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Supply@ME Capital
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===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 |}
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