Editing Supply@ME Capital
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* Listed on the London Stock Exchange in the United Kingdom, Supply@ME Capital plc is a company that's on a mission to help businesses maximise their profits, in particular raise funds more efficiently. | * Listed on the London Stock Exchange in the United Kingdom, Supply@ME Capital plc is a company that's on a mission to help businesses maximise their profits, in particular raise funds more efficiently. | ||
* The flagship offering of the company is a web application that enables companies that are inventory-intensive<ref>Here, inventory refers to the goods and materials that a business holds for the ultimate goal of resale, production or utilisation.</ref> and willing and able to take higher levels of risk (for higher levels of return), such as early-stage manufacturing companies, to raise funds. What makes the finance platform unique is that it raises the funds by selling [and then at a later stage (e.g. 90 days), buying-back, at a higher price (than the sold price)] the inventory of the businesses, using a type of financial agreement called the true sale inventory agreement.<ref name=":8" /> Evidence suggests that the agreement enables early-stage inventory-intensive companies to raise funds more efficiently, ultimately leading the companies to improve/maximise their profits<ref name=":3">https://www.sciencedirect.com/science/article/pii/S0929119914001606</ref>. | * The flagship offering of the company is a web application that enables companies that are inventory-intensive<ref>Here, inventory refers to the goods and materials that a business holds for the ultimate goal of resale, production or utilisation.</ref> and willing and able to take higher levels of risk (for higher levels of return), such as early-stage manufacturing companies, to raise funds. What makes the finance platform unique is that it raises the funds by selling [and then at a later stage (e.g. 90 days), buying-back, at a higher price (than the sold price)] the inventory of the businesses, using a type of financial agreement called the true sale inventory agreement.<ref name=":8" /> Evidence suggests that the agreement enables early-stage inventory-intensive companies to raise funds more efficiently, 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 33%. In other words, an £100,000 investment in the company is expected to return £511,000 in five years time. The main assumptions behind the estimate include: 1) a significant total addressable market size; 2) the uniqueness of the company's offering(s) and the experienced, founder-led team are able to capture a sizable amount of the market; and 3) a high discount rate | * 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 33%. In other words, an £100,000 investment in the company is expected to return £511,000 in five years time. The main assumptions behind the estimate include: 1) a significant total addressable market size; 2) the uniqueness of the company's offering(s) and the experienced, founder-led team are able to capture a sizable amount of the market; and 3) a high discount rate. | ||
* The degree of risk associated with an investment in Supply@ME Capital plc is 'high', with the shares having an adjusted beta that is 561% above the market (4.61 vs. 1). | * The degree of risk associated with an investment in Supply@ME Capital plc is 'high', with the shares having an adjusted beta that is 561% above the market (4.61 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. | ||
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===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, in particular raise funds more efficiently. | ||
===What's the company's main offering(s)? === | ===What's the company's main offering(s)? === | ||
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===== What's a major problem that the target audience experience? ===== | ===== What's a major problem that the target audience experience? ===== | ||
The problem is a lack of profits, more specifically a lack of financing. | |||
The Federation of Small Businesses, a lobby group for the UK’s smallest companies, said a survey of members found that successful applications for bank loans and other financing had dropped precipitously, with less than half of applications successful in the third quarter of 2022. The lobby group added that the smaller a business was, the less likely its request for a bank loan was to be approved. | |||
=====What's a key solution to the problem?===== | =====What's a key solution to the problem?===== | ||
The solution is Supply@ME, a web application that enables early-stage inventory-intensive businesses to raise funds. What makes the finance platform unique is that it raises the funds by selling [and then at a later stage (e.g. 90 days), buying-back, at a higher price (than the sold price)] the inventory of the businesses, using a type of financial agreement called the true sale inventory agreement.<ref name=":8" /> Evidence suggests that the true sale inventory agreement enables early-stage inventory-intensive companies to raise funds more efficiently, ultimately leading the companies to improve/maximise their profits<ref name=":3" />. | The solution is Supply@ME, a web application that enables early-stage inventory-intensive businesses to raise funds. What makes the finance platform unique is that it raises the funds by selling [and then at a later stage (e.g. 90 days), buying-back, at a higher price (than the sold price)] the inventory of the businesses, using a type of financial agreement called the true sale inventory agreement.<ref name=":8" /> Evidence suggests that the true sale inventory agreement enables early-stage inventory-intensive companies to raise funds more efficiently, ultimately leading the companies to improve/maximise their profits<ref name=":3" />. | ||
Note, with a true sale inventory agreement, | Note, with a true sale inventory agreement, the fundraising transaction is recorded off the balance sheet of the fundraising company (i.e. off-balance sheet transaction<ref>An off-balance sheet (OBS) transaction is a type of financial arrangement in which a company does not record certain assets or liabilities on its balance sheet. The main benefit of an OBS transaction is that it can help a company to manage its financial statements in a way that makes its financial position appear stronger than it would if the assets or liabilities were recorded on its balance sheet. | ||
One of the primary benefits of OBS transactions is that they can help a company to manage its level of debt and leverage, by allowing it to keep certain liabilities off its balance sheet. This can make the company's debt-to-equity ratio appear lower, which can be attractive to investors and creditors. | |||
