MM has priced in the promise of a future, how long can the market hold on to that promise?

MM is now trading at 3 times its IPO price of 1.00 a share. It is just two months since the IPO but its shares is already 3 times the IPO price and this is despite the fact that the IPO proceeds has not yet been fully used. Clearly the market has priced in the future prospect of the MM business.

Groceries and convenience stores are capital intensive and low margin businesses and those are the businesses of MM. Established player in this industry are PGOLD, MRSGI, SM, RRHI, and SEVN. The proceeds of the IPO once deployed maybe will be able to add a handful to a dozen operating stores. The additional stores will only produced marginal income for MM.

The key revenue actually for MM is the franchise fee. The margin for that is almost a 100% percent. But for now that revenue is still a footnote in the other operating income.

The COVID-19 pandemic if we take note of the events around us is battering strong the small and medium enterprises all over the country. Banks are tightening the lending standards against this segment. We believe this is the target market of MM for the franchise business. In a fine environment these entrepreneurs will have the capital and the willingness to go and get a franchise for a grocery or a convenience store. We don’t have a conclusive data on how the small and medium businesses are doing right now but by just looking around you can see that many are conserving capital.

We believe that the franchise fee revenue will take a significant period of time for it to become the main revenue line. For now its just a footnote in the other operating income.

Let’s just hope the market won’t wake up to the present reality.

MM’s P/E is 314 compared to that of PGOLD-20.27 and MRSGI-16.11.

Disclaimer: This is an independent analysis for discussion purposes with the aim of giving stock traders and investors an independent perspective. Accuretti Systems Inc. does not hold any MM, MRSGI, PGOLD, SM, RRHI, and SEVN shares.

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