Are those who are bullish able to expand on why?
Obviously a growing sector and I like the outline of how they plan to become a national business, but I have significant reservations over:
- Management/board experience is not convincing. Relevant experience is either in other sectors or on a small scale. Not clear they have the necessary experience to scale a company in this sector. I like to see small caps with big hitters involved.
- Competitive advantage - Not sold there is any competitive advantage here (perhaps the local WA angle but that doesn’t mean they will be able to grow to a national company). Not my technical area of strength so maybe I am missing something, but not clear what they are going to do better than existing, more established competitors. Furthermore, lack of diversification of revenue with 90% of their revenue from cloud services (which I would have seen as the service offering with the least competitive advantage - again, happy to be corrected).
- Negative cash and negative earnings isn’t surprising for a growth company, but declining revenue from the previous year is a red flag that should have been explained. The summary skips past 2019 results by commenting on growth in revenue from 2018. Furthermore, they have only given these 3 years of performance so not able to look over a longer trend for a company that has been established since 2012 (other than a loose statement of c.25% growth between 2016-2020 which is far from evident).
Given the buoyancy and FOMO in the sector, it wouldn’t surprise me to see it start strongly. However, I am a long term investor and not enough here to convince me.
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