Another benefit of OBS transactions is that they can help a company to manage its level of risk. By keeping certain assets or liabilities off its balance sheet, a company can limit its exposure to certain types of risk. For example, if a company enters into an OBS transaction to finance a project, it can limit its exposure to the project's risks by not recording the project's assets and liabilities on its balance sheet.</ref>, more specifically off-balance sheet inventory repurchase agreement transaction). The off-balance sheet transaction makes the financial position of the fundraising company appear better than it actually is, usually resulting in better investment (and creditor) terms. | |||
==== Secondary offering/audience ==== | ==== Secondary offering/audience ==== | ||
The secondary audience is inventory-intensive companies that follow the teachings of Islam (i.e. Islamic inventory-intensive companies). | The secondary audience is inventory-intensive companies that follow the teachings of Islam (i.e. Islamic inventory-intensive companies). | ||
Currently, inventory finance is treated as a loan, involving interest (payments). Interest is considered to be a sin in Islam (Quran 2:278-279), and, therefore, Muslims should avoid engaging in transactions that involve interest. Accordingly, the current form of inventory finance excludes 1.97 billion people (or 25% of the global population). | Currently, inventory finance is treated as a loan, involving interest (payments). Interest is considered to be a sin in Islam (Quran 2:278-279), and, therefore, Muslims should avoid engaging in transactions that involve interest. Accordingly, the current form of inventory finance excludes 1.97 billion people (or 25% of the global population). The Supply@Me Finance company claims that its form of inventory finance is structured in a way in which the inventory is actually sold (i.e. it's not treated as a loan, and, therefore, there is no associated interest), making the platform an inventory finance platform that truly sells the inventory (i.e. true sale inventory finance platform), and, therefore, an inventory finance platform that is allowed to be used by Muslims (i.e. Muslim-permissible inventory finance platform). | ||
Many Islamic countries adopt Sharia, Islamic law, and the Supply@ME finance structure has been approved as being compliant within the principles of Shariah, thereby making the platform one of the first shariah-compliant inventory finance platforms. | |||
== Which are the main competitors of the product? == | == Which are the main competitors of the product? == | ||
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!HSBC business loan | !HSBC business loan | ||
|- | |- | ||
|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 | |||
| 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 | |||
|- | |||
|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 | ||
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| style="background: green; color: white;" |Yes | | style="background: green; color: white;" |Yes | ||
|- | |- | ||
|Is the platform focused on | |Is the platform focused on financing the supply chain of the companies (i.e. 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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|Does the product provide financing related to inventory (i.e. inventory-related financing)? | |Does the product provide financing related to inventory (i.e. 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 | |||
| 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 financing related to accounts receivables (i.e. receivables-related financing)? | |||
| style="background: red; color: white;" |No | |||
| 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 | |||
| style="background: green; color: white;" |Yes | |||
|- | |||
|Does the product provide financing related to accounts payables (i.e. payables-related financing)? | |||
| style="background: red; color: white;" |No | |||
| 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: 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: green; color: white;" |Yes? | |||
| style="background: red; color: white;" |No | |||
| style="background: red; color: white;" |No | |||
|- | |||
|Does the platform record the finance transactions on a blockchain (i.e. Blockchain-enabled SCF platform)? | |||
| 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: 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 | |||
| style="background: red; color: white;" |No | |||
| style="background: orange; color: white;" |N/A | |||
| style="background: orange; color: white;" |N/A | |||
| 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 | ||
|- | |||
|Roughly, what proportion of global inventory is the platform able to finance (i.e. inventory finance coverage)? | |||
| style="background: orange; color: white;" |N/A | |||
| style="background: orange; color: white;" |N/A | |||
| style="background: orange; color: white;" |N/A | |||
| style="background: orange; color: white;" |N/A | |||
| style="background: orange; color: white;" |N/A | |||
| style="background: orange; color: white;" |N/A | |||
| style="background: orange; color: white;" |N/A | |||
| style="background: orange; color: white;" |N/A | |||
| style="background: orange; color: white;" |N/A | |||
| style="background: orange; color: white;" |N/A | |||
| style="background: orange; color: white;" |N/A | |||
| style="background: orange; color: white;" |N/A | |||
|- | |- | ||
|What is the average total price of financing inventory using the platform (i.e. inventory finance price)? | |What is the average total price of financing inventory using the platform (i.e. inventory finance price)? | ||
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| style="background: orange; color: white;" |Medium | | style="background: orange; color: white;" |Medium | ||
| style="background: orange; color: white;" |Medium | | style="background: orange; color: white;" |Medium | ||
| style="background: | | style="background: orange; color: white;" |Medium | ||
| style="background: orange; color: white;" |Medium | | style="background: orange; color: white;" |Medium | ||
| style="background: green; color: white;" |Low | | style="background: green; color: white;" |Low | ||
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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 (following a reverse takeover) on 27th March 2020<ref>Officially, the company was formed on 1st March 2000 (i.e. almost 23 years ago).</ref>, 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 | 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<ref>Officially, the company was formed on 1st March 2000 (i.e. almost 23 years ago).</ref>, 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 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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|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 (%) |