ASX trading volume of 37.4 M trades fo the month of August,  almost the same as the record March 2021 volume of 37.5 M trades.   

SWF Q1 2022 revenues will be much stronger than Q4.  

It's a shame management decided to raise capital at the worst possible time. 

DISC. - HELD

$15 m of capital to be used over the next 18 months as follows:

• $3.5 M for marketing.  They have very low customer acquisition costs, and if this can be maintained, is a good allocation of capital.  
• Technology development: $7.3 M.  Resources have been applied to improve their IU to date, and the return on this investment has been poor in my opinion.  The new CEO may be able to improve the outcomes here.  Time will tell. 
• Data strategy and infrastructure: $2.2M. Presumably to analyse marketing strategy outcomes and UI feedback?  
• Additional headcount: $1.4M.  More overheads.  HR manager presumably, and 3 other staff. 

The above investments are clearly to improve Selfwealth's ability to take on the 'Big 4' head on, and differentiate their offering from the likes of Stake, etc.   

Notably, they have not committed to a crypto offering and have deferred the implementation timing, AND it appears Selfwealth are looking to implement their own exchange rather than partnering with an existing exchange.   This makes much more sense and should be within their capability, and will result in a better ROI. 

This capital will ensure Selfwealth's growth can continue, but the question is, will they extract a return on this capital if competition intensifies.   

DISC - I HOLD.   

Key takeaways:

1) Revenue down 12% Q on Q.  Refer point 3 for why.

2) Active traders up 11% on prior quarter to 95189.  

3) Number of Oz trades per active trader fell to 3.5, down from 6.6 in the prior quarter.  This si the lowest recorded trade volume per active tader in the past 3 years, and well down on the average of 4.9. 

4) Cash held up 4% Q on Q.  

5) New product developments - instant cash trasnfer - Q1, and crypto product in Q2.  It is unclear what the crypto offering will entail.   With new crypto adresses growing over 10% this year, this could be a good product differentiator, if executed well.  

DISC - HELD.  

We are currently in the middle of the crypto "alt-season", which occurs at this time in the Bitcoin halving cycle.   It is having a noticable impact on the use of sharemarket trading platforms.   I have compared a leading Crypto platform, Swyftx.com.au's web traffic since the beginning of the year.  As one can see on the attached graph, it indicates crypto exchanges are eating inot the investment market of shar etrading platforms.  

So, what does this mean for Selfwealth?   

1. I think there may be some softness in the number of trades compared to previously corresponding periods, particularly in H1 2022, as we hit peak Crypto mania. 
2. It shows a crypto exchange would be a great product / services to wrest customers off the 'big-4'.  I predict a crypto exchange will be on the product roadmap for Selfwealth over the next few months.  

Selfwealth hit an interesting qualitative milestone in April, surpassing NABtrade.com.au in webpage rankings.  

It is interesting to note that Selfwealth competitors webpage rankings have been trending downwards this calendar year.   

DISC - I HOLD. 

This presentation can befound on Coffee Microcaps You tube channel in the next day or so.   Interesting takeaways from me:

1. Concerns surrounding interest income (after ANZ pulled the rug out from Netwealth) were addressed.  ANZ must give 12 months notice to change interest rate agreement.  SWF foot the bill of client's account fees, and this will need to be re-negiotiated along with any change to interest rates.  Account fee costs are due for re-negiotiation over the next 6-12 months (SWF is ANZ's largest customer in realtion to No. of accounts - +80k).  So, any loss in interst income can be offset by account cost reductions.  
2. Cloud native platform offers the ability to adjust and enhance product offerings, in comparison to competitors.  Legacy, big 4 have to revamp legacy technology to incorporate changes / innovations.  
3. Boad recently approved $3M per annum increase n IT spend.  i.e. Selfwealth are investing heavily in teh platform to expand offering, UI interface to challenge the "Big 4" head on.  
4. "Big 4" hold 70% of on-line brokerage currently.  SWF are challenging this presently on value fo rmoney, but increasingly on a better product as well. 
5. 18K active trader additions of Q3 likely to slow down to 12k per quarter of the past year.  Robert acknowledged SWF were caught short in Q3 in realtion to customer demand, but advises the issues experienced have been addressed now. 
6. Marketing budget will be increased significantly, with customer acquisition costs currently at $20/cient (2 month payback!). 
7. US trading platformed turned profitable in February - 2 months after launch! 75% of trade were US trades in Q3.  this is expected to double in the near term, increasing gross margins.  
8. Subscritpions.  Only 2.5-3% of active traders take up $240 pa service.  Enhancments are planned to improve this metric.  
9. Product roadmap to be releaed mid-year, which will show service offerings / enhancements to be incorproated going forward.  A crypto exchange is one such offering under consideration, subjec to customer demand / requests.  

