Editing Supply@ME Capital
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* | * Headquartered in the United Kingdom, Supply@ME Capital plc is a company that's on a mission to help businesses maximise their profits. | ||
* The flagship offering of the company is a web application that enables | * The flagship offering of the company is a web application that enables inventory-intensive businesses (such as manufacturing companies) to finance their inventory<ref>Here, inventory refers to the goods and materials that a business holds for the ultimate goal of resale, production or utilisation.</ref>. What makes the inventory finance platform unique is that it records the inventory finance transactions on a blockchain<ref name=":0">A digital file distributed to everyone participating in a cryptocurrency network. The blockchain acts as a kind of general ledger, keeping track of all the transactions that happen in the network. Everyone can look at the blockchain to see what transactions have happened on the network, and the blockchain is sealed using cryptography so that no one can tamper with it.</ref>. Evidence suggests that a blockchain-enabled inventory finance platform will result in inventory-intensive companies financing their inventory much more efficiently<ref name=":2" /><ref name=":4">https://www2.deloitte.com/content/dam/Deloitte/sg/Documents/finance-transformation/sea-ft-crunch-time-iv-blockchain.pdf</ref>, ultimately leading the companies to improve/maximise their profits<ref name=":3">https://www.sciencedirect.com/science/article/pii/S0929119914001606</ref>. | ||
* The expected return of an investment in Supply@ME Capital plc over the next five years is 411%, according to the estimates of Proactive Investors, which equates to an annual return of | * The expected return of an investment in Supply@ME Capital plc over the next five years is 411%, according to the estimates of Proactive Investors, which equates to an annual return of ccc%. In other words, an £10,000 investment in the company is expected to return £51,100 in five years time. | ||
* The degree of risk associated with an investment in Supply@ME Capital plc is 'high', with the shares having an adjusted beta that is | * The degree of risk associated with an investment in Supply@ME Capital plc is 'high', with the shares having an adjusted beta that is 714% above the market (6.14 vs. 1). | ||
*Assuming that a suitable return level over five years is 10% per year and Supply@ME Capital achieves its expected return level (of 411%), then an investment in the company is considered to be a 'suitable' one. | *Assuming that a suitable return level over five years is 10% per year and Supply@ME Capital achieves its expected return level (of 411%), then an investment in the company is considered to be a 'suitable' one. | ||
== Operations == | == Operations == | ||
===How did the idea of the company come about?=== | ===How did the idea of the company come about?=== | ||
The idea of Supply@ME Capital plc came to Alessandro Zamboni, the now founder of the company, when he developed a strong desire to maximise the profits of his business | The idea of Supply@ME Capital plc came to Alessandro Zamboni, the now founder of the company, when he developed a strong desire to maximise the profits of his business. Researching into how to do that, he realised that one of the best ways is to finance more efficiently the business' working capital<ref>https://www.imf.org/-/media/Files/Publications/WP/2019/wpiea2019165-print-pdf.ashx</ref>, in particular inventory<ref>Huff, J. & Rogers, D. S. (2015) Funding the organization through supply chain finance: a longitudinal investigation. Supply Chain Forum: An International Journal, 16(3), 4-17.</ref>. He also realised that there are many companies that feel the same way as him, with profit maximisation one of the fundamental assumptions of economic theory. In his quest to maximise the profits of his business and others, Supply@ME Capital plc was born. | ||
===What's the mission of the company? === | ===What's the mission of the company? === | ||
The mission of Supply@ME Capital plc is to help companies maximise | The mission of Supply@ME Capital plc is to help companies maximise their profits. | ||
===What's the company's main offering(s)? === | ===What's the company's main offering(s)? === | ||
===Who’s the target audience of the company’s flagship/first product?=== | |||
The audience is companies that have a relatively high amount of inventory (i.e. inventory-intensive companies), such as manufacturing companies. Examples of the companies include the international steel, energy, minerals and materials conglomerate JSW Group, the electrical and mechanical workshop equipment supplier Clarke International and the Italian supermarket company Esselunga. | |||
=== | === What's a major problem that the target audience experience? === | ||
