Capital raise

1. EQUITY RESEARCH
Technology
20 August 2014
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Rating BUY
Previous BUY
Price Target 0.90$
Previous n/a
Share Price (A$) 0.55$
52 week low - high (A$) 0.30 - 0.6
Risked valuation (A$/share) 0.88
Methodology DCF
Risk High
Capital Structure
Shares on Issue (m) 1070
Shares on Issue diluted (m) 1070
Free Float (%) 7%
12mth Av Daily Volume ('000) 145
Market Cap ($m) 588
EV ($m) 578
Key Metrics 2014e 2015e 2016e 2017e
Revenue ($m) 41 88 162 272
EBITDA ($m) 8.3 26.4 55.1 100.8
NPAT rep ($m) 6.0 19.5 41.0 75.3
NPAT adj($m) 6.0 19.5 41.0 75.3
EPS adj (¢) 0.01 0.02 0.04 0.07
DPS (¢) 0.0 0.0 0.0 0.0
Revenue Growth (%) 225% 218% 109% 83%
EBITDA growth (%) 610% 226% 110% 83%
NPAT margin (%) 634% 30% 34% 37%
EPS growth (%) 534% 226% 110% 83%
DPS growth (%) n/a n/a n/a n/a
PER 68.4x 21.0x 10.0x 5.4x
EV/Revenue 14.3x 6.6x 3.6x 2.1x
EV/EBIT 72.5x 22.2x 10.6x 5.8x
Op Cashflow ($m) 7.7 19.0 40.2 73.8
Capex ($m) -0.7 -0.7 -0.7 -0.7
FCF ($m) 7.0 18.3 39.5 73.1
Net Cash ($m) 17.3 35.6 75.1 148.2
Share Price Graph
Analyst
Haris Khaliqi +61 2 9993 8168
haris.khaliqi@fostock.com.au
Foster Stockbroking was the Joint Lead Manager to the
Placement of 45.5m shares at $0.55 per share to raise A$25m
and received fees for this service
99 Wuxian Ltd (NNW.ASX)
Capital raising to fund user growth
Event:
 $25m equity issue to fund growth
 Strategic review process underway
Investment Highlights:
 $25m equity issue supported by domestic and international institutions. NNW
recently completed an $25m capital raising, which was oversubscribed and
resulted in the addition of quality domestic and international institutions on the
register. Foster Stockbroking was Joint Lead Manager to the raise. The use of
funds will primarily be used for joint marketing initiatives, which has been the
key driver for organic growth to date, infrastructure/IT system upgrades for
growth and working capital.
 NNW enters a seasonally strong growth period. Management are expecting the
growth trajectory will replicate that of last year where Gross Transactional Value
increased ~4 fold from June to December 2013. GTV as of 30 June 2014 was
$579m, if it follows a similar growth trajectory to last year FY14 GTV could reach
$2.3b (FSBe $2.1b), representing an exceptional 110% YoY growth rate. We
forecast CY14 revenue of $41m.
 Growth initiatives could result in material step change in performance. Aside
from the steep forecasted organic growth there are growth initiatives requiring
funding which could have a material step change in registered user and revenue
growth. Two key initiatives include a direct marketing campaign focussed on the
300m+ mobile banking user base that are not registered on the platform, and
utilising the online reward redemption facility across their partners. We believe
both these growth opportunities justify investment and are a key driver of
initiating the strategic review process.
 Strategic review underway with high profile global investment banks engaged.
A strategic review process is underway with strong engagement with a number
of high profile global investment banks to ensure that NNW’s current listing
structure and capital structure, supports the optimum outcome for the
shareholders. Numerous tier one global investment banks are engaged. We view
the appointment of a tier 1 investment bank or syndicate of banks to run an
alternate market listing and capitalize the business for growth will be a positive
development.
 Alternate market listing the catalyst to bridge peer valuation gap. NNW trades
at $20 per registered user vs. peer group average of $111. In our view, the
market discount can quickly unwind given the registered user growth prospects,
purchasing intent of the registered user together with marketing it to a wider
investment audience that has a strong appetite for Chinese m-commerce
companies.
Recommendation:
 We have updated our valuation to account for the issuance of 45.5m shares. Our
risked valuation is revised to $0.88/share from $0.92/share.