Rob Edgley argued low interest rates, and high asset prices are not going anywhere.  Therefore, the secular tailwind driving the Selfwealth growth is not going to change anytime soon.  

DISC - I HOLD.  

Good result - key takeaways:

1) Revenue up 178% Q on Q.

2) Active traders up 18645 over Q, up 166% YoY.

3) Cash held increased 26% YoY.  

4) Cashflow positve @ $558k.  

The key metric I was interested in this quarter was gross margins.   The cashflow report, doesn't tell the full story as the US trading is paid 1 month in arrears.  It would be handy if Selfwealth report quarterly revenue as well as receipts to help reconcile that revenue from US trading.   

Assuming trade and FX costs are booked at execution,  backing in the US trading revenue for March will allow for a reasonable estiamte of gross margins going forward.  Now, 36266 US trades were made over the quarter.  If one were to say 33% of these trades were made in March, this equates to around $135k in trade revenue and say, $375k in FX (0.6% of FX transactions).  So that is $560k in revenue not booked against costs of goods for the quarter. 

Assuming the above assumptinos are correct, I come up with a gross margin of 47%.   This compares to a gross margin of 38% for the FY of 2020.     

One happy camper if my assumptions are correct.

DISC - I HOLD. 

I am aniticpating a strong result for Q3.   The key features of the result I am expecting, & I think holders need to look out for:

1) Strong growth in active traders, driven by expanded offering.  Competitors such a NABtrade are losing market share to Selfwealth - refer to web traffic ranking data in the figure attached.  

2) Gross margins . The first quarter of the new deal with openmarkets, with higher margins going forward. Margins will increase as trade volumes increase as well.  This represents an inflection point for the business IMO.  

3) Costs will be flat or falling, Q on Q, due to ETF admin costs in Q2, and reduction in CoGS due to new deal with openmarkets.  

I think operating cashflow will be well over $1 Million, but it is hard to forecast & really depends on the new deal with Openmarkets.  The uncertainty will be washed away with these results, & I am looking forward to discovering gross margins going forward..

DISC - I HOLD.

Mr Vu has been buying shares on market.  Just $25 k, but this represents 20% of his total holding.  

DIS - I hold

Interesting slide from slide deck.  Google trends indicate  gaisn in market awareness of Selfwealth vs "big 4".

Key Takeaways:

1) Average daily registrations in February runrate at 855 per day, up from 240 per day in December.  An increase of 356% in two months!

2) Active traders at 78619, an increase of 11270 in 6.5 weeks!

3) Client cash as at Feb. 17 is $472M up from $435M at end of December.  An 8.5% increase in 6 weeks.

4) Record trade volumes in January of 151811 trades.  131412 trades to date in February.  On track for +500k trades for quarter.

SWF high season trending better than I expected.  

DISC - I HOLD

Selfwealth launched US trading platform this week. Key takeaways:

1. 7000 US account applications in the first 9 days. Remember, Selfwealth have been onboarding 1000 active accounts per week this year.
2. New account registrations increased since US platform launch.

Alexa webpage rankings correlate with reported increase in new account registrations. With ranking up 6k places since October. Two issues to note:

1. Selfwealth pay ETF costs this quarter, so costs should spike this quarter.
2. Trading is seasonally quieter in Q2.

DISC: HELD.

Solid results for Q1, with key takeaways:

1) Active traders up around 11k to 57k traders ovre quarter. 

2) Revenue of $4.37 M, up around 5% on prior quarter.  

3) Cash held now $49 M, up 12% on prior quarter.  

4) Record trades for the month of September @ 137k trades. 

5) Selfwealth have 6% market share of online investors, up from 4% in December 2019.  

6) US trading platorm development is on track, as is new mobile UI for Q2 2021.  

Overall a solid result, noting the first half of the financial year has historically been the weakest half for Selfwealth with respect to growth.   Over H1 2019, SWF grew quarterly revenue <5%, & over H1 2020 SWF grew quarterly revenue <20%.  In contrast, over H2 2019, SWF grew quarterly revenue >45%, and over H2 2020, SWF grew quarterly revenue >200%.   

Selfwealth Full ear Presenation included the following update: 

1) Active traders exceeded 50 000 in July.  This represents at least 7.7% growth over the month of July.  Confirms growth in new members is continuing apace. 

2) Cash balance exceeded $400 m fo rthe first time in August.  This represents 9% growth over a 7 week period.  

3) US trading to launch between October and December - Only weeks away. 

4) Continued improvements to the product, including live-pricing, independent research, & access to IPOs.   

Item 4 above shows management's focus on solving customer problems and building a loyal customer base, and a great product in the process.   

This update increases my confidence that revenue will exceed $22M this year. 

DISC - I hold.   

