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Supply@ME Capital plc operates a platform that provides inventory monetisation services to manufacturing and trading companies in the United Kingdom, the Middle East, Italy, North Africa, the United States, and internationally. The company is based in London, the United Kingdom.
* 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 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, mainly given the stage of the business lifecycle that the company is in currently.
* 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.


== Operations ==
== Operations ==
===How did the idea of the company come about?===
===How did the idea of the company come about?===
The idea of Supply@ME Capital plc came to 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 manage more effectively the business' working capital, in particular inventory management. He also realised that there were many companies that felt the same way as him, with the majority of companies in the world experiencing the same desire. In his quest to maximise the profits of his business and others, Supply@ME Capital plc was born.
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 (i.e. an early-stage inventory-intensive company). Researching into how to do that, he realised that one of the best ways is to raise funds (i.e. funding), in particular funding related to the inventory of a business (i.e. inventory-related funding).<ref>Huff, J. & Rogers, D. S. (2015) Funding the organization through supply chain finance: a longitudinal investigation. Supply Chain Forum: An International Journal, 16(3), 4-17.</ref> He also realised that there are many company owners that feel the same way as him, with profit maximisation one of the fundamental assumptions of economic (and business) 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? ===
===What's the mission of the company? ===
The mission of Supply@ME Capital plc is to help companies maximise their profits/manage their working capital more effectively.
The mission of Supply@ME Capital plc is to help companies maximise/improve their profits.


===What's the company's main offering(s)? ===
===What's the company's main offering(s)? ===
===Who’s the target audience of the company’s flagship/first product?===
The audience is small and medium-sized, manufacturing companies (i.e. companies that hold a large amount of inventory), such as (Apple, Inc<!-- Need a SME, manufacturing company. -->). Note, here, inventory refers to the goods and materials that a business holds for the ultimate goal of resale, production or utilisation.


Most companies hold some amount of inventory. Which companies in particular? I suggest targeting companies that hold a large amount of inventory. For me, it makes sense to sell the unwanted inventory (or any inventory for that matter) back to the place/company that the inventory was bought.
==== Flagship offering/audience ====


=== What's a major problem that the target audience experience? ===
=====Who’s the target audience of the company’s flagship/first product?=====
The problem is that holding inventory costs money, mainly in terms of 1) acquiring the inventory in the first place and 2) then storing the inventory until its eventual use and 3) depreciation (most inventory depreciates over time).
The primary audience is companies that are 1) inventory-intensive (i.e. manufacturing companies) and 2) willing and able to take higher levels of risk [(for higher levels of return), such as early-stage companies (i.e. companies that are less than two years old)] (i.e. early-stage inventory-intensive companies).<ref>Typically, companies that are less than two years old find it particularly challenging to raise sufficient or any funds.


===What's a key solution to the problem/what's the product?===
The finance cost of the Supply@Me Capital type of finance is the highest, and, therefore, we expect the finance form to be used by those who are unable to use the other forms (i.e. those that are less than two years old).</ref>
The solution is xxx.


xxx is a platform that is designed to enable manufacturing companies to sell its unwanted inventory faster than ever, allowing the company to maximise its profits.
===== What's a major problem that the target audience experience? =====
"The widespread belief ... is that the lack of finance constitutes the main obstacle to the growth of [small-and medium-sized enterprises]." European Bank for Reconstruction and Development.<ref>https://www.sciencedirect.com/science/article/pii/S0883902698000275#FN1</ref>


What makes the platform unique is that it's the only platform that xxx.
As indicated in the above quote, a major problem that the target audience experience is a lack of profits, more specifically a lack of financing.


===What makes the product unique?===
Indeed, the Federation of Small Businesses, a lobby group for the UK’s smallest companies, said a survey of members founds 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?=====
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, there is no legal obligation to return the finance, thereby reducing the financial risk of the fundraising company.
 
