Following @mikebrisy 's SPZ results update, am firming up thoughts to open a position on SPZ with excess cash from the unplanned exit from AD8.
Listened to the SM interview with Paul and Richard from Feb 2024. It is a bit dated, but still very useful to get an understanding of the business. Also went through @Strawman 's notes from 3 or so months go.
It is a very simple business to understand, thankfully! Have not fully digested the recent results, but wanted to document my initial thoughts and pause a bit prior to pulling the trigger on a starter position to get going.
Investment Thesis
- Huge TAM, theoretically "all car parks in the world in countries that have a friendly legislative regime around providing car/driver information" - SPZ is just starting in each of the countries that it is in, so growth ahead is huge
- Financials are very compelling - FCF $13.3m, cash $12.7m, revenue up 42% YoY, EBITDA up 47% YoY, EBITDA Margin a healthy 26.6%, already profitable with NPAT up 47% etc
- Sites have grown at a fast clip - 45% in FY25, across multiple countries
- US Peak Parking acquisition will accelerate the growth across the US
- Win-win for customer and SPZ - monetise car park assets at no/minimal capex cost to customer, in return for shared revenue to ensure "car parks are always available to genuine customer"
- Low-ish capex requirement per site (reminds me a lot of MTO!)
- Share price is now at the same price as the capital raise for the Peak Parking acquisition - not a bad time to join the party
The Risks
- Changes in regulatory framework can hurt - Qld, Denmark, de-risk by expanding to more countries
- Product is not super long-term sticky (as compared to say, SAAS software like XRO, SDR), customers can leave at the end of contract and go with someone else - de-risk with good service
- There are lots of competitors - de-risk with good service
- Technology does not appear to be uniquely proprietary to SPZ, feels like there are viable technical solutions which a competitor can provide - not a high entry barrier/insurmountable moat - - de-risk with good service
- High dependence on maintaining high human-based service to customers, it is not an install and leave situation like software - Paul talked about the need to constantly touch base with customers etc, ongoing dependence on good sales force
It looks like a very exciting business to own. But my niggling fear is that the moat is not as watertight as I would like it to be, which holds me back a bit, but hell I can be convinced!
Much appreciate if SPZ holders could glance through and point out anything missing or incorrect, particularly the risks.
Discl: Not Held, but looking to open position
