We believe +40k end users by Dec-17 is feasible (153 days / 5...

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15/08/17

22:15

Post #: 26516952
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Originally posted by Good Oil ↑

Recent research FYI... interest building imo

Investment Highlights:

· 9SP business development sales pipeline is accelerating. Recently, 9SP signed a LOI to provide a white-label version of the 9 Spokes platform to RBC, an NZ bank and has proof of concept with OCBC in Singapore. Notably there has been increased interest from North American and Australasian banks, following Barclays having gone ‘live’. The sales pipeline has been accelerated with two relationships, IBM in North America and another vendor in the Asia Pacific region. We note that 9SP is in a much stronger negotiating position today than when they signed Barclays and we are optimistic that the financials of any contract will be more favourable.

· Adoption rate of end-users continues to accelerate, with Barclays promotional roll-out on-going. Previously, 9SP announced that they have likely signed up 11.5k subscribers to its platform by the end of July. Based on current run rates of adding 1k subscribers every 5 days, and Barclays having ramped up marketing initiatives. We believe +40k end users by Dec-17 is feasible (153 days / 5 days x 1k subscribers + 11.5k subscribers @ end of July = 42.1k subscribers). This is across all channels, including 9 Spokes Direct.

· As Barclays sign paying end users, 9SP is able to benefit financially from the uplift in subscribers. Today, 9 Spokes is receiving c.NZ$200k per mth from Barclays (c.NZ$2.4m per year). This equates to c.28.5k paying end users, if 1 app is utilised (NZ$0.2m x 12)/(NZ$35 per app x 12 months x 20% commission). We anticipate an uplift in licence revenues from Barclays in Q418e to be possible.

· As at 30th June, 9SP’s cash balance is approximately NZ$21.1m. With cash receipts from all channels of NZ$1.2m+ forecasted in Q2 and expected cash outflows in the quarterly of NZ$4.9m, 9SP’s cash burn is NZ$3.7m. Future cash burn excludes any one-off revenues that may occur from signing any new customers, such as a North American or Australasian bank.

Recommendation and Price Target:

· We maintain our BUY recommendation and our share price target is A$0.45/share. Our earnings estimates are unchanged. Given the breadth of the business development pipeline and progress that 9SP has made on a range of large prospects over the last quarter, we are confident that the company is likely to succeed in winning at least two channel partners in the near-term.

· Catalysts for the share price include: 1) acceleration of end-user customer adoption, 2) additional channels in existing jurisdictions; and 3) additional channels in new jurisdictions.

Expand

We believe +40k end users by Dec-17 is feasible (153 days / 5 days x 1k subscribers + 11.5k subscribers @ end of July = 42.1k subscribers). This is across all channels, including 9 Spokes Direct.

Even the research analysts don't know the difference between "users" and "sign ups".

Only 3-5% of all "sign ups" will be active users after 1 month. Sure, there will be 40,000 free "signs ups" by December but only 1,200 will be active "users" on the platform. This is standard practice in the IT industry for free software. I'll like to see these so called research analysts recalculate their projections based on the correct formula.

Why doesn't 9SP release more details on user activity? After all, they're an analytics company.

Last edited by oggede: 15/08/17

9SP Price at posting: 12.0¢ Sentiment: Sell Disclosure: Not Held
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0 Great analysis

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