The problem is a lack of profits. | |||
===What's a key solution to the problem?=== | |||
The solution is Supply@ME, a web application that enables inventory-intensive businesses to finance their inventory. What makes the inventory finance platform unique is that it records the inventory finance transactions on a blockchain<ref name=":0" />. Evidence suggests that a blockchain-enabled inventory finance platform will result in inventory-intensive companies financing their inventory much more efficiently<ref name=":2" /><ref name=":4" />, ultimately leading the companies to improve/maximise their profits<ref name=":3" />. | |||
The solution is Supply@ME, a web application that enables | |||
== Which are the main competitors of the product? == | == Which are the main competitors of the product? == | ||
A key way to determine an offering’s closest competitors is by looking at other offerings that are targeting the same or similar target audience (i.e. | A key way to determine an offering’s closest competitors is by looking at other offerings that are targeting the same or similar target audience (i.e. inventory-intensive businesses) and providing or aiming to provide the same core benefit (i.e. more/maximum business profits), and then ranking the offerings in terms of the total amount of time spent using and/or money spent purchasing the offerings. With that said, we view that the closest competitors of the Supply@ME platform are TraxPay, Demica and Novuna. A detailed comparison between Supply@ME and its main competitors are shown in the table below. | ||
{| class="wikitable" | {| class="wikitable" | ||
|+Competition analysis | |+Competition analysis | ||
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!Orbian | !Orbian | ||
!PrimeRevenue | !PrimeRevenue | ||
|- | |- | ||
|Is the product targeted toward | |Is the product targeted toward inventory-intensive companies? | ||
| style="background: green; color: white;" |Yes | | style="background: green; color: white;" |Yes | ||
| style="background: green; color: white;" |Yes | | style="background: green; color: white;" |Yes | ||
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| style="background: green; color: white;" |Yes | | style="background: green; color: white;" |Yes | ||
| style="background: green; color: white;" |Yes | | style="background: green; color: white;" |Yes | ||
|- | |||
|Is the core benefit of the product more/maximum business profits? | |||
| style="background: green; color: white;" |Yes | | style="background: green; color: white;" |Yes | ||
| style="background: green; color: white;" |Yes | | style="background: green; color: white;" |Yes | ||
| style="background: green; color: white;" |Yes | | style="background: green; color: white;" |Yes | ||
| style="background: green; color: white;" |Yes | | style="background: green; color: white;" |Yes | ||
| style="background: green; color: white;" |Yes | | style="background: green; color: white;" |Yes | ||
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| style="background: green; color: white;" |Yes | | style="background: green; color: white;" |Yes | ||
| style="background: green; color: white;" |Yes | | style="background: green; color: white;" |Yes | ||
|- | |||
|Is the product a supply chain finance (SCF)<ref>Supply Chain Finance is defined as the use of financing and risk mitigation practices and techniques to optimize the management of the working capital and liquidity invested in supply chain processes and transactions.</ref> platform? | |||
| style="background: green; color: white;" |Yes | | style="background: green; color: white;" |Yes | ||
| style="background: green; color: white;" |Yes | | style="background: green; color: white;" |Yes | ||
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| style="background: green; color: white;" |Yes | | style="background: green; color: white;" |Yes | ||
| style="background: green; color: white;" |Yes | | style="background: green; color: white;" |Yes | ||
| style="background: green; color: white;" |Yes | | style="background: green; color: white;" |Yes | ||
| style="background: green; color: white;" |Yes | | style="background: green; color: white;" |Yes | ||
| style="background: green; color: white;" |Yes | | style="background: green; color: white;" |Yes | ||
|- | |||
|Does the product provide inventory-related financing? | |||
| style="background: green; color: white;" |Yes | | style="background: green; color: white;" |Yes | ||
| style="background: green; color: white;" |Yes | | style="background: green; color: white;" |Yes | ||
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| style="background: green; color: white;" |Yes | | style="background: green; color: white;" |Yes | ||
|- | |- | ||
|Does the platform | |Does the platform record the finance transactions on a blockchain (i.e. Blockchain-enabled SCF platform)? | ||
