MARK Chosen As AI Tech Partner for $420 Billion ShenHua Energy

December 14, 2017 at 10:11 am Leave a comment

In a press release after the market closed yesterday it was announced that Remark Holdings has been chosen at the Artificial Intelligence technology partner for China ShenHua Energy Company. The $420 Billion market cap ShenHua that does $42 billion per year in revenue has chosen to use KanKan’s facial-recognition, gesture-recognition and tracking capabilities to accomplish the worker safety and management improvements, while KanKan’s artificial intelligence data platform will help ShenHua improve production efficiency. The partnership is a huge get for Remark’s Kankan as it represents a significant foothold for the company’s AI technologies in China’s energy space, further cementing Kankan’s status as an early leader in the race to capture market share in one of the largest energy markets in the world.

An analyst with Tailwinds Research (Carlson) published an excellent write up following his interview with Remark CEO Tao Shing yesterday afternoon, a very bullish report highlighting many factors that should help investors focus on the long term potential of Remark Holdings. With the extreme volatility that accompanies the large and growing short interest in Remark Holdings it can be easy to lose sight of the longer term picture and we agree wholeheartedly with Mr. Carlson’s take on the longer view.

The most telling takeaway from the interview was related to Kankan management bonuses as it was revealed that annual bonuses do not kick in if the company achieves the $30 million revenue figure that has drawn the attention of investors to that division’s momentum, but rather if the company achieves specific MULTIPLEs of that revenue goal. We see this as a rather STUNNING development, as we have long suspected that the company’s expectation of growing its business FOURFOLD over the next year (from $7.5m in AI revenue in 2017 revenue to $30m in AI revenue for 2018) might be setting the target TOO LOW. We now know that the bonuses for Kankan management are tied to generating much more than $30m in revenue next year. We have recently crunched the numbers using Sensetime and other AI startups’ recent fundings to determine a value for KanKan. Using the same revenue multiple applied to those other similarly situated (but lacking the high profile partners of Kankan) companies would result in a valuation of Kankan that exceeds $30 per Remark share. After the Tailwinds Research interview, we are left to consider that our revenue estimate of $30m for next year is almost certainly going to be too low.

As the Kankan story becomes better understood by the investing community, we expect to see even greater volatility as professional money managers jockey to build a holding that is big enough to move the needle. The tricks being employed in the daily trading of MARK shares are clearly evidence that this stock is under heavy accumulation. This is not surprising, as there are only 11 trading days left in the year, MARK’s smallish float makes it difficult to buy in bulk and we wonder how many fund managers would like to show a meaningful position in Remark Holdings (one of the top 20 total returns on the Nasdaq in 2017) to add a little “window dressing” to the annual report they will send out.

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