Rodman & Renshaw Initiate Coverage on Quepasa with $7.00 Target

Quepasa Corp.

QPSA: Price: $3.55; Market Cap (MM): $124.8
Market Outperform; Target Price: $7.00

Amit Dayal - Senior Analyst (212-356-0535)


QPSA: An Emerging Social Discovery Platform

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Overview: We are initiating coverage on Quepasa Corp. (NYSE Amex: QPSA) with a Market Outperform / Speculative Risk rating and a $7.00 price target. Quepasa Corporation is a social media technology company which owns and operates www.Quepasa.com and its associated social networking and gaming platform. The company just closed its merger with myYearbook.com, a social networking service that enables meeting new people both online and via the mobile phone.

Positioning For A Future In Social Discovery QPSA could be viewed as a strategic SNS restructuring play where the successful closure of merger with myYearbook provides the platform for the company’s future trajectory. We believe the new management team will be working on building a growth strategy around the social discovery theme targeting an international audience. This will incorporate migrating users on to a single myYearbook based platform and leveraging Quepasa’s team / resources for faster product introduction.

A Volatile Year In the Market QPSA stock has had a volatile year with the stock currently trading at the mid $3 levels compared to the high of $14 levels seen in January 2011. Market gyrations, social networking company IPO’s, launch of Wonderful City on Facebook and a significant strategic acquisition have all contributed towards its volatility. Going into 2011, QPSA was perhaps the only pure play social network company publicly traded in the US markets. We believe the buzz around social networking IPO’s and the premium valuations being assigned to these companies drove some of the momentum in the stock.

Valuation QPSA is currently trading at a revenue multiple 0.85x and P/E multiple of 9x to our expectations for 2013. This compares to industry averages ranging from under 1x to over 15x on a revenue basis and 8x to 22x on P/E basis. We believe any multiple expansion for the company will be driven by 1) successful integration of myYearbook 2) new product / service introductions (especially in Mobile) 3) potential re-branding of the service 4) improved revenue visibility 5) a substantially larger US and international user base and 6) consistent improvements in traffic trends.

We believe investor’s looking for exposure to growth opportunities in the social networking arena may find QPSA attractively positioned into the next phase of its expansion. We are comfortable assigning the company a $7.00 price target that results in a P/E valuation multiple of ~18x to our 2013 estimates. We believe this is an inline multiple relative to the industry averages predicated on industry average growth expectations.

Risks (1) Highly Competitive Industry With Large Established Players. (2) Integration Risks. (3) Technology Risks. (4) Dilution Risks.






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This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.

Since Rodman & Renshaw, LLC is not a tax advisor, transactions requiring tax consideration should be reviewed carefully with your tax advisor. Similarly, Rodman & Renshaw, LLC is not a law firm and provides no legal opinions or legal advice.

Rodman & Renshaw, LLC may make a market in the securities being discussed.

Rodman & Renshaw, LLC and/or its officers or employees may have positions in any of the securities of this (these) issuer(s).

Member FINRA.
Member SIPC.
Notice Regarding Privacy and Confidentiality:

Rodman & Renshaw, LLC reserves the right to monitor and review the content of all e-mail communications sent and/or received by its employees.

This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.

Since Rodman & Renshaw, LLC is not a tax advisor, transactions requiring tax consideration should be reviewed carefully with your tax advisor. Similarly, Rodman & Renshaw, LLC is not a law firm and provides no legal opinions or legal advice.

Rodman & Renshaw, LLC may make a market in the securities being discussed.

Rodman & Renshaw, LLC and/or its officers or employees may have positions in any of the securities of this (these) issuer(s).

Member SIPC.
Member FINRA.

REF:011707RR-MN



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Brian Harvey
Quepasa Corporation
VP Capital Markets and Investor Relations
310-801-1719
brian.harvey@quepasacorp.com
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