Net Element (NETE) Zach's Small-Cap Research Report

Zacks Investment Research Page 4 scr.zacks.com of the company. NETE shareholders can end up with an additional 6.7% of the depending on the financing NETE brings to the closing. At Net Element s current enterprise value of $43.6 million (using a $7.27 stock price) this puts the entire valuation of Mullen Technologies at between $201 million and $291 million . We will get financial information on the privately held Mullen once the S-4 is filed in the next few weeks. Until then, we can look at the valuations of other EV companies and (taking out Nikola), they trade at an average of 12.2 times sales. If Mullen can produce and sell 5,000 MX-05 SUVs at $55,000 per car that is revenue of $275 million add to that used car sales of maybe $40 million, and 200 Dragonflys at $150,000 or another $30 million. This adds to a conservative $345 million. 12.2 times that is an enterprise value of $4.2 billion by 2023. Keep in mind the company should need at least another $400 million to get there and we expect much of that should be loans. If Net Element ends up post merger with 50 million shares outstanding, EV per share could be $70 per share by 2023 with no further equity dilution. Discounting that for risk and dilution and time, we could easily see a current share price over $30 per share once the deal closes. Ticker Gross Revenue Revenue Revenue Company EBITDA Margin % 2021E 2020E LTM Kandi Technologies KNDI 3 25 24% 137 78 106 Li Auto LI NA 10 6% 2,580 1,310 173 NIO NIO NA NA NA 4,080 2,280 1,387 Nikola NKLA (0) 0 176% 76 0 0 Tesla TSLA 4,020 4,070 14% 44,830 30,850 28,180 EBIDTA EV/21E EV/20E EV/LTM Margin Sales Sales Sales 3% 3.7 6.6 4.8 NA 11.9 23.4 177.4 NA 15.1 27.0 44.3 -214% 98.2 NM NM 14% 8.6 12.5 13.7 Included Enterprise EV/GM EV/EBITDA in Average? Value 20.1 155.6 y 512 3187.5 NA y 30,600 NA NA y 61,500 35545.0 -29262.6 y 7,500 95.1 96.3 y 387,000 Workhorse Group WKHS (22) (5) -736% 133 9 1 Xpeng XPEV NA (558) -106% 2,020 783 526 Average -2936% 18.4 263.7 3295.0 NA 15.7 40.4 60.1 12.2 62.3 599.2 -447.9 -112.2 y 2,450 -56.7 NA y 31,620 98,014 INVESTMENT THESIS Net Element is in the process of a reverse merger and has plans to sell off its payment processing business. If the deal goes according to plan, Net Element shareholders will own between 15% and 21.7% of the survivor company. Mullen Technologies is an electric car vendor that is raising money to build an assembly plant in the US for cars that are already being produced and sold in China. Its first model is expected to be delivered in the US in the first half of 2021. This transaction should make the required capital raising process faster, less costly, and require less regulatory approval. The S-4 will provide more information allowing investors to see the inherent value of Mullen and could compel the stock price higher. Net Element s current valuation is based solely on its value as a payment processor leaving little down size for investors and much upside as business returns to normal after pandemic lockdowns are lifted.