| style="background: green; color: white;" |Yes | | style="background: green; color: white;" |Yes | ||
| style="background: red; color: white;" |No | | style="background: red; color: white;" |No | ||
| style="background: red; color: white;" |No | | style="background: red; color: white;" |No | ||
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| style="background: red; color: white;" |No | | style="background: red; color: white;" |No | ||
| style="background: red; color: white;" |No | | style="background: red; color: white;" |No | ||
| style="background: red; color: white;" |No | | style="background: red; color: white;" |No | ||
| style="background: red; color: white;" |No | | style="background: red; color: white;" |No | ||
|- | |- | ||
|What is the | |What is the total cost of the inventory-related finance? | ||
| | |2% of the inventory value | ||
|N/A | |||
|N/A | |||
| | |N/A | ||
| | |N/A | ||
| | |N/A | ||
| | |N/A | ||
| | |N/A | ||
| | |N/A | ||
| | |||
| | |||
|} | |} | ||
== What is the main way that the company expects to make money? == | == What is the main way that the company expects to make money? == | ||
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=== Total Addressable Market === | === Total Addressable Market === | ||
Here, the total addressable market (TAM) is defined as the global finance arrangement market, and based on a number of assumptions, it is estimated that the size of the market as of today (27th November 2022), in terms of revenue, is $ | Here, the total addressable market (TAM) is defined as the global working capital finance arrangement market, and based on a number of assumptions, it is estimated that the size of the market as of today (27th November 2022), in terms of revenue, is $119 billion<ref name=":1">https://www.pwc.co.uk/business-restructuring/pdf/working-capital-report.pdf</ref>. | ||
It can be argued that the TAM of the company is the global working capital securitisation servicing market, and it is estimated that the size of the market as of today (27th November 2022), in terms of revenue, is $385 billion. | It can be argued that the TAM of the company is the global working capital securitisation servicing market, and it is estimated that the size of the market as of today (27th November 2022), in terms of revenue, is $385 billion. | ||
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===Serviceable Available Market=== | ===Serviceable Available Market=== | ||
The serviceable available market (SAM) is defined as the global inventory finance arrangement market, and based on a number of assumptions, it is estimated that the size of the market as of today (27th November 2022), in terms of revenue, is $48 billion<ref name=":1" | The serviceable available market (SAM) is defined as the global inventory finance arrangement market, and based on a number of assumptions, it is estimated that the size of the market as of today (27th November 2022), in terms of revenue, is $48 billion<ref name=":1" />. | ||
===Serviceable Obtainable Market=== | ===Serviceable Obtainable Market=== | ||
Here, the serviceable obtainable market (SOM) is defined as the Italy inventory finance arrangement market, and based on a number of assumptions, it is estimated that the size of the market as of today (27th November 2022), in terms of revenue, is $1.2 billion. | Here, the serviceable obtainable market (SOM) is defined as the Italy inventory finance arrangement market, and based on a number of assumptions, it is estimated that the size of the market as of today (27th November 2022), in terms of revenue, is $1.2 billion. | ||
== Who are the key members of the team? == | == Who are the key members of the team? == | ||
=== Directors === | === Directors === | ||
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'''Nicola Bonini – Group Head of Origination''' | '''Nicola Bonini – Group Head of Origination''' | ||
Nicola has more than 20 years' experience in balance sheet lending and cashflow finance, gained during her time at some of the UK’s most prominent banking institutions. Previously, she was Vice President and Head of Commercial Finance at Bank Leumi (UK) plc, where she managed a portfolio of companies with turnover of up to £1bn. Before this, Nicola served as Executive Director at Falcon Group UK, where she joined the newly formed UK inventory finance team. Nicola has also held senior, | Nicola has more than 20 years' experience in balance sheet lending and cashflow finance, gained during her time at some of the UK’s most prominent banking institutions. Previously, she was Vice President and Head of Commercial Finance at Bank Leumi (UK) plc, where she managed a portfolio of companies with turnover of up to £1bn. Before this, Nicola served as Executive Director at Falcon Group UK, where she joined the newly formed UK inventory finance team. Nicola has also held senior, highprofile business development and relationship management roles at major banks, including BNP Paribas, The Royal Bank of Scotland and Bank of Scotland Corporate. Nicola joined the Group in September 2021 to take a leading role in business development, client onboarding and retention. She holds a BA in Business Studies from the University of East London. | ||
