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Tuesday, 25 March 2014

Profit guarantee to Catcha Media?

RHB Research issue a buy recommendation on Catcha Media on 6 Mar 2014, stating that there is market  capitalisation  mismatch between it Australian listed  27.4%-owned  iCar Asia and Malaysia
ACE listed Catcha Media. However,   iCar Asia still a loss making entity.

The Edge weekly feature Catcha Media two weeks ago base on the same analyst report from RHB .Research.

The Edge further emphasis that the valuation is excluding Catcha Media's e-commerce division, despite never expressly stated it e-commerce business under which company.

Previous media and analyst report show that Catcha Media's e-commerce business is under and

The report stated that Catcha Media has ceased operation of it e-commerce division funded by Intel Capital and compete with Catcha Media's partner of vendor of newly acquired, Now, issue of conflict of interest no longer arise if Catcha ceased to operate this division.

However, Catcha Media  acquired at hefty S$5mil (RM12.3mil). I think many e-commerce operator in Malaysia like those selling on eBay and might dream of any company would acquired their business at RM12.3million. In fact, many ebay seller and seller are cashflow positive before international postage rate hike by Pos Malaysia Berhad compare to, which is still a loss making entity yet still able to value at  hefty S$5mil (RM12.3mil).

Renown investor Peter Lynch said he never invest in a company if he is not a customer or consumer of that company's product. As sell luxury product, few people want to admitted that they never bought from before. Thus, nobody question the deal and the deal go through without much question from shareholder.

Further, Patrick Grove, founder and CEO of Catcha Media claim there is a profit guarantee of S$1.5mil (RM3.7mil) for the 12 months after the completion of the deal at the time of acquisition of . ( Usually, profit guarantee should be 3 years in stead of just one year)

Now, if the company making loss and ceased operation. Can the vendor just run away with S$5mil (RM12.3mil). Shouldn't Catcha Media recover at least S$1.5mil (RM3.7mil) profit guarantee from the vendor of ( or S$4.5million if profit guarantee 3 years ) .

Who should be responsible if profit guarantee never executed? Can vendor just runaway with S$5mil (RM12.3mil) and unable to recover even  a small portion S$1.5mil (RM3.7mil) the CEO announced during acquisition!

Catcha Media has been selected as outsourced partner of Mavcap to managed fund invest in Startup in late 2013. It is not sure who would managed the fund? Catcha Media CEO Patrick Grove or  Khailee Ng,  Co-founder and CEO of,  a unit merged with Catcha late last year.

News report stated that now Khailee Ng  have spend a good chunk of his time as venture partner for 500 Durians, a US$10million micro fund under Silicon Valley's 500 Startups, devoted to investing in South-east Asian Startups. Khailee Ng was entrepreneur in resident for 500 startup at one point.

Report stated that Khailee have since put money behind venture such as, Privy,CompStak, Supply Hog, Noonswoon, Watch Over Me ( and iMoney. and CompStak are US base startup.

If Khailee already handful , then it seem Patrick Grove will be the one who will managed fund outsource from Mavcap. While startup who unable to get funding from traditional financial institution like Patrick Grove approach of growing startup eco-system in Malaysia. Shareholder of Catcha Media hope more corporate governance and fiduciary duty display  towards shareholder of a public listed company. Everybody understand venture investment involve high risk, but there is no gun pointing at your head to force you to announce that the deal come with a profit guarantee. However, if you voluntary announced that the risk have been taken care of. Shouldn't someone be responsible when it is not?