==== Secondary offering/audience ====
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). Because the finance on the Supply@Me Finance platform 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), the platform is allowed to be used by Muslims (i.e. Muslim-permissible inventory finance platform). Indeed, the Supply@ME platform has been approved as being compliant within the principles of Sharia, Islamic law, 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? ==
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. early-stage inventory-intensive businesses) and providing or aiming to provide the same core benefit (i.e. more/maximum business profits, in particular more efficient financing), 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 Supply@ME platform are TraxPay, Demica and Novuna. A detailed comparison between Supply@ME and its main competitors are shown in the table below.
{| class="wikitable"
{| class="wikitable"
|+
|+Competition analysis
!
!
!Supply@ME
!Supply@ME
!TraxPay
!TraxPay
!Demica
!Demica
!Hitachi Capital (UK)
!Novuna
!Marco Polo Network
!Kyriba
!Taulia
!Orbian
!PrimeRevenue
!LiquidX 360
!TradeShift
!HSBC business loan
|-
|-
|Price
|Is the product targeted toward early-stage, 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 platform focused on providing financing (i.e. finance 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
| 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 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
|-
|Does the platform truly sell the inventory (i.e. true sale inventory finance 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
| 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
|-
|-
|
|Is the platform compliant with Sharia law (i.e. Sharia-compliant inventory finance 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
| 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
|-
|-
|
|What is the average total price of financing inventory using the platform (i.e. inventory finance price)?
|
| style="background: red; color: white;" |High
|
| 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: orange; color: white;" |Medium
| style="background: orange; color: white;" |Medium
| style="background: orange; color: white;" |Medium
| style="background: orange; color: white;" |Medium
| style="background: red; color: white;" |High
| style="background: orange; color: white;" |Medium
| style="background: green; color: white;" |Low
|}
|}


== What is the main way that the product expects to make money? ==
=== Finance price/cost ===
With inventory financing, the default liability is restricted to the company’s inventory only, rather than to the whole business. As a result, the risk to the financier is higher than traditional financing (i.e. business loans), and, therefore, the finance price/cost is higher (than traditional financing).
 
Furthermore, with equity financing, there is no legal obligation to return the finance<ref>It's expected that the finance will be returned (with a profit), but there's no legal obligation to do so.</ref>. Consequently, the risk to the financier is higher than debt financing, and, therefore, the finance price/cost is higher (than debt financing). With the finance arrangement provided by Supply@ME Capital, the finance comes from the selling [and then at a later stage (e.g. 90 days), buying-back, at a higher price (than the sold price)] of inventory<ref name=":8">With the buyer having no obligation to sell back the inventory and the seller having no obligation to buy back the inventory, the arrangement here is different to a traditional inventory repurchase arrangement, where there is an obligation to sell-back/buy-back the inventory. If the buyer chooses not to sell back the inventory, then the original seller will need to buy the same inventory from another entity; similarly, if the seller chooses not to buy back the inventory, then the original buyer will need to sell the inventory to another entity (or hold onto it).
 
We understand that while there is no obligation for the original buyer to sell back the inventory, the buyer is incentivised to sell back the inventory, because of a more attractive price (than if the buyer was to sell the inventory to another party) or to not sell it at all; similarly, the original seller is incentivised, because it will be logistically very expensive to replace inventory that has also be used (in the production of a final product).</ref>, and, therefore, the arrangement is more like an equity financing arrangement (rather than loan/debt financing arrangement). Accordingly, we expect the cost/price of the financing (that is provided by Supply@ME Capital) to be higher than both traditional financing and non-traditional financing [i.e. (on-balance sheet) inventory repurchase (repo) agreement<ref>An inventory repurchase agreement, also known as a inventory repo, inventory RP, or inventory sale and repurchase agreement, is a form of short-term borrowing. The dealer sells inventory to investors and, by agreement between the two parties, buys it back shortly afterwards (e.g. 60 days), at a slightly higher price.</ref>], thereby making the Supply@ME Capital financing one of the more/most expensive forms of financing.
 