== How much does the company expect to make over the next five years? == | == How much does the company expect to make over the next five years? == | ||
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|What's the estimated company peak market share? | |What's the estimated company peak market share? | ||
|1% | |1% | ||
|We estimate that especially given the | |We estimate that especially given the leadership of the company, the peak market share of Supply@ME Capital is around 1%, and, therefore, suggests using the share amount here. As of 31st December 2021, Supply@ME Capital's current share of the market is negligible. | ||
|- | |- | ||
|Which distribution function do you want to use to estimate company revenue? | |Which distribution function do you want to use to estimate company revenue? | ||
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== What are the key risks of investing in the company? == | == What are the key risks of investing in the company? == | ||
As with any investment, investing in Supply@ME Capital carries a level of risk. Overall, based on the Supply@ME Capital's adjusted beta (i.e. 4.61)<ref>Research shows that an investment has two main types of risks: 1) non-systematic and 2) systematic. Systematic risk is the risk related to the overall market, and non-systematic risk is the risk that's specific to an individual investment. Evidence shows that taking on non-systematic risk is inefficient, and it's, therefore, best to eliminate it; and in most cases, elimination is fairy easy to do [by holding a diversified portfolio of investments (i.e. around 15 investments)]. Accordingly, when assessing the riskiness of an investment, it’s best to look at the systematic risk only (i.e. ignore the non-systematic risk). A key measure of systematic risk is beta, and a main way to determine the riskiness of an investment is to compare the beta of the investment with the beta of the market, which is 1. For example, Supply@ME Capital's adjusted beta (5 years, monthly data) is | As with any investment, investing in Supply@ME Capital carries a level of risk. Overall, based on the Supply@ME Capital's adjusted beta (i.e. 4.61)<ref>Research shows that an investment has two main types of risks: 1) non-systematic and 2) systematic. Systematic risk is the risk related to the overall market, and non-systematic risk is the risk that's specific to an individual investment. Evidence shows that taking on non-systematic risk is inefficient, and it's, therefore, best to eliminate it; and in most cases, elimination is fairy easy to do [by holding a diversified portfolio of investments (i.e. around 15 investments)]. Accordingly, when assessing the riskiness of an investment, it’s best to look at the systematic risk only (i.e. ignore the non-systematic risk). A key measure of systematic risk is beta, and a main way to determine the riskiness of an investment is to compare the beta of the investment with the beta of the market, which is 1. For example, Supply@ME Capital's adjusted beta (5 years, monthly data) is 6.14, and is, accordingly, 714% above the market beta (of 1); assuming that a 'high' level of riskiness is 50% or more above the market beta, then the riskiness of investing in Supply@ME Captial is considered to be 'high' (714%>50%). | ||
For estimating an asset's beta, in terms of time period, and frequency of observations, the most common choice is five years of monthly data, yielding 60 observations. One study of U.S. stocks found support for five years of monthly data over alternatives. An argument can be made that the 2 years, weekly data can be especially appropriate in fast growing markets. | For estimating an asset's beta, in terms of time period, and frequency of observations, the most common choice is five years of monthly data, yielding 60 observations. One study of U.S. stocks found support for five years of monthly data over alternatives. An argument can be made that the 2 years, weekly data can be especially appropriate in fast growing markets. | ||
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The beta value in a future period has been found to be on average closer to the mean value of 1.0, the beta of an average-systematic-risk security, than to the value of the raw beta. Because valuation is forward looking, it is logical to adjust the raw beta so it more accurately predicts a future beta.</ref>, the degree of risk associated with an investment in Supply@ME Capital is 'high'. | The beta value in a future period has been found to be on average closer to the mean value of 1.0, the beta of an average-systematic-risk security, than to the value of the raw beta. Because valuation is forward looking, it is logical to adjust the raw beta so it more accurately predicts a future beta.</ref>, the degree of risk associated with an investment in Supply@ME Capital is 'high'. | ||
