SummaryEdit
- The mission of the company is to help make investing in real estate accessible to everyone (and not just the wealthy).
- The company’s flagship product is targeted towards Active Investors, who are a group of people that are willing and able to be actively involved in the process of finding suitable investments. The product is a real estate investment platform. What makes the platform unique is that the investments transaction information is recorded on a blockchain. Research suggests that recording the information on a blockchain will result in Active Investors making investments faster and/or at a lower cost, and, ultimately, more money.
- The Stockhub company estimates that the expected return of an investment in the company over the next five years is 55x. In other words, an £1,000 investment in the company is expected to return £55,000 in five years time.
- The degree of risk associated with an investment in CitaDao is higher than in a company that's say trading on a public market (such as, HSBC).
OperationsEdit
What's the mission of the company?Edit
The mission of CitaDAO Protocol Limited is to help make investing in real estate accessible to everyone (and not just the wealthy).
What's the company's main offering(s)?Edit
At the moment (as of 16th May 2022), the main and only offering of the company is CitaDAO.
Who’s the target audience of the company’s flagship product?Edit
The audience is Active Investors, who are people that are actively involved in the process of deciding which investments to make.
What's the flagship product?Edit
The product is a real estate investment platform. In other words, it's a platform for buying and selling real estate investments, such as a commercial property.
What makes the flagship product unique?Edit
The uniqueness of the platform is that the information about the buying and selling of the investments (i.e. the investments transaction information) is recorded on a blockchain. Research suggests that recording the information on a blockchain will, in time, result in Active Investors making investments faster and/or at a lower cost, and, ultimately, more money.
What's the biggest achievement of the company?Edit
What's the next key milestone of the company?Edit
MarketEdit
Stockhub believes that the best monetisation method of the company is trade commissions. In other words, the company makes money whenever an investment is bought or sold on the company's platform.
What's the total addressable market of the company?Edit
Here, the total addressable market (TAM) is defined as the global real estate market, and based on a number of assumptions, it is estimated that the size of the market as of today (16th May 2022), in terms of revenue, is $600 billion (£511 billion).
What's the serviceable available market of the company?Edit
Here, the serviceable available market (SAM) is defined as the global, Active Investor-focused real estate market, and based on a number of assumptions, it is estimated that the size of the market as of today (16th May 2022), in terms of revenue, is $60 billion.
What's the serviceable obtainable market of the company?Edit
Finally, here, the serviceable obtainable market (SOM) is defined as the UK, Active Investor-focused real estate market, and based on a number of assumptions, it is estimated that the size of the market as of today (16th May 2022), in terms of revenue, is $2 billion.
CompetitionEdit
TeamEdit
FinancialsEdit
What are the financial forecasts?Edit
In keeping in-line with industry standards, the number of years of financial forecasts shown below is five years.
Income statementEdit
| Year/Item | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Year end date | 28/02/2022 | 28/02/2023 | 28/02/2024 | 28/02/2025 | 28/02/2026 |
| Revenues (£'000) | £126.169 | £332.681 | £842.810 | £2,051.447 | £4,797.544 |
| Gross profits (£'000) | £100.935 | £266.145 | £674.248 | £1,641.158 | £3,838.035 |
| Operating profits (£'000) | £25.234 | £66.536 | £168.562 | £410.289 | £959.509 |
| Net profits (£'000) | £20.439 | £53.894 | £136.535 | £332.334 | £777.202 |
What are the assumptions used to estimate the financial forecasts?Edit
| Description | Value | Commentary |
|---|---|---|
Revenue
| ||
| What's the estimated current size of the total addressable market? | £511,000,000,000 | Here, the total addressable market (TAM) is defined as the global advertising market, and based on a number of assumptions[Note 2], it is estimated that the size of the market as of today (14th March 2022), in terms of revenue, is £511 billion (or $600 billion). |
| What's the estimated terminal annual growth rate of the total addressable market? | 3% | Research shows that the growth rate of the global advertising market (i.e. the total addressable market) is similar to the growth rate of global gross domestic product[2], which has averaged (medium) around 3% per year in the last 20 years (2001 to 2022)[3]. |
| What's the estimated peak market share of the company? | 2% | Research shows that there's an almost perfect positive correlation between the amount of adverting revenue generated on a platform and the total amount of time spent by users on the platform. In other words, the more time users spend on a platform, the more advertising revenue the platform generates. Accordingly, Stockhub believes that the best measurement unit of future advertising market share is time. In UK broadcasting, there's a limit on the amount of advertising that can be shown to viewers, and the limit is 15% of 24 hours (i.e. around 9 minutes per hour or around 216 minutes a day). Research suggests that Active Investors represent around 10.4% of the global population and that the average amount of time Active Investors spend researching investments is 30 minutes per day. Consequently, the Stockhub company estimates that the peak market share of its namesake platform is around 2%, and, therefore, suggests using the share amount here. |
