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Supply@ME Capital
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== Appendix == === Cost of equity === {| class="wikitable" |+Cost of equity (%) !Input !Input value !Additional information |- |Risk-free rate (%) |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 50 years, so we have used the longest maturity, which is 30 years. |- |Beta |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-looking, it is logical to adjust the raw beta so it more accurately predicts a future beta. |- |Equity risk premium (%) |5.26 |Here, the equity risk premium is in relation to the global region, and is calculated as at 1st January 2022. Research suggests that for the region of equity risk premium, it's best to use one that is the same or similar to the region of the beta market portfolio. Here, the region of the beta market portfolio is the world/global, so we have used the world/global region for the equity risk premium. |- |Cost of equity (%) |27.74% |Cost of equity = Risk-free rate + Beta x Equity risk premium. |} ===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 Β£10,000 investment in the company is expected to return Β£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?==== {| class="wikitable" |+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 we expect 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 the 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 we believe is in-line with the multiples of online marketplaces. |- |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 $54.80 million (or Β£45.30 million). |- |Which time period do you want to use to estimate the expected return? |Between now and one year time |Research suggests that when using the relative valuation approach, it's best to estimate the expected return of the company between now and one year time. |} The Supply@ME Capital platform connects buyers and sellers (of inventory), and, therefore, acts as a marketplace. The medium adjusted EV/sales multiple of Bloomberg-defined marketplaces is 6.18x. {| class="wikitable" |+Marketplace peers !Company name !Primary exchange !Market capitalisation ($m) !EV/next year sales (x) !Sales growth rate (%) !Adjusted EV/sales (x) |- |Japan Exchange Group |Japan |7,510 |6.52 |3.79 |172.03 |- |Mercari, Inc. |Japan |3,180 |2.16 |41.70 |5.18 |- |Airbnb, Inc. |United States |61,219 |5.75 |17.94 |32.05 |- |Yonghui Superstores |China |4,605 |0.55 |8.90 |6.18 |- |JSE Ltd. |South Africa |500 |2.63 |4.62 |56.93 |- |Zillow Group, Inc. |United States |8,359 |3.63 |82.81 |4.38 |- |Creema Ltd. |Japan |20 |0.29 |25.89 |1.12 |- |Via S/A |Brazil |730 |0.44 |4.69 |9.38 |- |Cogent Communications Holdings Inc |United States |2,777 |6.00 |4.27 |140.52 |- |Shutterstock, Inc. |United States |1,825 |2.15 |7.46 |28.82 |- |KAR Auction Services, Inc. |United States |1,420 |1.49 | -15.78 | -9.44 |- |Fiverr International Ltd. |United States |1,269 |2.95 |57.97 |5.09 |- |North Media A/S |Denmark |178 |0.69 | -3.35 | -20.60 |} === 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): #The growth-adjusted EV/sales multiple (the default multiple is 42x); #The Year-one sales forecast (the default forecast is $3.5 million); and #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. {| class="wikitable sortable" |+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. {| class="wikitable" |+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 === {| class="wikitable" |+Economic links to cash flow patterns |- !Cash flow type!!Introduction!!Growth!!Shake out!!Mature!!Decline |- |Operating|| style="background: red; color: white;" |-|| style="background: green; color: white;" |+ | style="background: orange; color: white;" | +/-|| style="background: green; color: white;" |+|| style="background: red; color: white;" |- |- |Investing|| style="background: red; color: white;" |-|| style="background: red; color: white;" |-|| style="background: orange; color: white;" |+/-|| style="background: red; color: white;" |- | style="background: green; 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;" |+/- |}
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