidation completed, cash rewards introduced and share buy-back
programme initiated

Increased revenue by 94% to 1.53 million (6 months to 31 Oct 2003: 0.79m)

Doubled EBITDA to 0.68 million (2003: 0.34 m)

75% increase in pre-tax profit to 0.38 million (2003: 0.22m)

Cash at bank increased to 1.225 million (against 0.919m at April year end 2004.

Director Speak.

Mark Smith, CEO, said: 'This has been a period of good progress for
themutual.net, which saw the company consolidate its position as a major
facilitator of email marketing and online shopping. We are delighted with the
strong growth in our website and email marketing revenues, which has flowed
through to enhance our profitability and balance sheet. With the development of
MutualShop and the substantial continued growth in the online advertising
market, we look forward to the future with confidence.'


Activity During The Period.

During this period we implemented a number of strategies to deal with the
challenges that email marketing faces now and, potentially, in the future.
These included:

* Working closely with ISP's to improve understanding and cooperation with
regard to email delivery;

* Double opt-in registration to ensure the validity and quality of new
members;

* Collection and use of increased targeting data to assist in delivering
mails that are both relevant and effective to our members and our clients;
and

* The introduction of an eCRM program to educate new members and further
encourage existing members to utilise our services.


Outlook Statement From The Chairman.

From our website activity, themutual.net now generates in excess of 1,500,000
of online sales for our website partners each month. We anticipate this will be
greatly enhanced by the introduction of the MutualShop, our new shopping portal
which is due for `soft' launch shortly before Xmas, with a final launch to
include price-comparison shopping and full functionality by the financial year
end. This is the largest overhaul of the website that the company has
undertaken, including a full redesign, and will be further supported by adding
user functionality, allowing better control of their membership and the number
of emails received.

To have managed such internal change while the company continued its
substantial growth in revenue and profitability is a strong achievement and
testament to the scalability of our business model and operations.

We have also begun exploratory analysis of launching a similar product into
France and Germany. We will report on this further at the year end.

Fundies.

In their note of 29th November 2004, Durlacher has forecast 2.2p a share in earnings for 2006, which means that TMN is on a forward PE of just over 14.

The average multiple for the sector is 26, and then there is ASOS on a 2006 PE of around 27. Clearly there is a good argument for TMN to be re-rated.

I notice that Growth Company Investor tipped TMN recently at 30p. Hopefully the next few months will ensure the re-rating will get underway for themutual.net.

Dyor.

cheers Gf.

GF, what will a re-rating mean to the company and its SP???

Recently written article from Lemming Investor..............

themutual.net.plc (TMN)


by Edward Kalfayan 1 January 2005

Technical position of the share price chart
During the two months end August to end October the share price of this relatively unnoticed but increasingly profitable, small, internet portal company, which directs buyers to goods and services they are searching for, more than doubled from 15p to 35p, and thus retraced the whole of the previous year's price fall. It has since tracked horizontally in the trading range 28-34p. Currently at 28p the price is on the support line of the upward channel and is oversold, with the chart signalling a double bottom. This could lead to a strong movement between now and the end of January; or at the latest, when confirmed in a trading statement, which last year came on April 20.



At the same time the first reports are coming in from the press of strong on-line shopping over the Christmas and New Year. We are now looking to the next ASOS trading statement (last year Jan 16) to reveal any general sales outperformance for on-line shopping.

What's original?
The company incentivises shoppers to purchase goods and services through its website from over 500 merchants, including John Lewis, Dell, Argos, Amazon and many others of similar global standing, in exchange for trading points and/or shares in the company, as well as for discounts on many of the items bought.

It also stimulates business by sending out every day, on average, one million promotional e-mails, both relevant and effective to members and clients, and does so at practically no cost. All are accompanied by reward opportunities to provide strong reason to receive and react, which sets the company apart from other e-mail marketing providers. Considering the power and cost of advertising, which in this case is free, TMN has created a strong platform for its future growth.