| Which distribution function do you want to use to estimate the revenue of the company? | Gaussian | Research suggests that the revenue pattern of companies is similar to the pattern produced by the Gaussian distribution function (i.e. the revenue distribution is bell shaped)[4], so Stockhub suggests using that function here. |
| What is the estimated lifespan of the company? | 50 years | Stockhub's vision is to be a large organisation (more than 10,000 employees), and research shows that the average lifespan of a large corporation is around 50 years.[5] |
| What's the estimated standard deviation of the company's revenue? | 5 years | Another way of asking this question is this way: within how many years either side of the mean does 68% of revenue occur? The Stockhub company suggests using 5 years (i.e. 68% of all sales happen within 5 years either side of the mean year), so that's what's used here. |
Growth stages
| ||
| How many main stages of growth is the company expected to go through? | 4 stages | Research suggests that a company typically goes through four distinct stages of cash flow growth.[6] Research also shows that incorporating those stages into the discounted cash flow model improves the quality of the model and, ultimately, the quality of the value estimation.[7]
In addition, research shows that a key way to determine the stage which a company is in is by examining the cash flow patterns of the company.[8] A summary of the economic links to cash flow patterns can be found in the appendix of this report. Stockhub estimates that with its operating and investing cash flows both negative (-) and its financing cash flows positive (+), the company is in the first stage of growth (i.e. the introduction stage), and, therefore, it has a total of four main stages of growth. |
| What's the expected duration of growth stage 1? | 17 years | Research suggests that given the expected lifespan of the company (i.e. 50 years), 17 years is suitable for stage 1.[9] |
| What's the expected duration of growth stage 2? | 4 years | Research suggests that given the expected lifespan of the company (i.e. 50 years), 4 years is suitable for stage 2.[9] |
| What's the expected duration of growth stage 3? | 8 years | Research suggests that given the expected lifespan of the company (i.e. 50 years), 8 years is suitable for stage 3.[9] |
| What's the expected duration of growth stage 4? | 21 years | Research suggests that given the expected lifespan of the company (i.e. 50 years), 21 years is suitable for stage 4.[9] |
Growth stage 1
| ||
| Cost of goods sold margin (%) | 20% | Research suggests that it's best to use a similar margin rate as the one used by peers that are in the same growth stage (i.e. growth stage 1)[10], and the margin for its peers was 20%. |
| Selling, General and Administrative expenses margin (%) | 80% | Research suggests that it's best to use a similar margin rate as the one used by peers that are in the same growth stage (i.e. growth stage 1)[10], and the margin for its peers was 80%. |
| Tax rate (%) | 19% | Research suggests that it's best to use the marginal tax rate of the country in which the company mainly operates. The Stockhub company mainly operates in the United Kingdom, and the marginal tax rate there is 19%. |
| Depreciation rate (%) | 10% | Research suggests that it's best to use a similar margin rate as the one used by peers that are in the same growth stage (i.e. growth stage 1)[10], and the margin for its peers was 10%. |
| Fixed capital margin (%) | 25% | Research suggests that it's best to use a similar margin rate as the one used by peers that are in the same growth stage (i.e. growth stage 1)[10], and the margin for its peers was 25%. |
| Change in working capital (£000) | Zero | Stockhub suggests that for simplicity, the change in working capital figure is zero. |
Growth stage 2
| ||
| Cost of goods sold margin (%) | 20% | Research suggests that it's best to use a similar margin rate as the one used by peers that are in the same growth stage (i.e. growth stage 2)[10], and the margin for its peers was 20%. |
| Selling, General and Administrative expenses margin (%) | 60% | Research suggests that it's best to use a similar margin rate as the one used by peers that are in the same growth stage (i.e. growth stage 2)[10], and the margin for its peers was 60%. |
| Tax rate (%) | 19% | Research suggests that it's best to use the marginal tax rate of the country in which the company mainly operates. The Stockhub company mainly operates in the United Kingdom, and the marginal tax rate there is 19%. |
| Depreciation rate (%) | 10% | Research suggests that it's best to use a similar margin rate as the one used by peers that are in the same growth stage (i.e. growth stage 2)[10], and the margin for its peers was 10%. |
| Fixed capital margin (%) | 25% | Research suggests that it's best to use a similar margin rate as the one used by peers that are in the same growth stage (i.e. growth stage 2)[10], and the margin for its peers was 25%. |
