The flaws in the analysis are pretty obvious in my opinion. They put a revenue multiple based on the mean of huge SaaS companies (mean market cap is $4.3B and median is $1.6B).
Velpic requires a risk premium compared to these players.
Further, his analysis is an isolated snap shot in time. Velpic has a significantly deeper pipeline of growth compared to the big SaaS players. Growth is exponential and if realised Velpic will be rerated compared to these companies that are further along the exponential curve.
Just to be humorous, let me do a terrible rough analysis of more appropriate SaaS peers given their nature on the growth profile and market cap:
The research reports are really difficult to compare as they changed the Year End.
First Report:
Second Report:
They also really make it annoying to read because the 31 December 2014A and 2015A results are just duplicates of the 30 June results presumably because it was a private company and they did not have the exact information.
It makes it look like the half year result drops from revenue $2.6M in 2015A to $1.9M in 2016E which is not actually correct.
At the end of the day it is just a research report that has an upward valuation. Personally, I think the valuation method is flawed but I also agree that it is a diligent process to cover Baillieu Holst's legal liability as they represent clients. Throwing huge multipliers looks bad if things don't work out (damages reputation) and tactically it is better for research houses to incrementally revise upwards as certainties are hit.
I would not be surprised if we hit 8c that they revise it upwards by swapping numbers around!
I know some people are disappointed by having an 8 cent target but I am suggesting that if you are a long term holder there is little concern.
Private investors know the long term value of this company without the whole 'consensus estimates' and 'firm reputation/client maintenance' considerations when conducting their valuations.
I agree with the principle that greater eyes covering this security the better it is for long term holders so I welcome the report
P.S. Sorry for my essays!
