Supply@me Capital Share Discussion Threads

[julianw2] 15/9/2020 13:06

Lol- all out in force today aren't they.

[micky67] 15/9/2020 13:05

News incoming guys as these B#stards flood the boards to gather shares just before RNS time. Hold on tight and buy more now before we head right up again.

[different world] 15/9/2020 13:03

jaytee1 - I don't frequent the LSE boards, but if anyone here does they are welcome to cut and paste and use it.

[bbmsionlypostafter] 15/9/2020 13:01

julianw2
Member since: 14 Aug 2020

LOLS!

[julianw2] 15/9/2020 12:59

Roger another paid troll - run along its dinner time - kiddies in the playground

[inayatk] 15/9/2020 12:59

Hindsight is a great Roger but point accepted

[mickluv1] 15/9/2020 12:53

I'm not kicking myself and I know a few other large holders that aren't!What's your position roger

[roger148] 15/9/2020 12:51

Can see the hysteria on this share is subsiding with volume dropping off. Many are kickint themselves not dumping at 0.08Now look at the price could it drop another 50% from here May well do

[jonc] 15/9/2020 12:50

Insiders are selling.It is a boardroom pump and dump hence the transfer of shares with more to come.

[jonc] 15/9/2020 12:48

I earn more than you goofy.Kerching......

[jaytee1] 15/9/2020 12:46

Can you put this on the LSE BB too please?

[tburns] 15/9/2020 12:42

It is the director investment at 0.7p that keeps my heart from beating too fast! Great top up opp here

[tburns] 15/9/2020 12:42

It is the director investment at 0.7p that keeps my heart from beating too fast! Great top up opp here

[trying2getrichquick] 15/9/2020 12:34

Very true!

[different world] 15/9/2020 12:31

And as MD of a well respected company, he's not a crook unlike Pizza man.

[trying2getrichquick] 15/9/2020 12:16

Also, for anyone doubting that Alessandro Zamboni isn’t a millionaire, he was MD of Nike in Italy for 11 years. I can assure you that he was not on minimum wage 😀

[trying2getrichquick] 15/9/2020 12:11

If no one has read it -

Supply@ME Capital PLC - Initiation
Innovation in supply chain finance
Supply@ME Capital PLC (LON:SYME) offers an innovative technology platform to provide inventory monetisation, which can enable a wide range of manufacturing and trading businesses to improve their working capital position (via a “true sale” of the inventory to special purpose vehicles incorporated by Supply@ME) and also provide a new asset class to investors.

Supply@ME delivers this using a service model that brings together funders with companies across a range of industry sectors, through a securitisation programme. The structure works via special purpose vehicles (“Stock Companies”) that are the commercial counter-parties of the manufacturing or trading companies. Supply@ME is operating as a pure service provider, rather than acting as a lender through its balance sheet.

The inventory monetisation system is typically used by client companies on a multi-year basis. In this sense, it is not a quick cash solution for businesses. Nonetheless, the model is finding new demand in the current business environment as companies seek to free up working capital and investors search for decent yield in high quality fixed income instruments.

The business trajectory:

Supply@ME attained a London stock market listing in March 2020 via a reverse takeover with a company called ABAL Group. It is important to note that the former operations of ABAL are unconnected with Supply@ME (and are not owned by Supply@ME).

Supply@ME has a deep pipeline of inventory to be securitised on behalf of client companies — some €1.3bn of inventory, of which around €0.5bn is ready to be served/for execution by virtue of the completion of the onboarding process. During the second and third quarters of 2020, Supply@ME will undertake the issuance of the securitisation notes for these inventories, kick-starting the fee income revenue stream for Supply@ME. We believe that this could represent a material catalyst for the share price.

Financial outlook
As the securitisations are executed during the remainder of the current financial year, we expect a substantial uplift in revenues for Supply@ME. With limited incremental costs to be incurred, we are also forecasting a strong level of profitability for the company in the full-year (FY) to end-March 2021, with further growth in the coming years.