| Change in working capital (£000) | Zero | Stockhub suggests that for simplicity, the change in working capital figure is zero. |
Growth stage 3
| ||
| Cost of goods sold margin (%) | 20% | Research suggests that it's best to use a similar margin rate as the one used by peers that are in the same growth stage (i.e. growth stage 3)[10], and the margin for its peers was 20%. |
| Selling, General and Administrative expenses margin (%) | 40% | Research suggests that it's best to use a similar margin rate as the one used by peers that are in the same growth stage (i.e. growth stage 3)[10], and the margin for its peers was 40%. |
| Tax rate (%) | 19% | Research suggests that it's best to use the marginal tax rate of the country in which the company mainly operates. The Stockhub company mainly operates in the United Kingdom, and the marginal tax rate there is 19%. |
| Depreciation rate (%) | 10% | Research suggests that it's best to use a similar margin rate as the one used by peers that are in the same growth stage (i.e. growth stage 3)[10], and the margin for its peers was 10%. |
| Fixed capital margin (%) | 25% | Research suggests that it's best to use a similar margin rate as the one used by peers that are in the same growth stage (i.e. growth stage 3)[10], and the margin for its peers was 25%. |
| Change in working capital (£000) | Zero | Stockhub suggests that for simplicity, the change in working capital figure is zero. |
Growth stage 4
| ||
| Cost of goods sold margin (%) | 20% | Research suggests that it's best to use a similar margin rate as the one used by peers that are in the same growth stage (i.e. growth stage 4)[10], and the margin for its peers was 20%. |
| Selling, General and Administrative expenses margin (%) | 40% | Research suggests that it's best to use a similar margin rate as the one used by peers that are in the same growth stage (i.e. growth stage 4)[10], and the margin for its peers was 40%. |
| Tax rate (%) | 19% | Research suggests that it's best to use the marginal tax rate of the country in which the company mainly operates. The Stockhub company mainly operates in the United Kingdom, and the marginal tax rate there is 19%. |
| Depreciation rate (%) | 10% | Research suggests that it's best to use a similar margin rate as the one used by peers that are in the same growth stage (i.e. growth stage 4)[10], and the margin for its peers was 10%. |
| Fixed capital margin (%) | 25% | Research suggests that it's best to use a similar margin rate as the one used by peers that are in the same growth stage (i.e. growth stage 4)[10], and the margin for its peers was 25%. |
| Change in working capital (£000) | Zero | Stockhub suggests that for simplicity, the change in working capital figure is zero. |
RisksEdit
As with any investment, investing in CitaDao carries a level of risk. Overall, based on the key risks highlighted below, the degree of risk associated with an investment in CitaDao is higher than in a company that's trading on a public market (such as, HSBC).
Early-stage investmentEdit
CitaDao is at one of the earliest stages of the business lifecycle, and the failure rate of companies at that stage is usually much higher than those at a later stage.
Illiquid investmentEdit
The number of transactions in shares of private companies is usually significantly lower than in public companies, typically resulting in it taking longer to sell shares in private companies at a price that is at least equal to the price that the shares were bought at. Accordingly, the CitaDao investment is considered to be higher risk than more liquid companies.
ValuationEdit
The Stockhub company estimates that the expected return of an investment in the company over the next five years is 55x. In other words, an £1,000 investment in the company is expected to return £55,000 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 CitaDao achieves its expected return level (of 55x), then an investment in the CitaDao company is considered to be a 'suitable' one.
What are the assumptions used to estimate the return?Edit
| Description | Value | Commentary |
|---|---|---|
| Which valuation model do you want to use? | Discounted cash flow | There are two main approaches to estimate the value of an investment:
Research suggests that in terms of estimating the expected return of an investment over a period of 12-months or more, the approach that is more accurate is the discounted cash flow approach[11], so that's the approach that Stockhub suggests to use here; nevertheless, for completeness purposes, separately, the valuation of the company is also estimated using the using the relative valuation approach (the valuation based on the relative approach can be found in the appendix of this report). |
| Which financial forecasts to use? | Stockhub | The only available forecasts are the ones that are supplied by the Stockhub company (the forecasts can be found in the financials section of this report), so Stockhub suggests using those. |
Growth stage 1
| ||
| Discount rate (%) | 25% | There are two key risk parameters for a firm that need to be estimated: its cost of equity and its cost of debt. A key way to estimate the cost of equity is by looking at the beta (or betas) of the company in question, the cost of debt from a measure of default risk (an actual or synthetic rating) and apply the market value weights for debt and equity to come up with the cost of capital.