These two elements in the strategy, which distinguish TMN from the likes of Kelkoo and the other shopping portals, have been responsible so far for the meteoric growth of registrations in TMN. But a third element will appear on test by mid-Jan, and be launched in final form by April: Mutual Shop, a web site enhancement, will thereafter provide full price comparison for the goods and services searched. TMN already earns a small commission on all purchases, which will then surely increase.

Comparisons with ASOS (ASC)
The parallels are comforting. I acquired ASOS at 9p last year, and inaugurated coverage for lemming at 7.75p on 16 Jan (until my broker unfortunately persuaded me to take profits after a 66p% rise to 15p). Do you remember the old fashioned broker's claim - now surely no more than an Old Wife's Tale - that it is NEVER wrong to take a profit? ASOS, now 78p, has since been as high as 91p. It is still growing very fast in line with the extension of broadband and the rapid increase in the number of young people who live in an e-world. And so is TMN.

TMN 's cap at 11.5m is today only around the same level as ASOS was twelve months ago, though the ASOS cap has pulled away to 55m as it slowly gained recognition during 2004.
The growth of registrations for TMN is much higher, both as a percentage, and in absolute terms. The TMN portal covers an unlimited range of products AND services whereas ASC, for the moment, only sells actual products, works in a narrower market segment; and limits itself, for the moment, to fashion items. Both have two great growth drivers in common ie the spread of Web literacy, - and the growth of Online Shopping, which has had a record Christmas. Each year online shopping is adopted by an additional raft of young persons blossoming out as new wage earners with a serious spending budget of their own. The market is thus set to grow and grow for decades.

Comparison with Retail Shops
Actual shops are constrained geographically and financially. However brilliant a retail innovation, its growth is handicapped by having to acquire new sites. Competition can usually pop up suddenly, to satisfy a similar demand in other locations. So first mover advantage has only minor value.
Online shopping is very different. A large clientele is quickly accessible through a few established portals. Even a significant share of global population is accessible within five years - quite impossible with physical retail. Note how EBay, Amazon, Dell Computer, Kelkoo have all quickly expanded internationally in the past, and see how Neteller, ITouch, ASOS, and hundreds of other e-businesses with a clear USP are also now able to achieve this, exploiting first mover advantage. A winning electronic trading formula can be extended to another country at very low cost. For electronic winners in their own countries, the world can also be their oyster.

Rapid increase in new users/potential buyers
TMT (End of) FY2003 FY2004 Nov 04
New Registrations - monthly rate 12k 36k 47k
Total registered client base 433k * 822k (89%) 1.15m(40%)
ASC
New registrations - monthly rate 19k 17k
Total registered client base 190k 283k (49%) 422k (49%)

Fifteen months ago, in Sept 2003, the company acquired MutualPoints from GUS, adding 66% to turnover and seemingly reaching critical mass. Since then there has been an accelerating rate of registrations: Organic growth thus made up only a quarter of the 89% growth experienced up to the end of FY 2004. This suggests that the wholly organic 40% growth in the current year to March 2005 reflects acceleration.

One of the most effective third party email databases in the country.
The management works closely with ISP's to improve understanding and cooperation with regard to email delivery. Double opt-in registration ensures the validity and quality of new members. In the Board's opinion, this is one of the most effective third party email databases in the country.

A million visitors are sent to the advertisers on a monthly basis leading to more than 1.5m on-line sales being made through the web site every month.


Vital Statistics
2004 2005 Durlacher
H1 H2 FY H1 H2
Turnover 789k (100%) 1,411 (179%) 2,199 1,535 (195%) 1665 (100%)

Gross Profit 748k (94.8%) 1,263 (89.5%) 2,011(91.45%)1,355(88.3%)
EBITDA 340k 675 1,015 685
Profit BT 219k 431 650 383 1.00m
Cash at bank 511 919 919 1,225
EPS (diluted) 0.56p 1.00p 1.56p 0.54p

Taxation will be levied for the first time, with 140k provided for in the H1 ac/s; whilst eps has marked time. Nevertheless Cash is up strongly by 306k and the company has used a further 87k to buy back 500k of its own shares in the new form ie 1.15%. This has countered any slight dilution of the equity through the reward process, and looks like ongoing policy.

