When one does the math, it becomes apparent that 15c is likely in the near future for 1ST Group, driven by accelerating growth in number of sites and increases in average revenue per site.
1ST continue to re-iterate that they will be reaching cash-flow breakeven in the near term. Whether that is in 6 months time or 9 months time is important but less relevant than the end state itself. Once 1ST reach breakeven, they will be generating around $2m in revenue per quarter. That is annual revenue of $8m and growing.
1ST has all the other hallmarks of a strong SaaS business that investors wish to see. Strong leadership, high gross margin, large market size, and competitive advantage. Moreover, the largest competitor seems to be crashing down to Earth. One of 1ST's advantages is TRUST and privacy. It is embedded into the D&A of the company.
The average high growth SaaS business, (let alone an above-average business such as 1ST), trades on a 6x revenue multiple on the ASX. So, we can put the pieces together... 1ST will in the near future be exceeding $2m rev per quarter or $8m per annum. This is being led by the new major partnerships such as Medibank, Bennestar and St Vincents Health. On a conservative 6x revenue multiple on break-even revenue, this is a market cap of $48m.
Given that there are 355m shares on issue, (with a very impressive top 20 register I might add), a market cap of $48m equates to a share price of 13.5 cents. This is the conservative end of the range, because there are countless examples out there of similar businesses trading on a 10x multiple. That would be a share price of 22 cents for 1ST on break-even revenue...
I think the Q4-FY19 results will be important to show that revenue is beginning to accelerate and this will be released to the market soon. The next few months will present the last remaining chances to accumulate below 10 cents. We are still largely flying under the radar relative to other microcaps, but I am confident that 1ST will soon hit the spotlight big time.
There has never been more interest in 1ST than right now*, we've had some great results so far, but this is early days in a long journey for this company, looking forward to when this RUNS..
Good luck all and enjoy the ride.
Notes: * June 2019 was the highest volume month on record, surpassing May 2019.
1ST Price at posting:
6.3¢ Sentiment: Buy Disclosure: Held
