Have been on the sidelines for a while now since this was pitched by one of my brokers some time back. I may have jumped the gun with an entry last week however it appears that this business may be getting close to a meaningful rerate. As with any small business there are fixed costs which dictate the scale that must be reached for a business to become profitable. 9SP have for years been stuck below that level.
In June they surpassed 100k users, up from 50k at the beginning of last FY and generated $8.2m in revenue so around $82 per user. Granted the revenue split is around half recurring and half deployment based so not linear but the $82/user gives some indication at least of what is required.
Early 2018 they signed contract with BNZ in NZ which went live as myBusiness Live in early 2019 and appears to be gaining significant traction. The BNZ marketing kicked off around April and their YouTube clip posted a month ago has 457k views and counting, they have also been running a TV ad campaign.
In January 2019 they launched a white label product in Singapore with OCBC bank
In March they entered a co-sell agreement with
Microsoft and a global collaboration agreement framework agreement with
Visa USA.In April they successfully delivered a paid POC to a '
Major European' bank which is currently in the initial customer testing stage.
While all of this traction is significant, it's so far incremental and the largest potential as I see it has to be the top 5 bank in the USA which they have been working with for over a year and are in advanced stage negotiations with. Wiki lists the top 5 banks as;
1. JP Morgan Chase
2. Bank of America
3. Citigroup
4. Wells Fargo
5. Goldman Sachs
In the USA there are around
30 millions SME's, a deal with any of the tier one banks will be transformational rather than incremental. 9SP would potentially be gaining access to millions of SME's in a single hit. Considering it's taken years to get to 100k this is where the game would change. Likewise the Visa USA framework has significant potential to be transformational despite the less advanced stage of the agreement. Should they miss on these two potential monsters then the companies incremental pathway to profit remains on track for 2020.
Having raised $5.3m post quarter end with a forecast burn of around $1m for the next quarter and dropping after that the company appear to be adequately funded to meet their aspirations, a kick start from any one of these major deals could in my view substantially rerate. At the target of 1m SME's @$82 a piece this would be a company generating ~$82m, land the USA bank and this is near term reality and a
ten bagger plusView attachment 1634791
