Gfinity plc

What type of investment is Gfinity and is it a suitable investment for me?

Gfinity plc, together with its subsidiaries, designs, develops, and delivers esports offerings to publishers, sports rights holders, and brands and media companies in the United Kingdom, North America, and internationally. The company delivers esports related technology and services for third parties, as well as provides broadcast and production services. It owns and operates gamer-centric websites, including gfinityesports.com, realsport101.com, stealthoptional.com, racinggames.gg, epicstream.com, mtgrocks.com, siege.gg, and stockinformer. In addition, the company offers IT development and tournament services, as well as event operator services; and engages in the online media activities. Gfinity plc was incorporated in 2012 and is based in London, the United Kingdom.

What is Gfinity and what makes it unique?

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. Researching into how to do that, he realised that one of the best ways is to finance more efficiently the business' working capital, in particular inventory. 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?

The mission of Supply@ME Capital plc is to help companies maximise their profits.

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. Evidence suggests that a blockchain-enabled inventory finance platform will result in inventory-intensive companies financing their inventory much more efficiently, ultimately leading the companies to improve/maximise their profits.

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. ccc) and providing or aiming to provide the same core benefit (i.e. ccc), 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 Gfinity plc's offerings are ccc, cccand ccc. A detailed comparison between Gfinity plc and its main competitors are shown in the table below.

Competition analysis

	Supply@ME	TraxPay	Demica	Novuna	Marco Polo Network
Is the product targeted toward ccc?	Yes	Yes	Yes	Yes	Yes
Is the core benefit of the product ccc?	Yes	Yes	Yes	Yes	Yes
ccc?	Yes	Yes	Yes	Yes	Yes
ccc?	Yes	No	No	No	No

What is the main way that the company expects to make money?

ccc

What’s the size of the company target market?

Total Addressable Market

Here, the total addressable market (TAM) is defined as the global ccc market, and based on a number of assumptions, it is estimated that the size of the market as of today (3rd December 2022), in terms of revenue, is $ccc billion.

Serviceable Available Market

The serviceable available market (SAM) is defined as the global ccc market, and based on a number of assumptions, it is estimated that the size of the market as of today (3rd December 2022), in terms of revenue, is $ccc billion.

Serviceable Obtainable Market

Here, the serviceable obtainable market (SOM) is defined as the United Kingdom ccc market, and based on a number of assumptions, it is estimated that the size of the market as of today (3rd December 2022), in terms of revenue, is $ccc billion.

Who are the key members of the team?

Board of directors

Neville Upton, Chairman

After graduating at the London school of Economics, Neville joined Coopers & Lybrand where he qualified as a Chartered Accountant. Neville’s formative years were at Euromoney where he gained experience in finance, M&A and various commercial projects. After a brief spell at The Decisions Group as Finance and Operations Director, in 1998 he established a call centre business, The Listening Company, which specialised in multichannel communication applications and high quality customer service solutions. The business was sold in 2011 to Serco for a sum in excess of £60 million, at which time it had a turnover of £82 million and employed 4,000 people. Neville co-founded Gfinity in 2012 and assumed the role of Chairman in March 2020.

John Clarke, Chief Executive Officer

John is an experienced business executive having worked in and with leading global companies for the last 25 years. Prior to joining Gfinity, John worked for HEINEKEN N.V. where he was Head of Global Communications and, most recently, a senior commercial director within Lagunitas Brewing Company, a 100% owned subsidiary of HEINEKEN N.V. Previously he held senior leadership, corporate affairs and marketing positions within The American Express Company and Burson-Marsteller Public Relations. John was appointed to the board in September 2018, originally as a non-executive director. In May 2019 he was appointed as the Chief Commerical and Brand Officer, in which role he oversaw a rapid expansion of the Gfinity and RealSport communities. John was appointed Chief Executive in March 2020.

Jonathan Hall, Chief Financial and Operations Officer

Jon qualified as a Chartered Accountant with Arthur Andersen followed by a period of six years specialising in organisation and business process design with PA Consulting, a leading London based management consultancy firm. He subsequently spent five years as a Finance Director of Saracens Ltd and the wider Premier Team Holdings Group, before joining Gfinity in August 2014 where he led the process of the Company’s admission to AIM. As Chief Financial and Operations Officer Jon has responsibility for all aspects of finance and accounting, including financial planning, reporting and accessing capital to fund growth. He also retains responsibility for all company operations including event delivery, technology, HR and legal matters.