Here, to estimate the adjusted beta, we used the iShares MSCI World ETF to represent the market portfolio; and in terms of the time period and frequency of observations, we used five years of monthly data (i.e. 60 observations in total), which is supported by a study and is the most common choice. We note that the company in its current state was only really formed | Here, to estimate the adjusted beta, we used the iShares MSCI World ETF to represent the market portfolio; and in terms of the time period and frequency of observations, we used five years of monthly data (i.e. 60 observations in total), which is supported by a study and is the most common choice. We note that the company in its current state was only really formed following a reverse takeover on 27th March 2020, and, therefore, the numbers of available data observations is less than what's typically used in the five years of monthly data beta calculation (i.e. 33 observations vs. 60 observations). The beta value in a future period has been found to be on average closer to the mean value of 1.0, and because valuation is forward looking, it is logical to adjust the raw beta so it more accurately predicts a future beta. In addition, here, we have assumed that for an investment to be considered 'high' risk, it must have a beta value of 1.5 or more, and for it to be considered 'medium' risk, it must have a beta value of between 0.5 and 1.5. Further information about the beta ratings can be found in the appendix section of this report. | ||
That said, an argument has been made that especially in fast growing markets, it's best to use two years of weekly data; using the two years, weekly data, Supply@ME Capital's adjusted beta is 1.36, which is considered relatively 'medium' in terms of riskiness level. | That said, an argument has been made that especially in fast growing markets, it's best to use two years of weekly data; using the two years, weekly data, Supply@ME Capital's adjusted beta is 1.36, which is considered relatively 'medium' in terms of riskiness level. | ||
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===What's the expected return of an investment in the company?=== | ===What's the expected return of an investment in the company?=== | ||
We estimate that the expected return of an investment in the company over the next five years is 411 | We estimate that the expected return of an investment in the company over the next five years is 411%. In other words, an £10,000 investment in the company is expected to return £51,100 in five years time. The assumptions used to estimate the return figure can be found in the table below. | ||
Assuming that a suitable return level over five years is 10% per year and Supply@ME Capital achieves its expected return level (of 411%), then an investment in the company is considered to be a 'suitable' one. | Assuming that a suitable return level over five years is 10% per year and Supply@ME Capital achieves its expected return level (of 411%), then an investment in the company is considered to be a 'suitable' one. | ||
===What are the assumptions used to estimate the return?=== | ===What are the assumptions used to estimate the return?=== | ||
{| class="wikitable" | {| class="wikitable" | ||
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|Risk-free rate (%) | |Risk-free rate (%) | ||
|3.488% | |3.488% | ||
|Here, the risk free rate is the US 30 year treasury bond, and is calculated as at 16th December 2022. Research suggests that for the risk-free rate, it's best to use one that has the same or similar maturity to the estimated remaining lifespan of the company. Here, we have assumed that the estimated lifespan of the company is | |Here, the risk free rate is the US 30 year treasury bond, and is calculated as at 16th December 2022. Research suggests that for the risk-free rate, it's best to use one that has the same or similar maturity to the estimated remaining lifespan of the company. Here, we have assumed that the estimated lifespan of the company is perpetual, so we have used the longest maturity, which is 30 years. | ||
|- | |- | ||
|Beta | |Beta | ||
|4.61 | |4.61 | ||