 We maintain our BUY recommendation and 12 month PT of $0.90/sh
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2. 21 August 2014 Level 25, 52 Martin Place, Sydney, NSW 2000 | +61 2 9993 8100 | www.fostock.com.au 2
99 Wuxian Ltd (NNW.ASX)
$25M EQUITY ISSUE STRONGLY SUPPORTED BY DOMESTIC AND INTERNATIONAL
INSTITUITIONS
 NNW recently completed a $25m capital raising resulting in the addition of quality set of
domestic and international institutions to the register. Foster Stockbroking was joint Lead
Manager to the raise.
 raising has been the first opportunity since IPO for new institutions to enter the register. The
issue was oversubscribed and we were encouraged by the high level of interest from Asian
institutional investors closely following the company and high awareness of the Chinese m-
commerce market thematic.
 The use of funds will be used to fund joint marketing initiatives planned with banking
partners, which have been the key driver for organic growth to date, infrastructure/IT system
upgrades for growth and working capital.
COMPANY REMAINS ON STEEP GROWTH CURVE, ENTERING A SEASONALLY STRONG GROWTH
PERIOD
 The June 2014 quarter trading metrics continued to demonstrate strong results across all
KPI’s. The $292m GTV for the quarter together with platform revenue of $6.93m ($11.2m
YTD) indicates NNW is on track to meet our full year forecast revenue of $41m. We highlight
the seasonality in earnings is heavily weighted to the second half of the year. The platform
commission for the quarter at 2.4% was at the upper end of the target range.
 The operating and financial metrics reported continue a healthy upward trend indicating the
company remains on a steep growth curve. Figure 1 below displays the strong growth
achieved since inception with key highlights include registered user base increasing 6x from
5m to 31m and average value per transaction (ATV) increasing 2x from $30 to $59.
Figure 1: NNW KPI’s
Source: FSB Research
 NNW is entering a seasonally strong growth period and management are expecting the
growth trajectory will replicate that of 2013 whereby the GTV increased ~4 fold from June to
Oversubscribed $25m
capital raising has
resulted in the addition
of domestic and
international institutions
to the register.
Placement funds will
support direct
marketing initiatives as
the company enters a
seasonally strong
growth period.
The operating and
financial metrics
reported continue a
healthy upward trend
indicating the company
remains on a steep
growth curve.

3. 21 August 2014 Level 25, 52 Martin Place, Sydney, NSW 2000 | +61 2 9993 8100 | www.fostock.com.au 3
99 Wuxian Ltd (NNW.ASX)
December. The trend over the past two years has seen GTV in CYQ3 double that in CYQ2 and
CYQ4 double that in CYQ3.
 GTV as of 30 June 2014 was $579m. If this follows a similar growth trajectory to last FY13,
then FY14 could reach $2.3b (FSBe $2.1b), representing an exceptional 110% yoy growth
rate.
MARKETING PROGRAM SETS UP A STEP CHANGE IN SUBSCRIBER GROWTH.
 The growth in registered users to 31m has been organically driven from joint marketing
campaigns led by the banking partners and merchants. Organic growth will continue with the
recent $25m capital raising.
 We believe a significant opportunity exists for NNW to achieve a step change in subscriber
growth through the next stage of the company’s growth profile. We note further funding will
be required to execute.
 We believe both the following growth opportunities justify investment and are a key driver of
initiating the strategic review process to determine the optimal funding and listing structure.
Accelerate registered user growth targeting +320m available mobile banking customers not yet
registered on the 99wuxian platform.
 One of the key growth opportunities is to target the large pool of customers, which have
downloaded a mobile banking application however are not registered users of the 99
Wuxian platform. We estimate additional funding in the order of $140m for a direct
marketing campaign with NNW business partners.
 This investment in direct marketing could generate an 83% ROI within 24mths, given
relatively low cost of customer acquisition, refer to Figure 2 below. We have assumed 200%
growth in registered users or 30% of the registered banking app population can be achieved.
 Assuming NNW was to fund a target marketing initiative and the results were based on our
investment, growth and returns assumptions for our FY17 EBITDA of $100m forecast could
double to $200m.
 Applying the market value per registered user of US$111 creates an implied US$7b of
additional value. Hence, why believe management’s decision to undertake a strategic review
a prudent one to ensure the company is sufficiently funded to capitalise on this growth
initiative.