Leonard Rinaldi, Independent Non-executive Director

Len Rinaldi retired in April 2019 after 12 years as the General Manager, Western Europe, Apple, Inc., where he led sales / general management across Western Europe. Previously, as Apple’s CFO EMEIA 2007 – 2012, he oversaw revenue hyper growth from $7bn to $40bn. Len also sat on the boards of Apple India (revenues $800m) as it entered the market, and Apple France (revenues $4bn). His early career was spent in finance and business development/sales roles at AT&T and Alcatel Lucent, and has lived in Saudi Arabia, Singapore, USA, Paris, and London. Len holds an MBA in Finance from FDU. In addition he has Executive Leadership Certifications from Wharton School of Business and the University of Notre Dame.

Hugo Drayton, Independent Non-executive Director

Hugo has spent the past 30 years in publishing and media, as a pioneer in digital media, including planning and launching the UK’s first online newspaper – Electronic Telegraph, in 1994. He led Inskin Media, as CEO, for 10 years until 2020, growing it from start-up to a global, brand advertising business. Previously, he spent 10 years at The Telegraph Group, latterly as Group Managing Director. Hugo led Advertising.com, Europe, for 2 years, and was launch CEO of behavioural marketing company, Phorm. Hugo is a non-executive director on the board of FTSE250 Future plc, and is an investor/advisor to several media and ad-tech businesses. He serves as a Trustee of the Felix Byam Shaw (Felix Project) and British Skin Foundation charities. His early career was spent overseas, in Europe and South America, with Coats Viyella, and launching automated telephony services across Europe with Reed Telemedia.

How much does the company expect to make over the next five years?

Most recent full-year results

For the fiscal (and calendar) year 2021, revenue decreased by 55% to £0.5 million (FY2020: £1.1 million) as the company focused on automating the inventory finance process, via the development of its platform. The net loss in the period increased by 4.3x to £12.5 million (FY2020: £2.9 million), mainly reflecting its most recent acquisition (of TradeFlow) and investment in the business.

Most recent half-year results

During the six months ended 30th June 2022, revenues decreased by 23% to £209k (H1 2021: £271k) as the company maintained its focus on the development of its inventory finance platform. The net loss in the period increased by 226% to £6.2 million (H1 2021: £1.9 million), reflecting costs related to the TradeFlow acquisition and further investment in the business. Net current liabilities and net liabilities stood at £6.3 million and £4.0 million, respectively. The company ended the period with cash of around £1 million.

Since its most recent half year results

Since its most recent results (i.e. the results for the six months ended 30th June 2022), the company raised £ccc million via equity. It also issued £ccc million in new debt and repaid £ccc million in existing debt. Accordingly, it's cash, net cash, net current liabilities and net liabilities positions are £ccc million, £ccc million, £ccc million and £ccc million, respectively. It's worth noting that Supply@ME Capital is in the 'introductory' stage of the business lifecycle (i.e. growth stage one), and in that stage, financing cash flows are positive (i.e. the business relies on external funding).

What are the financials?

