Back in May of this year I took a position in VRE at what I considered to be a very good entry point, after it was revealed that HTC Corp. of Taiwan had taken a decent stake in the company which sees it currently sitting on a near 20% stake.
VRE for me, falls into the more speculative section of my investments and is perhaps typical of those stocks that have bags of potential with a novel and disruptive offering, but faces the usual hurdles regarding mass adoption.
Anyone that is new to the company following yesterdays spike may find the following useful as I hope do existing holders or watchers.
Firstly just to recap, VRE is an Irish based company that is best described as a virtual reality software focused business that developed and subsequently commercialised its own platform titled ENGAGE.
Originally conceived to target the online education and training space which in itself presents significant opportunities, more latterly since the arrival of Covid, the company has embraced the opportunity break into the area of remote conferencing.
VRE actually hosted a large annual event for HTC in March of this year after lockdowns restricted movement and the usual gathering of attendees, where suffice to say it was a huge success.
That led to the subsequent interest and investment from the billion dollar revenue generating company which from VRE's perspective seriously opens the door on growth potential.
Having taken my shares at under 9p following the announcement of the HTC deal, they soon surged to around 24p, before more recently retracing and effectively flat lining around the 13p level.
That was until yesterday, when massive volume by the companies standards with more than 1 million shares traded saw the price jump by 37% to close at 18.5p on the day, valuing the business at £34m.
No news was released to explain the reason for the rise and there was also a distinct lack of evidence of the shares being tipped anywhere, so no doubt all eyes will be looking eagerly for any potential explanation come Monday of next week.
For my part, in light of the sharp rise yesterday I thought it worth recapping on the companies progress and the prospects ahead, where I thought I'd start with my scribblings from June when I spoke with management on results day.
I certainly had plenty to discuss with the CEO and founder David Whelan along with CFO Seamus Larissey, who were more than happy to engage with me.
Without doubt both Exec's said that they see the company in an excellent spot which they pointed out has been massively enhanced as a direct result of the Pandamic and all that has brought with it.
Whelan told me that Covid has greatly accelerated online and distance learning and such as in the US he added that it has now blown that open.
It is there that VRE has already established a relationship with VictoryXR, whilst closer to home it is also involved with Oxford University.
He explained that in terms of the technology, the company had previously laid the right foundations to serve educational institutions, citing previous engagement with University professors in fine tuning the likes of its menu system on the platform to ensure the functionality was at an optimum.
Getting things right and adapted for ease of use has been paramount for VRE which now sees it ready to transition into wider adoption as ever more aspects of education migrate to online and distance learning.
But, away from the education sector the real opportunity and dramatic changes as a result of recent events must surely now lie in the area of business and commerce and remote conferencing.
Whelan believes that these changes and an enforced transition to home working and the subsequent restraints on travel that have hit conferencing are in many aspects very much here to stay, echoing the words expressed by others that things aren't going back to how they were.
Whelan talks of having recently hired aggressively to meet the post Covid demand and highlights that Engage is perfectly placed to meet the demands for companies wishing to bring together people remotely for team talks and conferences etc.
“Unlike Zoom which has its limitations on not only the number of people that can come together, our platform is more engaging and can fill important needs and requirements for companies.
This includes the availability of the likes of white boards and the ability to provide hallway conversations where business is often done along with personalised avatars”.
The whole concept of being able to diverge into a meeting with a small group room away from the main hub surely has mass appeal and will no doubt be a major attraction in terms of widespread adoption.
What has really garnered interest in AIM quoted VRE most recently however has been the exciting tie up with the giant HTC Corp. which looks potentially like a real game changer for the company.
“China is a massive market in VR and the fastest growing” says Whelan, “but to break in to that as an outsider is virtually impossible, particularly for a smaller player. Having worked with HTC for a number of years they had been keen to invest in the past but previously it just hadn't quite been the right time”.
That clearly changed in March after VRE assisted in the Virtual VIVE Ecosystem 2020, which proved a major success and saw HTC taking a 20% stake in the company.
“In order to succeed in China you really need someone in the ASIA market and HTC is both strong and well placed across VR and Telecommunications, a market that is already massive and ready to explode”.
Although rightly there is plenty of excitement and optimism around the HTC association, that exclusivity relates purely to Asia and VRE is actively engaged with potential partners in other regions which sees the CEO anticipating deals being done in the next three to six months.
But, if that isn't enough to whet investors palate's there is also apparently news due soon surrounding mobiles, a space where VRE is already partnered with Deutsche Telekom, so that may be a space worth watching.
The Android version of ENGAGE will be out in Q3-2020 with the Apple version out in H2 2020.
In terms of funding, FD Larrisey is open and frank and says that at the current burn rate, VRE has around 14 months of money in the kitty.
I ask the inevitable regarding a potential raise which is the norm for any company in growth mode, particularly with such a seemingly massive opportunity.