== What is the main way that the company expects to make money? ==
The main way that Supply@ME expects to make money from its platform is via finance arrangement fees, which is around 2% of the finance that the company helps to arrange. For example, if $10,000,000 worth of inventory finance is facilitated/arranged via the platform, then Supply@ME will make $200,000 on the arrangement (i.e. $10,000,000 x 2% =$200,000).
 
Another way that the company expects to make money is by securitising the inventories, selling the securitised-inventories to investors (the investors are expected to receive a coupon of 4-6% per annum) and then charging a fee to the investors for Supply@ME collecting payments and monitoring the security (i.e. servicing fee). The company expects the servicing fee to be between 6% and 8% of the value of the security. So, if, for example, the total value of the securitised-inventories is $100 million, then Supply@ME will make $7 million in servicing fees (i.e. $100,000,000 x 7% =$7,000,000).


== What’s the size of the company target market? ==
== What’s the size of the company target market? ==


=== Total Addressable Market ===
=== Total Addressable Market ===
Here, the total addressable market (TAM) is defined as the global automotive market, and based on a number of assumptions, it is estimated that the size of the market as of today (30th May 2022), in terms of revenue, is $3.0 trillion.
Here, the total addressable market (TAM) is defined as the global finance arrangement market, and based on a number of assumptions, it is estimated that the size of the market as of today (27th November 2022), in terms of revenue, is $965 billion.


It can be strongly argued that given the company's mission, the total addressable market is actually the global energy market; and research suggests that the estimated size of that market is $6.1 trillion.<ref name=":16" />
It can be argued that the TAM of the company is the global working capital securitisation servicing market, and it is estimated that the size of the market as of today (27th November 2022), in terms of revenue, is $385 billion.


===Serviceable Available Market===
===Serviceable Available Market===


Here, the serviceable available market (SAM) is defined as the global car market, and based on a number of assumptions, it is estimated that the size of the market as of today (30th May 2022), in terms of revenue, is $1.0 trillion.
The serviceable available market (SAM) is defined as the global inventory finance arrangement market, and based on a number of assumptions, it is estimated that the size of the market as of today (27th November 2022), in terms of revenue, is $48 billion<ref name=":1">https://www.pwc.co.uk/business-restructuring/pdf/working-capital-report.pdf</ref>.


===Serviceable Obtainable Market===
===Serviceable Obtainable Market===


Here, the serviceable obtainable market (SOM) is defined as the US car market, and based on a number of assumptions, it is estimated that the size of the market as of today (30th May 2022), in terms of revenue, is $262 billion.
Here, the serviceable obtainable market (SOM) is defined as the Italy inventory finance arrangement market, and based on a number of assumptions, it is estimated that the size of the market as of today (27th November 2022), in terms of revenue, is $1.2 billion.
==What's the biggest achievement of the company?==
==What's the next key milestone of the company?==