Financials

Year	1	2	3	4	5	6	7	8	9	10	11	12	13	14	15	16	17	18	19	20	21	22	23	24	25	26	27	28	29	30	31	32	33	34	35	36	37	38	39	40	41	42	43	44	45	46	47	48	49	50
Year end date	31/12/2018	31/12/2019	31/12/2020	31/12/2021	31/12/2022	31/12/2023	31/12/2024	31/12/2025	31/12/2026	31/12/2027	31/12/2028	31/12/2029	31/12/2030	31/12/2031	31/12/2032	31/12/2033	31/12/2034	31/12/2035	31/12/2036	31/12/2037	31/12/2038	31/12/2039	31/12/2040	31/12/2041	31/12/2042	31/12/2043	31/12/2044	31/12/2045	31/12/2046	31/12/2047	31/12/2048	31/12/2049	31/12/2050	31/12/2051	31/12/2052	31/12/2053	31/12/2054	31/12/2055	31/12/2056	31/12/2057	31/12/2058	31/12/2059	31/12/2060	31/12/2061	31/12/2062	31/12/2063	31/12/2064	31/12/2065	31/12/2066	31/12/2067
Type	Historic	Historic	Historic	Historic	Forecast	Forecast	Forecast	Forecast	Forecast	Forecast	Forecast	Forecast	Forecast	Forecast	Forecast	Forecast	Forecast	Forecast	Forecast	Forecast	Forecast	Forecast	Forecast	Forecast	Forecast	Forecast	Forecast	Forecast	Forecast	Forecast	Forecast	Forecast	Forecast	Forecast	Forecast	Forecast	Forecast	Forecast	Forecast	Forecast	Forecast	Forecast	Forecast	Forecast	Forecast	Forecast	Forecast	Forecast	Forecast	Forecast
Income statement
Revenues (£'000)	NA	4	1,147	538	1,801	3,534	6,711	12,327	21,906	37,665	62,654	100,833	157,000	236,506	344,688	486,019	663,015	875,059	1,117,362	1,380,364	1,649,821	1,907,756	2,134,284	2,310,068	2,419,025	2,450,751	2,402,156	2,277,961	2,089,943	1,855,094	1,593,091	1,323,605	1,063,945	827,415	622,545	453,170	319,150	217,456	143,348	91,423	56,411	33,675	19,449	10,868	5,875	3,073	1,555	761	361	165
Gross profits (£'000)	NA	(763)	408	(266)	1,351	2,651	5,033	9,245	16,430	28,249	46,990	75,625	117,750	177,379	224,047	364,514	497,262	656,294	726,285	897,237	907,401	1,049,266	1,173,856	1,270,537	1,330,464	1,347,913	1,321,186	1,252,878	1,149,469	1,020,302	716,891	595,622	478,775	372,337	280,145	203,926	143,617	97,855	64,506	41,140	25,385	15,154	8,752	4,890	2,644	1,383	700	343	162	74
Operating profits (£'000)	NA	(687)	(2,819)	(10,814)	1,081	2,121	4,026	7,396	13,144	22,599	37,592	60,500	94,200	141,904	172,344	291,611	397,809	525,035	558,681	690,182	659,928	763,103	853,714	924,027	967,610	980,300	960,862	911,184	835,977	742,038	477,927	397,081	319,184	248,224	186,763	135,951	95,745	65,237	43,004	27,427	16,923	10,103	5,835	3,260	1,763	922	466	228	108	50
Net profits (£'000)	NA	(551)	(2,964)	(12,487)	1,081	2,121	4,026	7,396	13,144	22,599	37,592	60,500	94,200	141,904	151,663	256,618	350,072	462,031	491,639	607,360	580,737	671,530	751,268	813,144	851,497	862,664	845,559	801,842	735,660	652,993	420,576	349,432	280,881	218,437	164,352	119,637	84,256	57,408	37,844	24,136	14,892	8,890	5,135	2,869	1,551	811	410	201	95	44

What are the assumptions used to estimate the financial forecasts?