Larissey explains that they are comfortable with the current position post the HTC injection and says there are no plans to raise further, as they were already confident of reaching break even and those plans were in place before the Covid situation.
Going on, he points out that the expectation has been there for revenues to ramp up with costs moving in the other direction and that hasn't changed.
He does however acknowledge that should an opening or opportunity arise that was beneficial to the business moving forward then of course it would be something that they would look at.
Speaking of the tech and where he wants the business to be in three or five years down the line Whelan says that there are others out there in the space, but not as suitable as what they are offering, some being aimed more at children and different areas to what VRE is addressing.
Going on, it is clear that the ambition and drive is very much there as he says the aim is to target Zoom and see Engage become the next platform of choice.
Whilst that may sound like a true blue sky dream, Whelan is deadly serious and has clearly put in place the right steps to take this business to a whole new level.
When viewed against the Zoom offering it isn't difficult to see the argument and as this industry accelerates Engage doesn't merely look like the part, it sounds it too.
As someone who at one time was mixing cement on a building site until the rain pushed him in a different direction, shareholders cash isn't something he takes lightly or for granted and as ambitious as he is, he adds that he is extremely careful when it comes to the area of money.
The VRE story looks a potentially great one to me and for those who can accept that it is still early days the upside potential with a little bit of luck could be extensive.
No guarantees in this game of course, but it looks like the company is on its way and in the right place at the right time.
So, back to the present day and following announcing the interim results last month there has been further positive news, that suggests the company is now building serious and increasing awareness with the sort of names that are now making would-be investors sit up and take notice.
Just last week the company revealed that the United Nations annual Global Youth Takeover was going virtual for the first time on October 24th by embracing the ENGAGE platform which follows on from other major organisations that have recently used the platform.
These include McKinsey & Company, Yahoo and the European Commission.
There have been other areas for progress too including what Whelan referred to in our conversation, that being the launch in July of ENGAGE Mobile the android and tablet supported version of VRE's proprietary platform which can be downloaded from its website.
In the interim announcement Whelan commented “VR Education has continued to sell Showcase Experiences on various VR platforms which perform well, however, the Group's ENGAGE platform revenue is beginning to dominate.
This shift in the sales mix towards ENGAGE has always been anticipated, however the pandemic has acted as a catalyst in many respects towards the uptake of VR services and the need for companies to start using it.
This increased interest and demand for VR can be clearly seen in the Group's partnership agreement with US-based VictoryXR, a world leader in VR and augmented reality ('AR') content creation for schools and education, for the use of the Group's ENGAGE platform which was announced in April 2020, and the memorandum of understanding with Virtual College Limited, an industry-leading digital learning solutions provider, to provide and deliver technology enhanced learning solutions in the UK and Middle East, which was announced post period end.
Post period end, the Group also signed a multi-year enterprise licence agreement with Tokyo Global Gateway, a large-scale experience-oriented English-education facility, for use of the Group's proprietary ENGAGE platform, effective from 1 September 2020”.
Clearly things now appear to be accelerating and at pace with such high profile names coming on board, with no doubt others also following suit.
To date though, there hasn't been news concerning ENGAGE in and around China, but that must surely only be a matter of time, given HTC's own very strong presence in the region.
Although the Virtual Reality space has enjoyed strong growth in recent years it remains in the bigger picture a relatively small or even niche space that has led to many potential players avoiding the area.
That is clearly good for VRE, particularly as the pandemic has now thrust the sector to the forefront both from individuals to large business entities.
Indeed, estimates from earlier this year suggest that sales of augmented and virtual reality headsets will reach around 6 million by the end of 2020 with the expectation of that moving to 26 million by 2023.
However, that doesn't factor in the full effects of the pandemic and the increasing prospect of large groups or businesses fully adopting the likes of the ENGAGE platform even when things do return to some kind of normal.
There are a number of attractions to VRE's customers for embracing its platform, not least future costs of extensive travel, to conferences and meetings being curtailed.
VRE now appears to be at something of a pivotal point where it needs continue driving forward alongside its heavyweight partner and make the most of the opportunities that are coming its way and which could make for increasing revenue momentum.
A strengthening of the balance sheet perhaps wouldn't go amiss though at the right price and looking at some of the names on the shareholder list it shouldn't have any trouble in securing further funds should it chose to go for that.
Aside HTC, Octopus sits on 7% whilst Unicorn holds 6.5% and Kernel Capital has a 5.4% holding, so one would assume that VRE could, should it need a bit extra to further accelerate have no problem.
It will be interesting to see if any news does break next week or if the shares ease back a little on nothing breaking.
Either way though the company does look destined for further positive deals ahead which will no doubt determine the direction of the shares.
So, despite it remaining a speculative play I'm quite relaxed and happy to bide my time here and enjoy the company of some serious and well respected institutional investors