== What's the business strategy of the company? ==
=== Product development ===
The price of the finance (i.e. the finance cost) is a key factor in the demand of the finance (and, therefore, the profitability of Supply@Me Capital). In other words, the lower the finance cost, the higher the finance demand, and vice versa. Consequently, we expect product development to be focused on just that (i.e. lowering the finance cost), as well as improving the accessibility of finance, in particular via the following main areas, in order of importance (from highest to lowest):
==== A suitably large inventory-related database and machine learning ====
A key ingredient to lowering the finance cost is inventory-related data. That is to say, the more inventory-related data to which an inventory-finance provider has access, the lower the finance cost (and, ultimately, the higher the finance demand). Accordingly, we believe that building a suitably large database of inventory-related data is key for the success of a company in the inventory-finance space, and, therefore, that’s where Supply@Me Capital needs to focus its energy. Indeed, a study by the International Monetary Fund (IMF) detailed that "the absence of comprehensive trade finance data posed a significant hurdle ... to make informed, timely decisions".<ref name=":2">https://www.imf.org/-/media/Files/Publications/WP/2019/wpiea2019165-print-pdf.ashx</ref> For us, therefore, a key milestone is the hiring of a chief technology officer (CFO) and senior data scientist (i.e. someone who has around five years experience with Python or another similar programming language), which we estimate will cost the company around >£100,000 per year each.
==== Internet of things ====
One key way to gather lots of useful information about inventory is to add sensors to the inventory and track the inventory over a communication network, such as the internet [i.e. via the Internet of things (IoT)<ref>The Internet of things (IoT) describes physical objects (or groups of such objects) with sensors, processing ability, software and other technologies that connect and exchange data with other devices and systems over the Internet or other communications networks.</ref>]. Indeed, the aforementioned IMF paper mentioned that the IoT will allow the real-time tracking of goods, which could become an important source of (big) data.<ref name=":2" />
==== Smart Contracts ====
Another way to lower the finance cost is to execute events (and actions) according to the terms of a contract (or an agreement) automatically, via something called Smart Contracts<ref>A smart contract is a computer program or a transaction protocol that is intended to automatically execute, control or document events and actions according to the terms of a contract or an agreement. The objectives of smart contracts are the reduction of need for trusted intermediators, arbitration costs, and fraud losses, as well as the reduction of malicious and accidental exceptions.</ref>.
==== Distributed ledger technology ====
Evidence suggests that recording inventory-related information (i.e. inventory finance transactions) on a distributed ledger<ref>A distributed ledger (also called a shared ledger or distributed ledger technology or DLT) is the consensus of replicated, shared, and synchronized digital data that is geographically spread (distributed) across many sites, countries, or institutions. In contrast to a centralized database, a distributed ledger does not require a central administrator, and consequently does not have a single (central) point-of-failure.</ref>, such as blockchain, will result in inventory-intensive companies financing their inventory much more efficiently<ref name=":2" /><ref name=":4">https://www2.deloitte.com/content/dam/Deloitte/sg/Documents/finance-transformation/sea-ft-crunch-time-iv-blockchain.pdf</ref>, ultimately leading the companies to improve/maximise their profits<ref name=":3" />. Accordingly, for us, the implementation of distributed ledger technology is a key milestone.
==== Other types of finance ====
We expect that once the company has captured a large enough share of the inventory-related finance market (say 10%), the company will then move to other, broader areas of finance, such as non-inventory-related assets (such as accounts receivables) and the business as whole (i.e. business loans and equity).
=== Sales and marketing ===
As touched upon earlier in this report, we expect Supply@ME Capital to initially target Italy-incorporated, early-stage inventory-intensive companies.
The company has developed one of the first Shariah-compliant inventory finance platform, and, it, therefore, makes sense to target people who follow Shariah (i.e. Muslims). According to the 2016 World Islamic Banking Competitiveness Report, Saudi Arabia, Malaysia, United Arab Emirates, Kuwait, Qatar, and Turkey represented over 87% of the international Islamic banking assets.<ref>World Islamic Banking Competitiveness Report 2013–14 EY Global Centre of Excellence, Bahrain.</ref>
Accordingly, we imagine that once the company has captured a large enough share of its initial market (say 10%), the company will then move to other geographically markets (i.e. Saudi Arabia) and target audiences (i.e. Islamic inventory-intensive companies), with the aim of going global.
== Who are the key members of the team? ==
== Who are the key members of the team? ==
The company is led by the person who believes in the mission of the company the most: the creator of the company mission (i.e. Alessandro Zamboni). Between them, the members of the team have helped companies raise a significant amount of finance and build some of the world's most renowned digital platforms.