Figure 2: Investment in direct marketing campaign assumptions
Source: FSB Research
Description Value
Customer acquisition cost per customer ($A) 2
Number of customers acquired (m) 70
Total Customer acquisition cost ($Am) 140
Time frame to acquire (months) 24
Average transactional value ($A) 55
Average transactions per annum 1
Incremenatal GTV (A$m) 3850
Platform comission (%) 0.03
NNW revenue (A$m) 115.5
ROI (%) 83%
FY14 GTV could reach
$2.3b (FSBe $2.1b),
representing an
exceptional 110% yoy
growth rate.
Growth initiatives
requiring investment
could result in a step
change in subscriber and
revenue growth.

4. 21 August 2014 Level 25, 52 Martin Place, Sydney, NSW 2000 | +61 2 9993 8100 | www.fostock.com.au 4
99 Wuxian Ltd (NNW.ASX)
Rewards redemption program to further drive registered user and revenue growth.
 The other significant opportunity is to ramp up the rewards redemption programs with
the banks. NNW is the only mobile platform where the bank customers can redeem
offline rewards points online.
 Traditionally reward points are redeemed through merchants via phone, mail etc. 99wuxian
platform allows points to be redeemed instantaneously across the 150 merchants.
 This is a very powerful marketing tool for the banks and has the potential to materially drive
usage and registration on the platform. Currently only 4 banks have been activated for
rewards redemption and are using it in a limited capacity due to NNW’s working capital
constraints.
 The working capital constraint is a function of the settlement cycle for rewards redemptions.
For a cash transaction the customer purchases online, NNW then settles with the merchants
less commission and the bank settles with NWW T+3. For a points redemption, NNW settles
with the merchants and the banks settle with NNW T+30 to T+60.
 The extended settlement period has cashflow implications and limits the amount of reward
redemptions that NNW can process on the platform. Ultimately, the ideal funding solution
would be to establish a lending facility where the banks lend against their own receivables.
However until such a facility can be established the growth in rewards redemption will need
to be funded on balance sheet.
 We estimate each bank has the potential to contribute $50-100m to the annual GTV (varying
on size of the bank and their associated reward programs). Activating the top 10 banks to
utilise the functionality of reward points redemption could increase GTV by $1b, translating
to incremental revenue of $30m (assuming 3% platform margin).
STRATEGIC REVIEW PROCESS UNDERWAY TO DETERMINE OPTIMAL LISTING AND CAPITAL
STRUCTURE
 NNW recently announced that a strategic review process is underway with a number of high
profile global investments banks to uncover where NNW’s optimal listing structure will
support the future capital requirements and valuation for shareholders.
 Primary driver for this process is the organic growth of the Chinese M-Commerce market
expected by NNW requires the implementation of significant growth initiatives that require
ongoing funding. The Board is also cognisant of the valuation metrics applied to its peer
group across the US and Asian capital markets.
 We understand there is strong interest from global investment banks which are thematically
following the Chinese m-commerce and m-payments space and have been involved in the
successful listing of JD.com and in the US and the upcoming IPO of Alibaba.
 We believe the conclusions from the strategic review process will address two key
aspects:
- Funding requirements to capitalise on the significant market opportunity; and
- Potential alternate market listing to ensure optimal investor base and
valuation.
 We view the appointment of a tier 1 investment bank or syndicate of banks to run an
alternate market listing and capitalize the business to position for growth will be a positive
development.
 A US listing would make sense in our view given the US investor appetite for exposure to
growth in the Chinese m-commerce market. This is best illustrated by the recent success of
Utilising the rewards
redemption facility could
drive an additional $1B
in GTV annually.
We view the
appointment of a tier 1
investment bank or
syndicate of banks to run
an alternate market
listing and capitalize the
business to position for
growth will be a positive
development and
catalyst for the share
price.

5. 21 August 2014 Level 25, 52 Martin Place, Sydney, NSW 2000 | +61 2 9993 8100 | www.fostock.com.au 5
99 Wuxian Ltd (NNW.ASX)
the IPO for Chinese online retailer JD (Chinese equivalent of Amazon). JD raised US$1.78b,
reported to be 19x oversubscribed and debuted with a market valuation of US$28b. The
upcoming IPO of Alibaba will also provide the spotlight on the Chinese m-commerce market.