Key inputs

Description	Value	Commentary
Revenue
What's the estimated current size of the total addressable market?	$119,000,000,000	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 (28th November 2022), in terms of revenue, is $119 billion.
What is the estimated company lifespan?	50 years	Research shows that the average lifespan of a large corporation is around 50 years.
What's the estimated annual growth rate of the total addressable market over the lifecycle of the company?	3%	Research shows that the growth rate of the working capital finance arrangement market (i.e. the total addressable market) is similar to the growth rate of global gross domestic product, which has averaged (medium) around 3% per year in the last 20 years (2001 to 2022).
What's the estimated company peak market share?	1%	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?	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), so we suggest using that function here.
What's the estimated standard deviation of company revenue?	5.5 years	Another way of asking this question is this way: within how many years either side of the mean does 68% of revenue occur? Based on Supply@ME Capital's current revenue amount (i.e. $0.6 million) and Supply@ME Capital's estimated lifespan (i.e. 50 years) and Supply@ME Capital's estimated current stage of its lifecycle (i.e. introduction stage), the we suggest using five and a half years (i.e. 68% of all sales happen within five and a half years either side of the mean year), so that's what's used here.
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. 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. 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. A summary of the economic links to cash flow patterns can be found in the appendix of this report. We estimate that with Supply@ME Capital's operating cash flows positive (+), investing cash flows 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 proportion of the company lifecycle is represented by growth stage 1?	30%	Research suggests 30%.
What proportion of the company lifecycle is represented by growth stage 2?	10%	Research suggests 10%.
What proportion of the company lifecycle is represented by growth stage 3?	20%	Research suggests 20%.
What proportion of the company lifecycle is represented by growth stage 4?	40%	Research suggests 40%.
Cost of goods sold as a proportion of revenue (%)	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), and the margin for its peers is 25%.
Operating expenses as a proportion of revenue (%)	15%	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), and the margin for its peers is 15%.
Tax rate (%)	0%	Research suggests that it's best to use a similar rate as the one used by peers that are in the same growth stage (i.e. growth stage 1), and the rate for its peers is 0%.
Depreciation and amortisation as a proportion of fixed capital (%)	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), and the margin for its peers is 10%.
Fixed capital as a proportion of revenue (%)	10%	Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 1), and the amount for its peers is 10%.
Working capital as a proportion of revenue (%)	15%	Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 1), and the amount for its peers is 15%.
Net borrowing ($000)	Zero	We suggest that for simplicity, the net borrowing figure is zero.
Interest amount ($000)	Zero	We suggest that for simplicity, the interest amount figure is zero.
Cost of goods sold as a proportion of revenue (%)	35%	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), and the margin for its peers is 35%.
Operating expenses as a proportion of revenue (%)	15%	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), and the margin for its peers is 15%.
Tax rate (%)	12%	Research suggests that it's best to use a similar rate as the one used by peers that are in the same growth stage (i.e. growth stage 2), and the rate for its peers is 12%.
Depreciation and amortisation as a proportion of fixed capital (%)	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), and the margin for its peers is 10%.
Fixed capital as a proportion of revenue (%)	10%	Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 2), and the amount for its peers is 10%.
Working capital as a proportion of revenue (%)	15%	Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 2), and the amount for its peers is 15%.
Net borrowing ($000)	Zero	We suggest that for simplicity, the net borrowing figure is zero.
Interest amount ($000)	Zero	We suggest that for simplicity, the interest amount figure is zero.
Cost of goods sold as a proportion of revenue (%)	45%	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), and the margin for its peers is 45%.
Operating expenses as a proportion of revenue (%)	15%	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), and the margin for its peers is 15%.
Tax rate (%)	12%	Research suggests that it's best to use a similar rate as the one used by peers that are in the same growth stage (i.e. growth stage 3), and the rate for its peers is 12%.
Depreciation and amortisation as a proportion of fixed capital (%)	10%	Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 3), and the amount for its peers is 10%.
Fixed capital as a proportion of revenue (%)	10%	Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 3), and the amount for its peers is 10%.
Working capital as a proportion of revenue (%)	15%	Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 4), and the amount for its peers is 15%.
Net borrowing ($000)	Zero	We suggest that for simplicity, the net borrowing figure is zero.
Interest amount ($000)	Zero	We suggest that for simplicity, the interest amount figure is zero.
Cost of goods sold as a proportion of revenue (%)	55%	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), and the margin for its peers is 55%.
Operating expenses as a proportion of revenue (%)	15%	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), and the margin for its peers is 15%.
Tax rate (%)	12%	Research suggests that it's best to use a similar rate as the one used by peers that are in the same growth stage (i.e. growth stage 4), and the rate for its peers is 12%.
Depreciation and amortisation as a proportion of fixed capital (%)	10%	Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 4), and the amount for its peers is 10%.
Fixed capital as a proportion of revenue (%)	10%	Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 4), and the amount for its peers is 10%.
Working capital as a proportion of revenue (%)	15%	Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 4), and the amount for its peers is 15%.
Net borrowing ($000)	Zero	We suggest that for simplicity, the net borrowing figure is zero.
Interest amount ($000)	Zero	We suggest that for simplicity, the interest amount figure is zero.

What are the key risks of investing in the company?

As with any investment, investing in Gfinity plc carries a level of risk. The key risks can be found below. Overall, based on the Gfinity plc's adjusted beta (i.e. 0.81), the degree of risk associated with an investment in Gfinity plc is 'medium'.