=== Directors ===
=== Directors ===
Line 123: Line 246:
'''Nicola Bonini – Group Head of Origination'''
'''Nicola Bonini – Group Head of Origination'''


Nicola has more than 20 years' experience in balance sheet lending and cashflow finance, gained during her time at some of the UK’s most prominent banking institutions. Previously, she was Vice President and Head of Commercial Finance at Bank Leumi (UK) plc, where she managed a portfolio of companies with turnover of up to £1bn. Before this, Nicola served as Executive Director at Falcon Group UK, where she joined the newly formed UK inventory finance team. Nicola has also held senior, highprofile business development and relationship management roles at major banks, including BNP Paribas, The Royal Bank of Scotland and Bank of Scotland Corporate. Nicola joined the Group in September 2021 to take a leading role in business development, client onboarding and retention. She holds a BA in Business Studies from the University of East London.
Nicola has more than 20 years' experience in balance sheet lending and cashflow finance, gained during her time at some of the UK’s most prominent banking institutions. Previously, she was Vice President and Head of Commercial Finance at Bank Leumi (UK) plc, where she managed a portfolio of companies with turnover of up to £1bn. Before this, Nicola served as Executive Director at Falcon Group UK, where she joined the newly formed UK inventory finance team. Nicola has also held senior, high-profile business development and relationship management roles at major banks, including BNP Paribas, The Royal Bank of Scotland and Bank of Scotland Corporate. Nicola joined the Group in September 2021 to take a leading role in business development, client onboarding and retention. She holds a BA in Business Studies from the University of East London.


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


{{Tesla's revenue}}
=== Most recent full-year results ===
=== Historic ===
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 quarter ====
==== Most recent half-year results ====
During the three months ended 31st March 2022, net income increased to $3.32 billion on revenues of $18.76 billion, representing a respective increase of 7x and 81% compared to the prior year, and equating to a net income margin of 18%. The company ended the quarter with cash of $18.01 billion, representing an increase of 2% from the end of 2021.  
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.


==== Most recent year ====
==== Since its most recent half year results ====
For the fiscal (and calendar) year 2021, Supply@ME Capital reported a net income of $5.52 billion.<ref name="Tesla4Q2021final" /> The annual revenue was $53.8 billion, an increase of 71% over the previous fiscal year.<ref name="Tesla4Q2021final" />
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).


The Company is of the opinion that the group has sufficient working capital for its present requirements, that is, for at least 12 months from the date of its recent prospectus (i.e. 3rd October 2022).
==== What are the financials? ====
 
