With respect I have a completely different view so this should be discussed.
First Report:
Second Report:
NOTICE: The year end date changes. They are not comparable data. One is based on full year results whilst the other is half year results. This makes sense as the 2016E 31 December is $1.9M and we know that the company makes more than this on an annual basis! So this is actually just a half year figure which you are comparing to the full year figure in the first report.
This is further exemplified by Page 1 of the new report which states "We have updated our model with minor changes to reflect actual FY16 numbers".
Basically, they wanted to give clients forecasted half year figures. These are not downward adjustments to their original forecasts!
Concerns of Customer Growth
The 15% customer growth month on month is different from revenue growth! Don't get this confused with monthly revenue figures!
I refer readers to announcement Velpic February 2016 Investor Update where Page 7 customer growth was 14% for the December Quarter.
This is all in line. Nothing has changed!
20% month on month was the historical revenue growth. Remember enterprise clients who are contracted take 3-4 months to begin cash inflows.
Valuation Methodology
Appreciate that broker reports have 'client maintenance' considerations. Having a huge upward valuation looks bad during volatility and they would prefer to incrementally revise upwards once we find support at 8c.
I don't understand the logic behind their valuation method. They compared Velpic to $1B+ SaaS companies that are on a completely different part of the exponential curve.
Simple finance dictates that a start up SaaS company requires a risk premium to these players to begin with...
Personally, if I was taking a multiplier approach to valuing this company I would have:
(a) Found 30 SaaS companies at the similar stage of revenue growth profile (Not $1B+ companies); and
(b) Applied the multiplier calculation to the annualised revenues from Velpic Platform alone and not the combined Velpic & Dash Digital.
This would have resulted in a huge multiplier but a lower revenue base (they applied their multiplier to combined Dash Digital and Velpic Platform revenues). You can understand what this methodology does to the target price though (Do your own due diligence. I have.)
hence why they did not choose this method given their responsibility to clients.
General Commentary
My view is that cash flows are within budget as forecasted revenue growth has not declined. It is merely confusion caused by adjusting calculation dates between the broker reports. The first report is based on Full Year Revenue whilst the second is Half Year Revenue.
This is why their price target has remained the same.
Open to thoughts and questions but I will be unable to respond for the remainder of today.
Just helping the team digest the information! Enjoy your Sunday afternoon!