Research indicates that companies in the first stage of the business lifecycle are often held by either undiversified owners or by partially diversified venture capitalists.[10] Consequently, it does not make sense to assume that the only risk that should be priced in is the market risk; the cost of equity has to incorporate some (in the case of venture capitalists) or maybe even all (for completely undiversified owners) of the firm specific risk. |
| Probability of success (%) | 20% | Research suggests that a suitable rate for a company in this growth stage (i.e. stage 1) is 20%. |
Growth stage 2
| ||
| Discount rate (%) | 15% | There are two key risk parameters for a firm that need to be estimated: its cost of equity and its cost of debt. A key way to estimate the cost of equity by looking at the beta (or betas) of the company in question, the cost of debt from a measure of default risk (an actual or synthetic rating) and apply the market value weights for debt and equity to come up with the cost of capital. |
| Probability of success (%) | 50% | Research suggests that a suitable rate for a company in this growth stage (i.e. stage 2) is 50%. |
Growth stage 3
| ||
| Discount rate (%) | 10% | There are two key risk parameters for a firm that need to be estimated: its cost of equity and its cost of debt. A key way to estimate the cost of equity by looking at the beta (or betas) of the company in question, the cost of debt from a measure of default risk (an actual or synthetic rating) and apply the market value weights for debt and equity to come up with the cost of capital. |
| Probability of success (%) | 100% | Research suggests that a suitable rate for a company in this growth stage (i.e. stage 3) is 100%. |
Growth stage 4
| ||
| Discount rate (%) | 10% | There are two key risk parameters for a firm that need to be estimated: its cost of equity and its cost of debt. A key way to estimate the cost of equity by looking at the beta (or betas) of the company in question, the cost of debt from a measure of default risk (an actual or synthetic rating) and apply the market value weights for debt and equity to come up with the cost of capital. |
| Probability of success (%) | 100% | Research suggests that a suitable rate for a company in this growth stage (i.e. stage 4) is 100%. |
Other key inputs
| ||
| What's the current value of the company? | £4,000,000 | As at 23rd February 2022, the Stockhub company estimates the current value of its company at £4 million. |
| Which time period do you want to use to estimate the expected return? | Between now and five years time | Stockhub suggests that to account for general market cyclicity, it's best to estimate the expected return of the company between now and five years time. |
Sensitive analysisEdit
The main inputs that result in the greatest change in the expected return of the Stockhub investment are, in order of importance (from highest to lowest):
- The discount rate (the default time-weighted average rate is 15%);
- The probability of success rate (the default time-weighted average rate is 71%); and
- Stockhub peak market share (the default share is 2%)
The impact of a 50% change in those main inputs to the expected return of the Stockhub investment is shown in the table below.
| Main input | 50% worse | Unchanged | 50% better |
|---|---|---|---|
| The discount rate | 10x | 55x | 412x |
| The probability of success rate | 14x | 55x | 88x |
| Stockhub peak market share | 27x | 55x | 82x |
ActionsEdit
To invest in CitaDao, click here.
To contact CitaDao, click here.
- ↑ Source: Stockhub Limited
- ↑ http://www.robertpicard.net/files/econgrowthandadvertising.pdf
- ↑ https://www.macrotrends.net/countries/WLD/world/gdp-growth-rate
- ↑ http://escml.umd.edu/Papers/ObsCPMT.pdf
- ↑ Stadler, Enduring Success, 3–5.
- ↑ Levie J, Lichtenstein BB (2010) A terminal assessment of stages theory: Introducing a dynamic approach to entrepreneurship. Entrepreneurship: Theory & Practice 34(2): 317–350. https://doi.org/10.1111/j.1540-6520.2010.00377.x
- ↑ Stef Hinfelaar et al.:, 2019.
- ↑ Dickinson, 2010.
- ↑ 9.0 9.1 9.2 9.3 http://escml.umd.edu/Papers/ObsCPMT.pdf
- ↑ 10.00 10.01 10.02 10.03 10.04 10.05 10.06 10.07 10.08 10.09 10.10 10.11 10.12 10.13 10.14 10.15 10.16 http://people.stern.nyu.edu/adamodar/pdfiles/papers/younggrowth.pdf
- ↑ Demirakos et al., 2010; Gleason et al., 2013