==== All periods ====
{| class="wikitable"
{| class="wikitable"
|+Historic financials<ref>Source: Stockhub Limited</ref><ref group="Note" name="Note04" />
|+Financials
|-
|-
!Year  
!Year  
!'''1''' !!'''2'''!!'''3'''!!'''4'''!!'''5'''
!'''1'''
!'''6'''
!'''2'''
!'''7'''
!'''3'''
!'''8'''
!'''4'''
!'''9'''
!5 !!6!!7!!8!!9
!'''10'''
!10
!'''11'''
!11
!'''12'''
!12
!'''13'''
!13
!'''14'''
!14
!'''15'''
!15
!'''16'''
!16
!'''17'''
!17
|-
!18
|'''Year end date'''||'''31/12/2005'''||'''31/12/2006<ref name=":12">{{cite web|url=https://www.mercurynews.com/2014/07/14/2006-san-carlos-start-up-tesla-seeks-sexier-electric-car/|title=2006: San Carlos start-up Tesla seeks sexier electric car|date=July 14, 2014}}</ref><ref name="SEC">{{cite web | url=https://www.sec.gov/edgar/browse/?CIK=1318605 | title=Tesla, Inc. TSLA on Nasdaq | publisher=[[U.S. Securities and Exchange Commission]]}}</ref>'''||'''31/12/2007'''||'''31/12/2008'''||'''31/12/2009'''
!19
|'''31/12/2010<ref name="SEC" />'''
!20
|'''31/12/2011<ref name="SEC" />'''
!21
|'''31/12/2012<ref name="SEC" />'''
!22
|'''31/12/2013<ref name="SEC" />'''
|'''31/12/2014<ref name="SEC" />'''
|'''31/12/2015<ref name="SEC" />'''
|'''31/12/2016<ref name="SEC" />'''
|'''31/12/2017<ref name="SEC" />'''
|'''31/12/2018<ref name="SEC" />'''
|'''31/12/2019<ref name="SEC" />'''
|'''31/12/2020<ref name="SEC" />'''
|'''31/12/2021<ref name="SEC" />'''
|-
| colspan="18" |<div style="text-align: center;">'''Income statement'''</div>
|-
|Revenues ($'million)|| 0||0||0.073||15||112
|117
|204
|413
|2,013
|3,198
|4,046
|7,000
|11,759
|21,461
|24,578
|31,536
|53,823
|-
|Net profits ($'million)||style="color: red;" |-12||style="color: red;" |-30||style="color: red;" |-78||style="color: red;" |-83|| style="color: red;" |−56
|style="color: red;" |−154
|style="color: red;" |−254
|style="color: red;" |−396
|style="color: red;" |−74
|style="color: red;" |−294
|style="color: red;" |−889
|style="color: red;" |−675
|style="color: red;" |−1,962
|style="color: red;" |−976
|style="color: red;" |−862
|721
|5,519
|-
| colspan="18" |<div style="text-align: center;">'''Balance sheet'''</div>
|-
|Total assets<br />($'million)
|8
|44
|34
|52
|130
|386
|713
|1,114
|2,417
|5,831
|8,068
|22,664
|28,655
|29,740
|34,309
|52,148
|62,131
|-
| colspan="18" |<div style="text-align: center;">'''Other'''</div>
|-
|Employees
|NA
|70
|268
|252
|514
|899
|1,417
|2,914
|5,859
|10,161
|13,058
|17,782
|37,543
|48,817
|48,016
|70,757
|99,290
|}
 