In this report, we examine the potential valuation upside for the shares (p11). We argue that there could be some 200% upside based on the complete execution of the pipeline of business. We believe that the current share price implies a substantial discount factor applied to the inventory securitisation pipeline. We argue that the business plan is supported by a unique service offering to client companies and the funders, delivered by a proven technology platform.

Year end Mar 31 Current 2021 2022 2023

Revenue, EURm (or €mln) 0.8 24.0 44.0 56.0
EBITDA, EURm (or €mln) (0.5) 19.4 32.5 36.7
Net Cash, EURm (or €mln) 1.7 15.8 37.9 58.8





Source: Proactive Research
As shown by the chart (above left), the largest segment of the European SCF market is receivables financing. This end of the supply chain already has a growing eco-system of finance providers offering services such as factoring and reverse-factoring. The inventory end of the working capital cycle is less well served, and this is the opportunity for Supply@ME.

Supply@ME has a substantial existing pipeline of inventory securitisation customers who have signed up to use the system. During the second and third quarters of 2020 the company will be marketing securitisation notes to investors.

To be clear, investors in Supply@ME Capital PLC shares are not buying the securitisation notes or gaining direct exposure to them. The notes are a separate investment instrument, with Supply@ME generating fee income on the issuance of these notes.

Big revenue uplift anticipated in FY March 2021

Based on the intended schedule of issuance, Supply@ME will realise a substantial uplift in revenues during the remainder of 2020, based on the fees generated on the securitisation notes issued. Successful delivery on the current pipeline should help to attract additional corporate clients in our view, and we expect revenue growth to therefore continue in 2021-2023. This revenue carries a strong gross margin for Supply@ME, and we therefore believe that the company also has a strong potential ramp-up in profits.

The following chart shows our forecasts for revenue and profit for 2020-2023.

Supply@ME growth outlook - years ended March


Source: Proactive Research
Three key differentiators of the Supply@ME business model

Details of our financial modelling are on p12-13.

In summary, we argue that the Supply@ME business model has a number of compelling attractions for investors:

Addresses a large and under-served market
A unique and rapidly scalable technology platform
A fee-based model requiring no risk capital to be put up by Supply@ME
Inventory ties up a large amount of working capital for many businesses

The need

Working capital management is a big issue for companies across a wide range of industry sectors. In particular, companies can often have a lot of money tied up in inventory. The following are typical figures for Days Inventory Held by different industry groups according to Supply Chain Digest:

Aerospace and defence — 47 days
Speciality chemical — 40 days
Food retail and wholesale — 23 days
Diversified industrials — 42 days
General retail (non-food, non-apparel) — 62 days
So, for example, a general retailer would have 1/6 (62/365) of a year’s worth of sales tied up in inventory.

The following schematic illustrates inventory within the context of the whole working capital cycle.

Inventory funding is the underserved segment of the working capital cycle

Working capital finance


Source: Supply@ME Capital
What Supply@ME provides is a funding solution for the inventory end of the working capital cycle, allowing businesses to reduce their Days Inventory Held, and therefore to free up balance sheet resources to be deployed elsewhere in their business.

The solution

The following schematic illustrates how the Supply@ME inventory monetisation solution connects companies with funders.

Supply@ME connects funders with companies wishing to release working capital

The Supply@ME business model


Source: Supply@ME Capital
The relationship between the three actors — the client company, Supply@ME, and the funders — can be characterised as follows:

The client company holds inventories of tangible value and with a known customer base. The client company wishes to free up working capital.
Supply@ME forms a special purpose vehicle called a stock company. This entity buys the inventory, leaving it physically located on the client company’s premises. The purchase is financed by the issue of securitisation notes, an asset-backed investment instrument.
The funders buy the securitisation notes. They will receive an interest payment, known as a coupon in bond market terminology, and receive their principal back when the inventory is sold to its end customer.


A unique and operationally robust technology platform



The inventory monitoring platform

The Supply@ME technology platform provides a unique set of legal & digital capabilities that allow the transfer of ownership and the continuous monitoring of the inventories.

