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ANALYSIS: Luokung Technology to Acquire eMapgo Technologies for Map Data

Donovan Jones 2019-09-15 20:05 PM

Short Take

Luokung Technology Corp. (Nasdaq: LKCO) announced it has agreed to acquire eMapgo Technologies (Beijing) for $119 million.

eMapgo provides a map service platform in China consisting of navigation electronic maps, ADAS maps and HD maps of the country as well as geographic location information services.

With the acquisition, LKCO seeks to combine eMapgo’s data with its indoor location data subsidiary Yuanli Anda, to create a full indoor / outdoor map for China.

Target Company

Beijing, China-based eMapgo was founded in 2004 and has obtained Class-A qualification certificates of navigable surveying and mapping, internet map service and geographic information system engineering.

Management is headed by CEO and Board Member Darwin Lu, who has been with the firm since 2011 and was previously head of Business Development at NATEQ.

The company has also obtained quality management system certificates of ISO9001 and ISO/TS16949 and CMMI3 while its map database covers mainland China, Hong Kong and the administrative region of Macao, accounting for about 8.5 million km of road networks and 70 million points of interest.

eMapgo’s primary offerings include:

  • In-Car Navigation

  • World Map & Web Map Service

  • Autonomous Driving

  • GIS

Market & Competition

According to a market research report by Market Research Future, the global mobile mapping market is projected to reach $37.4 billion by 2023. 

This represents a forecasted CAGR of 13.4 percent between 2018 and 2023. the widespread use and potential of the technology and various advancements in georeferencing technologies.

The main drivers for this expected growth are the widespread use and potential of the technology and various advancements in georeferencing technologies.

The Asia-Pacific region is projected to grow at the highest CAGR during the period due to the introduction of low-cost, high-performance solutions designed to meet the growing consumer demand as well as the adoption of partnership and expansion strategies by numerous key players in the region.

According to another market research report by The Business Research Company, the China surveying and mapping market size is projected to reach $3.54 billion by 2022.

Acquisition Terms and Financial

Luokung disclosed the acquisition price and terms as $119 million (RMB836 million) in cash and common stock paid ‘at a conversion rate of $7 dollars per share.’

Management said the deal was contingent upon its ability to close the financing for the purchase price.

A review of the firm’s most recent published financial results indicate that as of December 31, 2018, LKCO had $1.2 million in cash and equivalents and $34 million in total liabilities.

Free cash flow for the 12 months ended December 31, 2018, was a negative ($12.9 million).

In the past 12 months, LKCO’s stock price has dropped 38.7 percent vs. U.S. Interactive Media industry’s rise of 3.5 percent and the broader overall U.S. market’s increase of 1.6 percent, as the chart below indicates:

(Image: Simply Wall Street)

Commentary

Luokung is acquiring eMapgo to increase its data sources and quantity as well as provide ongoing access to new location data.

As LKCO stated in the deal announcement,

“EMG's mapping capabilities and its underlying database along with the Company's SuperEngine Spatial-Temporal big data engine capability will serve as the Company's two core technology clusters to support services and applications in LBS, remote sensing data, networking, smart city, autonomous driving and other fields.”

LKCO also said it will launch what it calls ‘China’s first Spatial-Temporal full-vector non-tiled covering indoor and outdoor map, by combining the technology from its subsidiary, Yuanli Anda...with EGM’s underlying data...’

This is an ambitious undertaking. At the very least, LKCO will operate EMG as a standalone entity.

With the deal, assuming it is consummated, LKCO brings in-house a rich data source that management believes will be the data lake it needs to produce a differentiated indoor/outdoor mapping capability.

(The opinions expressed by contributing analysts do not reflect the position of CapitalWatch or its journalists. The analyst has no positions in any stocks mentioned, no plans to initiate any positions within the next 72 hours, and no business relationship with any company whose stock is mentioned in this article. Information provided is for educational purposes only, may be incomplete or out of date, and does not constitute financial, legal, or investment advice.)