There seems to be a disconnect between what the market is...

There seems to be a disconnect between what the market is assuming and the way SHG operates and the Total Addressable Market (TAM) of $19 billion, particularly regarding what is realistically achievable.

As many investors are aware, there are three key market definitions:

- TAM – Total Addressable Market

- SAM – Serviceable Addressable Market

- SOM – Serviceable Obtainable Market

In my view, the TAM is less relevant, it's often just an optimistic sales figure that catches everyone's attention. The critical relationship among Managed Service Organisations (MSOs), SHG, physicians, and Primary Care Providers (PCPs) is an element that many seem to be overlooking here.

Currently, SHG can only capture a share of the TAM through MSOs, as it doesn’t issue licenses or payer contracts to anyone other than these MSOs.

Another crucial point is that MSOs, like PNS, cannot provide 19 payer contracts per physician. This is vital for investors to understand this in their numbers.

Each PCP or physician typically has contracts with up to 19 other MSOs, and in order for SHG to benefit, it must partner with every MSO servicing that particular physician.

For instance, if PNS has 50,000 physicians in its network, they can only bill each one under a single payer contract. Many mistakenly think this means it's 50,000 multiplied by 19 contracts, which is not accurate.

A physician may indeed have 19 different payer contracts with various MSOs, I.e 19 different MSOs on average.

It's important to remember that PCPs and practitioners do not cover these costs, the MSOs do.

MSOs bear the financial burden of image duplication, which can run into the billions annually, there incentive is to pay the licence and reduce the cost per month of image duplication by the PCPs/Physicians. They also pay the SHG licensing fees for each physician they onboard, significantly reducing duplicate imaging costs while facilitating image sharing and the other advantages offered by 3DICOM for all parties involved.

I believe there has been confusion surrounding the TAM model and the calculations involving 19 payer contracts, leading some to mistakenly multiply these figures. I saw a number of posts on X today where people were throwing this 19 around incorrectly leading to some wild numbers.

In the U.S., there are approximately 1.3 million physicians, each potentially holding up to 19 payer contracts (i.e working with 19 different MSOs) valued at $800 each, which contributes to the $19 billion TAM.

This nuance is crucial to grasp. SHG is not positioned to capitalise on this market unless it successfully partners with all MSOs in the field. We don’t need to at all, though to become valuable. My valuation is already quite significant with only a portion of the market.

Our initial ARR is more important than the bluesky TAM that is being thrown around.

For example, PNS is 1 MSO, and they are facilitating introductions to various entities within the Hopco network, assisting SHG in pitching this concept to numerous MSOs. The national rollout will not be exclusively to PNS, as they have indicated that they are meeting with MSOs and engaging potential customers which is why it is called a partnership.

SHG has suggested aiming for $30USD million in ARR this FY, equating to 37,500 annual licenses—a substantial ARR. Just this alone is massive. We got 1,000 licenses in a pilot program, to try and get 37.5k is not unreasonable at all in a national rollout to 30 different states.

This could be achieved by having a few MSOs with a few thousand physicians each adopt a license. If we onboard just a fraction of their physicians under one payer contract, say 10,000 physicians x 5 MSO, that would result in 50,000 payer contracts, generating $40 million in ARR.

Now, let’s return to the significance of these figures. If we onboard 5 MSOs and find that one physician is part of all 5 MSO networks, we could effectively generate five annual licenses from that single physician through the five different MSOs, thereby contributing to that physician’s potential count of 19 contracts. That is where I believe many have got it wrong. No MSO is in charge of giving this one Physician 19 payer contracts. It just happens if we sign on more MSOs that end up capturing a large portion of the physicians in the market. At full scale the 19 payer contracts become more important once we have hit a market share.

To me, the Serviceable Attainable Market lies with the 1.3m Physicians through the various MSOs. By default, we will have some physicians who will get multiple contracts but it is not in our nor MSOs control.

Even removing this multiplier of 19 we still have a ARR of $1bil USD Annually. It is still too large to fathom.

PME are doing $200m ARR a year…even 10% of this with our high gross margins and low capex and low cash burn business gives us a significant valuation.

If we can capture 10% of our 1.3m physicians (130k) we are sitting on a $100m ARR USD business every year. Multiplying this by an EV/Revenue multiple of say x10 and we are sitting on a $3 stock $1b MC in a couple of years. (These are all in USD).

I have not changed my thesis from the beginning, I have understood it better over the past 18 months, and although some were thinking differently on numbers and extrapolating the size off the potential market we could initially get to, I am basing this next FY 26 target of $30m USD ARR on what the company have suggested is “Possible” in a national rollout.

I would happily accept 10k, 20k, 30k licenses. Even 10k licenses is $8m ARR a year, that alone is another milestone.

I am using an incredibly low and conservative EV/Revenue here trying not to inflate the SP at all. A x10 multiple is ridiculously low, PME is well over x100. I am not suggesting we should be valued at this, just pointing to the fact we have a small under $100m MC company looking to potentially get 30m USD ARR within say 12 months and yet somehow people have forgotten this and are selling.

So yes, I am continuing to deeply research this company, add to my holdings and correspond with stakeholders to continually find reasons what NOT to like.