I like your analysis and agree with pretty much everything there. My only comment would be around the revenue multiple assumptions which appear arbitrary in nature.
The way I would look at the revenue multiple would be to determine a revenue multiple based on the Life Time Value of the customer. The equation would go something like this:
Life Time Value = ARR / (1 - churn rate) * Gross margin
DSE disclose all this info and I would guess it goes something like this:
LTV = $6.65m / (1 - 14%) * 63% = ~$30m if we then divide by the ARR, this would give us a revenue multiple of 4.5x
The biggest question mark I have is around the churn rate, whilst it's disclosed at ~3%, this relates to the Partner whereas I think this is too low as it implies the customer would use DSE for >30 years which seems a bit long. In comparison, the annual churn rate of say Xero is ~14% which equates to a customer sticking around for ~7 years and seems more reasonable given both customer bases are SMEs. We could however use somewhere between 7yrs and 10yrs and this would result in a revenue multiple range of 4.5x to 6.3x or 5.4x at the mid point.
I would say the current business is therefore worth btw $0.054 and $0.065 however this doesn't take into account the growth in the business. To highlight this, Xero currently trades at twice the LTV however I would prefer not to pay for that in order to be conservative.
Having said this, given the business appears to be growing its ARR at ~5% per month, I'm happy to assume the value of ~$0.06 and to see the business growth/valuation grow MoM by 5%.
DSE Price at posting:
5.0¢ Sentiment: Buy Disclosure: Held
(20min delay)