The platform enables the establishment of a legally backed digital version of physical inventory. This forms the basis for the transfer of funds to the client company, without physical transfer and is backed by a system of risk controls. The inventory is tracked based on an initial accurate assessment of client inventory control systems, using state of the art tracking technologies (and soon also the Internet of Things). The system creates an indelible record of transactions (distributed ledger) and an interface between client company systems and Supply@ME’s databases. This allows Supply@ME to monitor the progress of inventory towards sale and establishes triggers for any breach of terms or losses.

Also, the distributed databases are based on the securitisation reporting in order to create a trusted and transparent digital environment for the benefit of the funders.

Residual risks

In the event that the client company is unable to redeem the securitisation notes, then the inventory remains the property of the stock company. In order to mitigate any risk of losses in this situation, Supply@ME establishes a contractual agreement with resellers (“re-marketers”), at the start of the process, who will sell the inventory in the event that the client company has defaulted.

Furthermore, insurance policies are put in place with investment-grade insurers, against any risk of inventory damage, inventory fraud, or reseller non-fulfilment.

The measures help to ensure that the securitisation notes represent a low-risk fixed-income investment for the funders.

The monetisation model

The following schematic outlines the timeline for money changing hands, including the upfront fee model by which Supply@ME gets paid for its services.

Upfront fee income for Supply@ME, with no balance sheet commitment

The Supply@ME business model


Source: Supply@ME Capital
This illustration is based on a single payment cycle. In practice, companies will be signing up to use the Supply@ME service on a rolling basis, typically on a three-year contract. So at t+n in the diagram (above), rather than the client company repaying its principal sum, the company would put forward another consignment of inventory, continuing the securitisation note legal life-cycle.

Management team

As with any company introducing new innovations into the market place, an important consideration for Supply@ME Capital has been assembling an executive team with the right breadth of experience to deliver on the company’s strategy.

The following biographies summarise the background of some of the Supply@ME board members:

Chairman: Dominic White

White (47) has invested in public markets and private equity for 25 years. He has acquired and managed more than £3.0bn of assets across Europe, and held board positions at a number of public companies including KCR Residential (2017 onwards), REIT PLC, Eight Capital Partners PLC (2018 onwards) and Limitless Earth PLC (2014-2015, including its flotation on AIM), as well as at international investment institutions such as Security Capital European and Henderson Global Investors (2000-2005). He is a member of the Institute of Chartered Financial Analysts.

Chief executive officer (CEO): Alessandro Zamboni

Zamboni (41) specialises in financial services and related strategic and digital models, and has wide experience in advisory and training. Since 2008, he has managed the delivery and the sales operations of a consulting company specialising in regulatory & internal controls for banks and insurance firms. Zamboni founded the AvantGarde Group, the parent company of Supply@ME, in July 2014. He is also co-founder of Assofintech (Associazione Italiana Fintech e Insurtech, 2017), a fintech association representing more than 120 fintech companies in Italy. Prior roles include marketing consultant at L’Oréal (2001-2002); managing director (Milan) at NIKE (2003-2014).

Non-executive director: Susanne Chishti

Susanne Chishti (48) is the CEO of FINTECH Circle, Europe's first angel network focused on fintech opportunities & is founder of the FINTECH Circle Institute, the leading fintech learning platform offering innovation workshops to C-level executives and online courses. She is also the co-editor of The FINTECH Book (which has been translated into 10 languages and is sold across 107 countries), The WealthTECH Book and The InsurTECH Book (WILEY 2018). Awards include: Social Media Influencer of the Year 2018 (Investment Week); Top 7 Crypto Experts globally 2018 (Inc Magazine); City Innovator - Inspirational Woman in 2016; European Digital Financial Services ‘Power 50’ (2015). She has also been a fintech TV commentator on CNBC and is a guest lecturer on financial technology at the University of Cambridge. Chishti worked for more than 15 years at Deutsche Bank, Lloyds Banking Group, Morgan Stanley and Accenture in London and Hong Kong.