ALTERNATE MARKET LISTING COULD BRIDGE VALUATION GAP RELATIVE TO PEER GROUP
 We view an alternate market listing could be a catalyst to bridge a valuation gap relative
to NNW’s peer group. Figure 3 below compare NNW to leading Chinese and US internet
companies on a market valuation per registered user. Whilst monetisation differs across
the three groups (ie subscription, ad revenue, platform commission etc) the analysis
below highlights that NNW is trading well below the peer group average on key metrics.
 We believe the steep discount applied by the market is driven by two key factors: 1)
limited market liquidity and 2) NNW remains relatively unknown despite its A$588m
market cap at listing.
 In our view, the market discount could unwind given the subscriber growth prospects,
purchasing intent of the registered userbase together with marketing it to a wider
investment audience (i.e. the US equity markets).
 Applying the peer group average value per subscriber of $111 to the 31m registered
users on 99 Wuxian implies a valuation of A$3,411m or A$3.20/sh vs. current valuation
of $588m.
Figure 3: Value Per Registered User
Source: FSB Research, Company Reports
$294
$243
$204
$155 $150
$141
$125 $119
$111
$95
$76 $75
$33
$25 $22 $19
$4
$-
$50
$100
$150
$200
$250
$300
$350
Value Per Registered User
(Market Cap/No. Registered Users)
Alternate market listing
could bridge valuation
gap relative to peer
group.

6. 21 August 2014 Level 25, 52 Martin Place, Sydney, NSW 2000 | +61 2 9993 8100 | www.fostock.com.au 6
99 Wuxian Ltd (NNW.ASX)
NEAR TERM CATALYSTS TO DRIVE MARKET RE-RATING
 Conclusion of strategic review process – September
 Potential appointment of tier 1 investment bank/ syndicate of banks – October
 Outlining plan to address appropriate capital and listing structure to capitalise on
growth opportunities - October
 Q3 trading update - October
COMPANY VALUATION AND PRICE TARGET
 We have updated our valuation to account for the issuance of 45.5m shares and our
risked valuation has been revised to $0.88/share from $0.92/share.
 Our un-risked enterprise valuation for NNW is $4,701m or $4.41/sh and comprises a 10 year
operational NPV of $1,746m and a terminal value $2,954m. We have assumed a 10% discount
rate and a terminal growth rate of 3%. Accounting for $27m in cash we derive an equity
valuation of $4,728 or $4.42/sh.
 We have discounted our valuation by 80% to account for timing of subscriber growth, usage
and adoption of the platform. Our risked valuation is $945m or $0.88/sh. We will look to
unwind our risk weighting upon confirmation of subscriber and revenue growth in line with
our assumptions.
Figure 4: Valuation Summary
Source: FSB Research
RECOMMENDATION
 We reiterate our BUY recommendation and maintain our 12 month price target at $0.90/sh
Description A$m $/sh
Enterprise NPV (10 years) 1746.8 1.63
Terminal value 2954.9 2.76
Enterprise Value 4701.7 4.39
Net Cash 27.0 0.03
Equity Value 4728.7 4.42
Risk Factor (%) 80% 80%
Risked valuation 945.7 0.88

7. 21 August 2014 Level 25, 52 Martin Place, Sydney, NSW 2000 | +61 2 9993 8100 | www.fostock.com.au 7
99 Wuxian Ltd (NNW.ASX)
FOSTER STOCKBROKING DIRECTORY
Name Role Phone Email
Stuart Foster Chief Executive Officer +61 2 9993 8131 stuart.foster@fostock.com.au
Chris Francis Executive Director +61 2 9998 8167 chris.francis@fostock.com.au
Haris Khaliqi Executive Director +61 2 9993 8152 haris.khaliqi@fostock.com.au
Martin Carolan Executive Director +61 2 9993 8168 martin.carolan@fostock.com.au
Mark Fichera Executive Director +61 2 9993 8162 mark.fichera@fostock.com.au
Mark Hinsley Executive Director +61 2 9993 8166 mark.hinsley@fostock.com.au
Kevin Massey Senior Equities Dealer +61 2 9993 8130 kevin.massey@fostock.com.au
Tolga Dokumcu Execution & Dealing +61 2 9993 8144 tolga.dokumcu@fostock.com.au
George Mourtzouhos Execution & Dealing +61 2 9993 8136 george.mourtzouhos@fostock.com.au
Foster Stockbroking Pty Ltd
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