Selfwealth Stock, page-4

Last time I ran the numbers on SWF it was 62.5c and my conclusion was that it was priced for perfection. It has almost halved since then so I thought I'd run the numbers again. To those who are emotionally invested in this stock please skip to the next post rather than replying with attacks on me like you did last time.

What has changed in the last 10 months? The competitive landscape has become much more competitive. Seem to be several well funded competitors although only one has significant number of clients. The others only recently got their funding so their impact has probably not been felt yet. SWF have attracted a lot of clients but trading numbers are much lower per client. They have launched a mobile app but I used it once and went straight back to the desktop client. SWF have raised $10M and indicated that they need to spend to retain/increase client numbers.

Last time I thought if things went well they could get to 25% market share in 3 years. Now I think they will only get 10 to 12% market share. That is approximately 150000 to 180000 clients. At current rates that is somewhere around 2.2M trades per year. At a margin of $2.10 per trade that is revenue of $4.5M. I assume that interest covers the fixed costs of the business. At this stage I expect the business to be mature. So 15 times $4.5M gives an enterprise value of $67.5M versus the current market cap of $84M.

Possible kickers: Interest rates rise much higher
Possible negatives: They need to reduce brokerage rates to compete
Large cash customers leave. The spike in cash/HIN holdings last March looks to me like they got some institutional clients on board
ANZ cuts their interest rate as it seems to be high at the moment

So how about as a takeover candidate? Currently valued at about $840 per client. I don't think anybody is going to pay that much per client for the least sticky customers of a budget broker. For instance AMAYSIM sold their phone customers to Optus for less than $200 per customer and they probably had a higher revenue per customer than SWF. Different business but still comparable I think.

Could argue that if you add the $15M of cash on hand (I don't think they'll get the 18M they touted) then it might be fairly valued at the moment.