Non-executive director: Enrico Camerinelli

Camerinelli (57) is author of "Measuring the Value of the Supply Chain," and an advisor on transaction banking strategies, supply chain finance, blockchain and treasury management systems. He is a regular participant at major industry events (SIBOS, EuroFinance, World Trade Symposium, Association of Finance Professionals) and contributor to publications such as the Financial Times, and The Wall Street Journal. Prior experience includes: consultant editor, Finance Director Europe (2007-2010); senior analyst at Celent (2008-2010); co-author of ‘Supply Chain Finance EBA European Market Guide (2013); consultant editor gtnews (2010-2015); co-founder of NdT Il Naso di Tommaso (2017-2018) — a collaborative incubator; vice-president, Council of Supply Chain Professionals Italy (2015 onwards); member of the Italian delegation UN/CEFACT (2015 onwards); UN European Commission Supply Chain Programme Development Area member (2015 onwards); senior analyst, Aite Group Europe (2010 onwards).

Key milestones in the company's development

Progress

Supply@ME has reached an important juncture in its business development, having established a robust legal & technology structure, with the first securitisation notes now coming to market (expected in the second quarter of 2020). The following points outline some key developments for the business thus far.

2014 — Business originally founded as part of the AvantGarde Group.
2016 — First pilot project, inventory monetisation for an electronic goods distribution company
2017 – 2018 — Second pilot project, for a major Italian meat processing enterprise
2018 — Supply@ME established as a separate entity within the AvantGarde Group via a NewCo structure
2019 — Partnership formed with SIA SpA to extend the technology platform and completion of the new legal structure focused on a scalable securitisation framework
March 2020 — Supply@ME attains a UK stock market listing via reverse takeover deal with ABAL Group.
April 2020 — Supply@ME engages StormHarbour Securities LLP to manage the distribution and placing of securitisation notes.
Supply@ME is an entirely new company to the UK stock market, via March 2020 reverse takeover

In terms of the stock market listing that Supply@ME attained in March 2020, it is important to note that Supply@ME does not have any operational association with the old ABAL Group. ABAL was trading as a cash shell under AIM market rules, having disposed of all of its operating assets. Old accounting data listed under the SYME ticker relates to the former ABAL businesses that are not part of Supply@ME and never have been.

As a newly listed company, Supply@ME poses a question for the market in terms of what industry categorisation should be applied. The London Stock Exchange website currently applies the category “Software̶1;, possibly just a continuation of the category applied to the old ABAL Group. One alternative categorisation would be “Financials221;; however, this would give rise to a potentially misleading peer group, as Supply@ME is not a bank or a lender or indeed any kind of balance sheet based business.

The company can be viewed as part ICT, part asset manager

Our own view is that Supply@ME could be viewed as partly an ICT (information and communications technology) company and partly an asset manager overseeing investments of inventory on behalf of the funders. This issue of industry categorisation is important when it comes to assigning a valuation multiple to Supply@Me (discussion on p11). Looking forward, the securitisation programme covers a deep backlog of inventory securitisation that has been agreed with corporate clients.

Pipeline of securitisations


Source: Supply@ME Capital
In this context “pipeline̶1; means contracts originated and under the onboarding process by virtue of a term sheet signed.

“Ready to be served / for execution” means that the operational contract and integrating procedures are complete so that the stock company is ready to purchase the inventory.

The final point that we would highlight on the business development timeline is the partnership with SIA SpA.

Partnership with SIA

SIA is the European leader in the design, creation and management of technology infrastructures and services for financial institutions, central banks, corporates and the public sector, in the areas of card & merchant solutions, digital payment solutions and capital market & network solutions. SIA Group provides its services in more than 50 countries and also operates through its subsidiaries in Austria, Czech Republic, Croatia, Germany, Greece, Hungary, Romania, Serbia, Slovakia, and South Africa. The company also has branches in Belgium and the Netherlands and representation offices in the UK and Poland.

The partnership allows Supply@ME to leverage the SIAchain distributed ledger infrastructure. This is the blockchain element of the Supply@ME system that enables the legally binding inventory transfers. Partnering with SIA allowed Supply@ME to create an unrivalled system for secure and undeletable tracking of inventory on consignment and a trusted data environment for the benefit of securitisation notes funders.