With negative real interest rates (interest rate - inflation), investors are switching to riskier assets like never before. Selfwealth appears to be possibly the most direct beneficiary of this once in a generation phenomina.  

I say it is once in a generation because, investors have never experienced a time in their lives where real  interest rates are negative, and are searching for reasonable returns in riskier assets.  

Here are the takeaways. I think you will agree these numbers are rare to see indeed:

1) Revenue up 101% over three months.

2) Active traders up 44% over three months. 

3) Cashflow inflection point, with cashflow now running at +20% of receipts. Its maiden positive cashflow result. 

We are heading into unprecedented and volitile times.   Investing will be more challenging than ever, however, it is clear Selfwealth is one of the greatest ASX beneficiaries of the times.  

Datt Capital became as significant shareholder late last month, and have provided their theis in theis blog:https://www.datt.com.au/blog/a-high-growth-opportunity-in-volatile-times

Their forecasts are very optimistic, I don't Can't come up with earnings anywwhere near their estimate.  

But if they want to pump the stock, it is OK by me........

DISC: I hold

Selfwealth report remarkable numbers for Q3.  

• Revenue for the quarter excedds $2 million, 74% on Q2!
• Cash burn reduced to 70k for the quarter, down from $535k.
• Cash held increasaed by 164% ove rthe quarter to $359 million
• Teade volumes up 103% on previous quarter. 
• 10 420 new customers joined the platform over the quarter. A 49% increase over the quarter!   
• Gross margin expansion over the quarter as the business scals. 

Targeting the launch of the international trading platform late 2020.  

All signs pint to selfwealth having crossed the chasm, and is beignning to scale.   

Key takeaways:

1) Selfwealth are winning 25% of new or switching active traders (15000+ accounts per annum), with their estimated market share increasing to 4%. However, SWF reported 1741 new accounts in January, which equates to a run rate of 20000+ new customers per annum.  

2) Strong trends of January are continuing into February.  

But, SWF have just $1.5 Million in the bank, and are burning cash at a rate of ~$500k per quarter (although ETF costs were paid upfront last quarter).  But, I expect cash burn to fall to $330k this quarter,  With breakeven by the end of the calendar year possible.   

With the market downturn, it is possible there will be a jump in trades and cash, which is great for SWF.   They could surprise on the upside this quarter.  

Revenue relatively flat Q on Q, in seasonally quiet quarter. 

Key growth metrics:

1) Active traders grew 28% Q on Q.  this is well ahead of trading revenue, which augurs well for Q3.  

2) Cash held in trust grew 15% Q on Q.   It is only earning 1.25% interest, but it is most likely bottomed out at this rate.   A 0.25% rate increase will improve their revenue by about 7%.   

3) Shares held grew 25 % Q on Q. 

4) The gross margin per active user per annum  I estiamte to be $60 for trading margin, and $32 for interest income - A total of $92 per customer per annum.  

Key cost metrics:

1) Advertising grew 90% Q on Q.  

2) Acquisition cost per customer is $98 per customer.   CAC payback is around 13 months, which is excellent.    

3) Costs skyrocketed with teh launch of the ETF.  Cost of sales increased by about $300k, and given trading revnue was relatively flat, this must be the annual cost & launch costs of the ETF.    

The challenge with SWF is that its gross margins are around 40%.  It really needs to scale fast to reach break even from here.    Q2 2021 B/E looks possible, but it's the cash position will be precarious.   Q3 is critical. 

Quarterly revenue: $1.18M 

Breakdown:

Revenue from trades:  $0.745M (63%)

Revenue from interest: $0.39M (32%)

Subscription revenue:  $0.06M (5%)

Falling interest rates will continue to be a drag on revenue growth, with interest income falling from 50% in 2019, to is current share of 32%.    

If trades continue to grow above 25% Q on Q, continuing falls in interest income are manageable, given the creatino of the new business lines, SWF ETF, and advisor platform.    

1) SWF now in sight of cashflow breakeven, and should achieve this without another capital raise.   Revenue growth rapidly - 30% Q on Q, and CAC has fallen dramatically. 

Gross margins improving with scale ( it is still very low scale).  

I have dug deeper, and base don the qtr on qtr growth rate of 25% for the next 3 qtrs, and the 4th at 15%, I have SWF reaching breakeven in 2020 Q4 or 2021 Q1.   This does not take into account costs or income associated with the ETF launch, or advisor platform launch.   Noting costs are forecast to remain steady in Q1 2020.  Refer to cashflow forecast attached.   A tthe end of FY2020, SWF could have revenue at a run rate of $9 M pa, and beginning to generate growth at a healthy rate. 

Of course, there is the chance of a significant downturn, and this will de-rail SWF's explosive growth.   I think there is a 30% chance of this occurring prior to reaching breakeven, making this a high risk investment.