Strategic risks

COVID-19 risk

The COVID-19 pandemic drove an unparalleled level of uncertainty within the global economy. This has resulted in many organisations holding back from making long term spending commitments. It has also seen a movement away from spend on live, in- person events. The potential for further outbreaks and related lockdown measures also has implications for financial markets, which could have implications both for Gfinity’s share price and the availability of future capital.

Economic and political uncertainty

The United Kingdom’s exit from European Union has created a level of economic and political uncertainty, which provides risks at both a strategic and operational level for Gfinity. At a strategic level, the uncertainty could create challenges with regards to capital availability and the desire of global publishers, rights holders and brands to deliver programmes in the UK.

Intellectual property risk

Esports involves the use of intellectual property, typically owned by the publishers of the respective game titles. Gfinity must consider the risk of changes in strategy of the intellectual property owners, resulting in certain games not being available for use by Gfinity in its esports properties, or fees being required for the use of intellectual property, which may present a challenge to Gfinity’s business model.

Perception of video gaming

Some people view video gaming negatively, as something that promotes an unhealthy lifestyle and lack of social interaction. There is a risk that this perception will provide a barrier to entry to commercial partners and broadcasters, presenting a risk to Gfinity’s business model.

Competition risk

There are currently very few companies globally that can deliver full end to end esports solutions and Gfinity has established a first mover advantage. As the market develops, however, there is a risk of new entrants coming into the market, or game publishers looking to bring the capability in house.

Speed of revenue growth

Gfinity operates in a pioneering sector. Directors believe, supported by market research, that the value of that sector is significantly below the level it should reach, given the size and level of engagement of the audience and the attractiveness of that demographic to broadcasters and commercial partners. Nonetheless, that growth may not be linear and that may present a risk to the speed of revenue growth.

Operational risks

COVID-19 risk

Alongside the strategic risks, the COVID-19 outbreak has presented multiple operational risks to the business, including:

• Key staff availability; in the event that multiple people needed to be absent at a single point in time
• Facility availability; ensuring we remain able to generate competitive gaming content for our own programmes and for clients without breaching government regulations
• Maintaining efficient and effective ways of working, including ensuring that staff are able to do their jobs even if they can’t come to the office
• Maintaining appropriate communication, so the company’s activities remain focused and aligned.

Liquidity risk

Gfinity is currently a loss-making company and as such, must ensure that it has sufficient capital available to deliver on its strategy

Access to key skills

Esports is a new sector and as such, the number of people with deep experience in developing and delivering esports solutions is limited. Without access to this expertise, Gfinity would not be able to provide the depth of solutions to its client base or build its own Gfinity “tribe”.

Data security risk

Gfinity has built a large community of esports fans playing, watching and socialising through its own platform and those of CEVO and RealSport. Increasing levels of data protection regulation, including GDPR legislation, and ongoing cyber security risks, make it imperative that any data gathered through these platforms is collected, handled and protected in accordance with all relevant regulations. Any failure to do so would significantly erode trust, both among the esports community and prospective commercial partners.

How much can I expect to make from 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%. 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.

What are the assumptions used to estimate the return?

Key inputs

Description	Value	Commentary
Which valuation model do you want to use?	Discounted cash flow	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, so that's the approach that we suggest 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). Supply@ME Capital has never paid cash dividends, and it said that it currently does not anticipate paying any cash dividends in the foreseeable future. Accordingly, we suggest using the free cash flow valuation method (rather than the dividend discount model).
Which financial forecasts to use?	Proactive Investors	The only available long-term forecasts (i.e. >15 years) are the ones that are supplied by us (the forecasts can be found in the financials section of this report), so we suggests using those.
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.
Probability of success (%)	60%	Research suggests that a suitable rate for a company in this growth stage (i.e. stage 1) is 60%.
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 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.
Probability of success (%)	90%	Research suggests that a suitable rate for a company in this growth stage (i.e. stage 2) is 90%.
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 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.
Probability of success (%)	100%	Research suggests that a suitable rate for a company in this growth stage (i.e. stage 3) is 100%.
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 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.
Probability of success (%)	100%	Research suggests that a suitable rate for a company in this growth stage (i.e. stage 4) is 100%.
What's the current value of the company?	$54.80 million	As at 28th November 2022, the current value of the Supply@Me Capital company is $54.80 million (or £45.30 million).
Which time period do you want to use to estimate the expected return?	Between now and five years time	Research suggests that following a market crash, the average amount of time it takes for the price of a stock market to return to its pre-crash level (i.e. the recovery period) is at least three years. Accordingly, we suggest 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 analysis

