Quick and dirty "valuation". Management considers a revenue of ~$20M achievable by 2023. Considering the company sells hardware and software (i.e. not a pure SaaS business) and considering that this revenue could double by 2028, I will give a price/revenue multiple of say 5. Hence, arriving to a market cap of 100M by 2023. I assume the company will come back to the market in 4 quarters to raise some fresh capital, therefore increasing the share count to 120M. The share price will therefore be ~$83 cents.
This business appears this business is quite undervalued. Am I missing something?
New contract announcement.
Overall it's good news, but some things in small print at the end of the attachment need to be brought to attention. (I have brought this up in my notes).
SP3 released an annoucement today providing record revenue numbers for Feb 21 of $471k and Jan 21 of $404k.
They also signed Surf Life Saving WA. TCV of $250k.
Additional hosting, maintenance and web interface subscription revenues will be paid over 24 months following installation. Penetration in the utility markets with 10 new Spectur systems installed since start of the year.
The thing is that the record revenue figure were released the day before in the NWR presentation slides. The only new information was the Surf Life Saving WA contract and utility sales.
The market didn't really react much yesterday with only a +4% increase. But today, it pops on the reopen +26%.
You just needed to dig a bit deeper to get the information by going through the slides which would have enabled you to by yesterday rather than the more expensive prices today.
really wish I had a decent amount - have order at a lower price that will probably not be filled, now
Please see the attached document for my thesis on the valuation.
(Please correct me if I'm wrong, but I was not able to attach the document directly to my valuation).
End result was intrinsic value @ 10.2 cents.
SP3, a small company that I've been following for about a year now, may provide an attractive investment opportunity, given the escribed value given by today's market. (~7.5mc).
A bull case & valuation will follow, but for now just a rather in detail overview.
**I don't own SP3 shares, but do hold them on Strawman.
Had a quick glance at Spectur, a tiny little company (~$8m market cap) that develops remote sensing systems. They're pretty impressive, largely self sufficient units that can have high definition and thermal vision, and connected to smart cloud based software, storage and control. They're mainly used by utilities, and for Government and Construction sites.
At the latest half, the company reported revenue of just over $2m and a loss of $1m.
Roughly half of revenue comes from renting out a fleet of units to customers, and the other half from associated SaaS products. In total they get a roughly 60% gross margin.
On a run-rate basis from January levels, which picked up from a covid induced slump, Spectur is looking at $3m in annual revenues. That'd bring it much closer to breakeven, assuming they can do it.
It seems that the key thing to watch is the growth in the rental fleet, as that feeds the SaaS business. Spectur now has 350 units in the field, having grown from 0 in 2017. But numbers here have been flat over all for the past year or so, supposedly due to covid. Really good to see a strong start to the second half, but i'm mindful that sales tend to be especially lumpy for small businesses. Too early to tell if there's genuine traction.
I also have no insights into the competitive nature of the industry. As an outsider, Spectur's tech looks pretty cool, but I have no idea what else is out there, and how it compares. I might be wrong, but it's hard to see what competitive advantage you could have in this space; i dont think any of the (hardware) tech is proprietary.
I also dont know what the SaaS offering is like, but there'd be a lot of intense competition here in terms of image processing applications. That being said, the system is open to 3rd party integrations, and demand for things like AI, analytics, face recognition etc could be a good driver of unit sales.
The company has around $2m in net cash, which isnt a huge amount of wiggle room. They may need to raise again.
Shares are very thinly traded too, so will be very hard to build any reasonable position, and it'll be very volatile.
Anyway, it's something I might keep on a watch list.
SP3 Signs Emergency Response Beacons Sales Contract
~ Spectur signs largest single value Sales Contract to date.
~ Contract is for the design, manufacture, supply and services associated with Emergency Response Beacons for Surf Life Saving NSW.
~Spectur will earn upfront hardware and engineering revenue as well as ongoing service fee revenue for maintenance, data provision, cloud hosting and camera software access.
25 Nov 20: Small illiquid microcaps with savage share price flucuations has been one of the aspects of the market in 2020.
SP3 annouced good sales in October after disappointing this year. A massive share price appreciate to almost double the recent 5c capital raise price. Profit takers have come in but still holding at this stage.
The share price has fallen significantly since it's IPO and highs of >35c.
So it could go significantly higher if it can absorb the selling pressure and the sellers dry up.
Spectur Limited (ASX:SP3) Launches Spectur NZ
Spectur Limited (ASX:SP3) Sales and Pipeline Update
Hidden gem microcap whose momentum go slowed up by covid however have put on experienced sales reps in different states, have a new product to sell, and their target markets are hotting up. CEO wants to take it from a $6M company to a $20M company. A great 12 months ahead.
Microcap that has lost 85% of share price value since 2017.
But key metrics within the business itself are positive growing revenue by 250% and cutting cashburn by 70% in a similar timeframe.
Key valuation metrics suggest it is undervalued if eventually valued as a technology company:
But appears it is currently valued as an industrials equipment company with SaaS being a minor part of it's product.
If they can continue to develop R&D tech value so that they are perceived as more of a blue sky stock there could be a step change in valuation.
Cash burn is a little higher than I would like at around -$2m annually but sometimes this isn't a main factor for analysing microcaps as long as solvency is not a major risk.
Revenue growth has trended positively in recent years (accounting for Coronavirus effects in 2020) and as you would like to see for the possibility of breakeven cashflow within coming years, so if they can continue that trajectory results will be interesting with plenty of upside possible for share price.
15 Aug 20: SP3 offered a Share Purchase Plan (SPP) for $500k @ $0.05. They took oversubscriptions to end up raising $945k. 3 of the directors applied for the full amount of $30k each and were scaled back. Normally you expect to see the share price head lower towards the SPP price but there has actually been increased volume and price.
Significant insider buying
5 May 20: Cooper +400,000 for $23,200 @ 5.8 [1.5m]
24 Apr 20: Dyson +165,000 for $10,230 @ 6.2c [1.08m]
24 Mar 20: Cooper +250,000 for $20,000 @ 8c [1.1m] off market from founder
24 Mar 20: Bodeker +250,000 for $20,000 @ 8c [363,424] off market from founder
17 Mar 20: Dyson +293,000 for $20,519 @ 7 [893,300]
25 Oct 19: Biljana Smith +200,000 for $21,087 @ 10.5 (200,000)
24 Oct 19: Darren Cooper +100,000 for $11,000 @ 11 (850,000)
26 Aug 19: Darren Cooper +394,398 for $51,272 @ 13 (750,000)
26 Aug 19: Gerard Dyson +307,693 for $40,000 @ 13 (500,000)
16 Apr 19: Stephen Bodeker +76,923 for $10,000 @ 13 (113,424)
11 Apr 19: Darren Cooper +155,602 for $nil (in lieu of cash for NE Chair fees)
5 May 20: EGP Capital become a substantial holder briefly and then ceased to enable a sell down from the previous CEO. This has removed an overhang of shares. EGP is positive about the long term nature of its investment but it is too small market cap for EGP.