Financials

We believe that Supply@ME is on track to realise a significant step-up in revenues in FY Mar 2021 and that there is strong scope to continue growing this in the coming years.

The following chart summarises our expectation for inventory under management and revenue for the period through to FY March 2024.

We note that within these forecasts for inventory under management, the first €1.28bn is already contained within the pipeline from existing client companies, of which €0.5bn is ready to serve.

Revenues track inventory under management

Our forecasts - Inventory under management, and revenue


Source: Proactive Research
The revenue recognised by Supply@ME corresponds to net fee income generated from the issuance of securitisation notes. This is broadly proportionate to the value of notes issued, which in turn is closely correlated to inventory under management. Hence, our revenue forecast essentially tracks the figure for inventory under management.

In terms of profitability, Supply@ME will report two streams of profit & loss (P&L) costs:

Cost of goods sold (COGS) includes the cost of delivering the inventory monitoring system, including amortisation of the intangibles relating to the technology platform, and also the direct selling costs of the securitisation notes.

Operating expenses include general marketing expense, central costs, and management expenses.

We expect the COGS to remain fairly consistent at around 20% of revenues in the coming years, and hence COGS rises in line with revenues. We also expect some increases in operating expense as the company seeks to consolidate and expand its market presence.

The following chart illustrates our assumptions for costs relative to revenue over the period through to FY March 2023.

A strong 'drop through' of revenue into profit

Revenue converting into earnings before interest and tax


Source: Proactive Research
Based on our assumptions, Supply@ME becomes profitable already in FY Mar 2021, with profit growing robustly thereafter.

In order to support its growth strategy, Supply@ME will make further investments in the technology platform and in marketing expenses. The following chart shows our expectations for further investment relative to earnings before interest, tax, depreciation and amortisation, or EBITDA (as a proxy for cash profit).

Investment requirements are covered by EBITDA

Investments versus EBITDA


Source: Proactive Research
We believe that the investments required by the current business plan are covered by cash flows from the business.

Valuation and conclusion

Finally, we consider the potential share valuation for Supply@ME based on our financial forecasts for the company.

Valuing Supply@ME using peer group multiples is not a straight forward exercise. Comparing Supply@ME with speciality finance companies inevitably means a comparison with companies that are essentially lenders, and this is absolutely not the Supply@ME business model.

Instead, we argue that Supply@ME should be viewed as partly an ICT (information and communications technology) company and partly an asset manager overseeing investments of inventory on behalf of the funders.

The following table shows valuations for some UK listed mid-cap and small-cap asset management companies, on enterprise value to sales (EV/Sales) and price to earnings (PE).

Valuation multiples - Asset Managers


Source: Proactive Research, and market sources for consensus forecasts
The next table shows the valuation multiples for some UK listed ICT companies. Finding suitable peers is more difficult among ICT companies than asset managers. A lot of early-stage, high growth potential technology companies have no immediate prospect of profits, or sometimes even revenues, meaning that there are no multiples. And in terms of finding companies that offer similar technologies to Supply@ME, there simply aren’t any; however, the following companies provide some examples of ICT company valuations in the UK market.

Valuation multiples - ICT companies


Source: Proactive Research, and market sources for consensus forecasts
Potential for over 200% upside for the share price

Based on the lowest P/E multiple in the above tables (14.4x), and our forecast of 0.042p of earnings for Supply@ME in FY Mar 2021, the shares would trade at 0.71p versus the current share price of 0.19p.

Looking out to FY Mar 2022 or 2023, the EV/Sales multiples would offer similar upside.

We argue that the current share price implies a high degree of risk premium being applied to Supply@ME. We believe that this could narrow significantly based on successful execution on the current round of securitisation note offerings, due in the second and third quarters of 2020 (calendar year).

Financial models

The following tables summarise our financial forecasts for Supply@ME Capital

Income statement


Source: Proactive Research
Balance sheet


Source: Proactive Research
Cash Flow


Source: Proactive Research

[mikerocky] 15/9/2020 12:05

More buys than sells every day, yet the price drops. Don't fall for the MM games