The main inputs that result in the greatest change in the expected return of the Supply@Me Capital investment are, in order of importance (from highest to lowest):

1. The size of the total addressable market (the default size is $119 billion);
2. Supply@Me Capital peak market share (the default share is 1%); and
3. The discount rate (the default time-weighted average rate is 16%).

The impact of a 10% change in those main inputs to the expected return of the Supply@ME Capital investment is shown in the table below.

Supply@ME Capital investment expected return sensitive analysis

Main input	10% worse	Unchanged	10% better
The size of the total addressable market	To be added	411%	To be added
Supply@ME Capital peak market share	To be added	411%	To be added
The discount rate	To be added	411%	To be added

Appendix

Relative valuation approach

As noted earlier in this report, 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, so that's the approach that we suggest using to determine the estimated value of the company (the valuation based on the discounted cash flow approach can be found in the valuation section of this report); nevertheless, for completeness purposes, separately, the valuation of the company is also estimated using the relative valuation approach.

What's the expected return of an investment in the company using the relative valuation approach?

Accordingly, we estimate that the expected return of an investment in Supply@ME Capital over the next 12 months is 141%. In other words, an £10,000 investment in the company is expected to return £24,100 in 12-months 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 141%), then an investment in the company is considered to be a 'suitable' one.

What are the assumptions used to estimate the return figure?

Key inputs

Description	Value	Commentary
Which type of multiple do you want to use?	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 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?	Year 1	Research suggests that when using the relative valuation approach, it's best to use a time period of 12 months or less. Accordingly, for the sales figure, we suggest using Year 1.
In regards to the growth-adjusted EV/sales multiple, for the sales growth figure, which year(s) do you want to use?	Year 2 to 4, from now	We suggest that for the sales growth figure, it's best to use Year 2 to 4.
In regards to the growth-adjusted EV/sales multiple, what multiple figure do you want to use?	43x	Here, we suggest using a multiple of 43x.
Which financial forecasts to use?	Proactive Investors	The only available forecasts are the ones that are supplied by us (the forecasts can be found in the financials section of this report), so we suggest using those.
What's the current value of the company?	$54.80 million	As at 28th November 2022, the current value of the Supply@Me Capital company is $54.80 million (or £45.30 million).
Which time period do you want to use to estimate the expected return?	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.

Sensitive analysis

The two main inputs that result in the greatest change in the expected return of the Supply@ME Capital investment are, in order of importance (from highest to lowest):

1. The growth-adjusted EV/sales multiple (the default multiple is 42x);
2. The Year-one sales forecast (the default forecast is $3.5 million); and
3. The Year 2 to 4 sales growth forecast (the default forecast is 87%)

The impact of a 10% change in those main inputs to the expected return of the Supply@ME Capital investment is shown in the table below.

Sirius investment expected return sensitive analysis

Main input	10% worse	Unchanged	10% better
The growth-adjusted EV/sales multiple	To be added	141%	To be added
The Year-one sales forecast	To be added	141%	To be added
The Year 2 to Year 4 sales growth forecast	To be added	141%	To be added

Major shareholders

The table below shows those who hold 3% or more of the company's share capital, as of 14th October 2022.

Holdings of shareholders

Shareholder	Number of Ordinary Shares	Percentage of the issued share capital
The AvantGarde Group S.p.A.	12,742,513,009	22.51%
Venus Capital S.A.	7,900,000,000	13,95%

Note, the total number of issued share capital is as follows: 56,617,688,143 ordinary shares. What's the total number of outstanding warrants and options?

Economic links to cash flow patterns

Economic links to cash flow patterns

Cash flow type	Introduction	Growth	Shake out	Mature	Decline
Operating	-	+	+/-	+	-
Investing	-	-	+/-	-	+
Financing	+	+	+/-	-	+/-