|Here, to estimate the adjusted beta, we used the iShares MSCI World ETF to represent the market portfolio; and in terms of the time period and frequency of observations, we used five years of monthly data (i.e. 60 observations in total), which is supported by a study and is the most common choice. The beta value in a future period has been found to be on average closer to the mean value of 1.0, and because valuation is forward | |Here, to estimate the adjusted beta, we used the iShares MSCI World ETF to represent the market portfolio; and in terms of the time period and frequency of observations, we used five years of monthly data (i.e. 60 observations in total), which is supported by a study and is the most common choice. The beta value in a future period has been found to be on average closer to the mean value of 1.0, and because valuation is forward looking, it is logical to adjust the raw beta so it more accurately predicts a future beta. | ||
|- | |- | ||
|Equity risk premium (%) | |Equity risk premium (%) | ||
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| Which type of multiple do you want to use? | | Which type of multiple do you want to use? | ||
| Growth-adjusted EV/sales | | Growth-adjusted EV/sales | ||
| For the numerator, we believe that to account for the different financial leverage levels of its peers, it's best to use enterprise value (EV), rather than price. For the denominator, we believe that because | | For the numerator, we believe that to account for the different financial leverage levels of its peers, it's best to use enterprise value (EV), rather than price. For the denominator, we believe that because it expects Supply@ME Capital to reinvest almost all of its revenue back into the business over the five year forecast period and therefore its earnings are expected to be abnormally low over the period, it's best to use sales. Accordingly, we suggest valuing its company using the EV/sales ratio. However, we feel that to take into account the different business lifecycle stages of its peers, the most suitable valuation multiple to use is the growth-adjusted EV/sales multiple, rather than the EV/sales multiple. | ||
|- | |- | ||
|In regards to the growth-adjusted EV/sales multiple, for the sales figure, which year to you want to use? | |In regards to the growth-adjusted EV/sales multiple, for the sales figure, which year to you want to use? | ||
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|In regards to the growth-adjusted EV/sales multiple, what multiple figure do you want to use? | |In regards to the growth-adjusted EV/sales multiple, what multiple figure do you want to use? | ||
|43x | |43x | ||
|Here, we suggest using a multiple of 43x | |Here, we suggest using a multiple of 43x. | ||
|- | |- | ||
|Which financial forecasts to use? | |Which financial forecasts to use? | ||
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|Between now and one year time | |Between now and one year time | ||
|Research suggests that when using the relative valuation approach, it's best to estimate the expected return of the company between now and one year time. | |Research suggests that when using the relative valuation approach, it's best to estimate the expected return of the company between now and one year time. | ||
|} | |} | ||
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|Financing|| style="background: green; color: white;" |+|| style="background: green; color: white;" |+|| style="background: orange; color: white;" |+/-|| style="background: red; color: white;" |-|| style="background: orange; color: white;" |+/- | |Financing|| style="background: green; color: white;" |+|| style="background: green; color: white;" |+|| style="background: orange; color: white;" |+/-|| style="background: red; color: white;" |-|| style="background: orange; color: white;" |+/- | ||
|} | |} | ||
=== How does a supply chain finance platform works and what is the main benefit of the platform? === | |||
The main role of technology providers, generally known as FinTechs (financial technology firms), is to provide an online transaction platform (i.e. an SCF platform) to facilitate the exchange of information between buyers, suppliers and external funders. | |||
Banks may own the platform or utilise a third-party platform provider. The potential benefit of using a third-party platform provider is that corporate customers can choose between using their own funds, or single or multiple external funders. | |||
Using a longitudinal case study of a focal firm, Motorola, Blackman et al. (2013) explore the concept of financial supply chain (FSC) and find that sharing financial data with suppliers helps generate cost savings for both parties and improves the payment process as well as reducing risk. Two studies emphasize collaboration and the network features of SCF. | |||
Regarding reasons to adopt SCF, the primary objective is to extend payment terms or Days Payable Outstanding (DPO) (Van der Vliet et al., 2015; Liebl et al., 2016). Some firms aim to reduce risk in supply chains (Caniato et al., 2016; Liebl et al., 2016) while only a few adopt SCF for the purpose of process simplification (Liebl et al., 2016). | |||
== References == | == References == | ||
<references /> | <references /> |