Signs of astute management
On Dec 9, the company invested 120k in QXL to buy just over 1% of the equity (17,403 shares) at 690.46p/share. The quote is now 847p rising sharply, and several bidders are doing their DD. This astute management thus added over 27k (on paper) to the bottom line within three weeks.

'Guesstimates'
Registrations are up by 35% and the rate of increase is accelerating. The Durlacher forecast does not seem to take account of this, and shows only 9% revenue growth over the previous half, and 18% overr the year- impossible to accept. Furthermore last year the company was digesting the huge increase in registrations and turnover brought about by the GUS acquisition. We therefore think that more of this surge will go to the bottom line than last year through economies of scale. Head count increased by only four sales staff when the GUS business was absorbed in September 2003. So we have hopes that the forecast eps will be exceeded.

Currently the consensus forecast is 1.50p, and therefore at 28.5p/share the forward PE is 19, compared with ASC (ASOS - As Seen On Screen) now on a future PE of x 37 times. The two companies are not strictly comparable but both depend on the development of broadband, and the number of registered sites. ASOS however has the additional multiplier of driving up sales by adding buyers to cover new sectors, whereas the TMN driver of adding additional merchants is more passive, and has a weaker effect.

Future Track
Anticipating an increase in online consumer spend and advertising, TMN looks to strengthen its position further as a major facilitator in email marketing and online shopping. To us it looks as though somewhere there is a Critical Mass, and that at a certain level of market share the most impressive shopping portal will become the winner who takes all.
The rise of Google was swift and decisive. What is now left of the other search engines? And TMN has ensured that the route to any product or service through Google also passes close to TMN for anyone to see.

As well as imminently launching the new price-comparison shopping engine, TMN is actively pursuing plans for expansion within Germany and France in Q2/3 of 2005.

In our opinion the share has still to catch the public eye and is therefore a candidate for re-rating. This may happen as the inevitable seasonal surge in turnover is sensed by the market.

Hopefully a move up in the shareprice, but Im not puting any figures on it hampiman, its just onwards and upwards.

cheers GF.

Buyers coming in. If Deal Group Medias Upbeat trading statement is anything to go by today, this ones got BUY written all over it.

cheers GF.

Moving well and trully into the blue now.

cheers GF.

Some nice buys on this one.

cheers GF.

Just ticked up again.

cheers GF.

GF

You really can pick them. Where did you get this one from. When I first looked at it early on this afternoon I was sceptical, but after reading your posting and a little research this looks like another winner. Well done.

MS

From Evil Knievil, who said it had a superb cash flow. Hwe hasnt bought it yet as he wanted others opinions on it being an internet stock and Ive been trying to get him to buy for most of the day.

cheers GF. Off for a pint now, see ya.

Have one for me.

LOL

MS

bought 3 months ago and wondered if i had done the right thing
with such a heavy spread
drifed back but is now moving forward with avengence
forward per of 18 not dirt cheap but plenty of room
for further gains - other plus points
growth 25%
roche 48%
margin 29%
a move above 50p short term is likley

regards HUSTLER

Superb summing up Hustler.

cheers GF.

dow and nas comp battered tonight
will watch movement in the morning
and probably ramp up on this one
to take advantage of the markets

regards HUSTLER

Moving up again.

cheers GF.

News Just in Evil Knievil as opened a long position in this one with a maiden stake of 25,000 shares. He says its too lowly rated and is a cash cow.

Very good news then as that should mean the share is pushed on t1ps.com.

cheers GF.

Hi GF, does slater ring any bells????????

Yes its me.
cheers GF.

hi gf
i am thinking of starting a tip sheet
any advice

regards HUSTLER

Yup invite me to make a guest appearance or a dedicated column each month LOL.

Hustler if you have time could you please send me a PM.

cheers GF.

will do gf - over the weekend

regards HUSTLER