=== Forward ===
 
====What are the financial forecasts?====
{| class="wikitable"
|+Forward financials<ref>Source: Stockhub Limited</ref><ref group="Note" name="Note04" />
|-
!Year
!18 !!19!!20!!21!!22
!23
!23
!24
!24
Line 280: Line 310:
!49
!49
!50
!50
!51
!52
!53
!54
!55
!56
!57
!58
!59
|-
|-
|'''Year end date'''||'''31/12/2022'''||'''31/12/2023'''||'''31/12/2024'''||'''31/12/2025'''||'''31/12/2026'''
|'''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'''
|'''31/12/2027'''
|'''31/12/2028'''
|'''31/12/2028'''
Line 328: Line 353:
|'''31/12/2062'''
|'''31/12/2062'''
|'''31/12/2063'''
|'''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'''
|-
|-
| colspan="43" |<div style="text-align: center;">'''Income statement'''</div>
| colspan="45" |<div style="text-align: center;">'''Income statement'''</div>
|
|
|
|
|
|
|-
|-
|Revenues ($'million)|| $78,935||$112,257||$154,816||$207,049||$268,527
|Revenues (£'000)
|$337,721
|NA
|$411,894
|4
|$487,157
|1,147
|$558,739
|538|| 1,801||3,534||6,711||12,327||21,906
|$621,448
|37,665
|$670,282
|62,654
|$701,078
|100,833
|$711,102
|157,000
|$699,445
|236,506
|$667,163
|344,688
|$617,116
|486,019
|$553,551
|663,015
|$481,510
|875,059
|$406,171
|1,117,362
|$332,253
|1,380,364
|$263,564
|1,649,821
|$202,749
|1,907,756
|$151,247
|2,134,284
|$109,414
|2,310,068
|$76,757
|2,419,025
|$52,217
|2,450,751
|$34,448
|2,402,156
|$22,038
|2,277,961
|$13,673
|2,089,943
|$8,226
|1,855,094
|$4,799
|1,593,091
|$2,715
|1,323,605
|$1,490
|1,063,945
|$793
|827,415
|$409
|622,545
|$205
|453,170
|$99
|319,150
|$47
|217,456
|$21
|143,348
|$9
|91,423
|$4
|56,411
|$2
|33,675
|19,449
|10,868
|5,875
|3,073
|1,555
|761
|361
|165
|-
|-
|Gross profits ($'million)||$23,680||$33,677||$46,445||$62,115||$80,558
|Gross profits (£'000)
|$101,316
|NA
|$185,352
|(763)
|$219,221
|408
|$251,432
|(266)
|$279,652
|1,351||2,651||5,033||9,245||16,430
|$301,627
|28,249
|$315,485
|46,990
|$319,996
|75,625
|$314,750
|117,750
|$300,223
|177,379
|$277,702
|224,047
|$249,098
|364,514
|$216,679
|497,262
|$182,777
|656,294
|$149,514
|726,285
|$118,604
|897,237
|$91,237
|907,401
|$68,061
|1,049,266
|$49,236
|1,173,856
|$34,541
|1,270,537
|$23,498
|1,330,464
|$15,502
|1,347,913
|$9,917
|1,321,186
|$6,153
|1,252,878
|$3,702
|1,149,469
|$2,160
|1,020,302
|$1,222
|716,891
|$670
|595,622
|$357
|478,775
|$184
|372,337
|$92
|280,145
|$45
|203,926
|$21
|143,617
|$10
|97,855
|$4
|64,506
|$2
|41,140
|$1
|25,385
|15,154
|8,752
|4,890
|2,644
|1,383
|700
|343
|162
|74
|-
|-
|Operating profits ($'million)||$11,840||$16,839||$23,222||$31,057||$40,279
|Operating profits (£'000)
|$50,658
|NA
|$123,568
|(687)
|$146,147
|(2,819)
|$167,622
|(10,814)||1,081||2,121||4,026||7,396||13,144
|$186,434
|22,599
|$201,085
|37,592
|$210,323
|60,500
|$213,331
|94,200
|$209,834
|141,904
|$200,149
|172,344
|$185,135
|291,611
|$166,065
|397,809
|$144,453
|525,035
|$121,851
|558,681
|$99,676
|690,182
|$79,069
|659,928
|$60,825
|763,103
|$45,374
|853,714
|$32,824
|924,027
|$23,027
|967,610
|$15,665
|980,300
|$10,335
|960,862
|$6,612
|911,184
|$4,102
|835,977
|$2,468
|742,038
|$1,440
|477,927
|$815
|397,081
|$447
|319,184
|$238
|248,224
|$123
|186,763
|$61
|135,951
|$30
|95,745
|$14
|65,237
|$6
|43,004
|$3
|27,427
|$1
|16,923
|$1
|10,103
|5,835
|3,260
|1,763
|922
|466
|228
|108
|50
|-
|-
|Net profits ($'million)||$9,354||$13,302||$18,346||$24,535|| $31,820
|Net profits (£'000)
|$40,020
|NA
|$97,619
|(551)
|$115,456
|(2,964)
|$132,421
|(12,487)||1,081||2,121||4,026||7,396|| 13,144
|$147,283
|22,599
|$158,857
|37,592
|$166,156
|60,500
|$168,531
|94,200
|$165,769
|141,904
|$158,118
|151,663
|$146,256
|256,618
|$131,192
|350,072
|$114,118
|462,031
|$96,263
|491,639
|$78,744
|607,360
|$62,465
|580,737
|$48,052
|671,530
|$35,846
|751,268
|$25,931
|813,144
|$18,191
|851,497
|$12,376
|862,664
|$8,164
|845,559
|$5,223
|801,842
|$3,240
|735,660
|$1,949
|652,993
|$1,137
|420,576
|$643
|349,432
|$353
|280,881
|$188
|218,437
|$97
|164,352
|$48
|119,637
|$24
|84,256
|$11
|57,408
|$5
|37,844
|$2
|24,136
|$1
|14,892
|$0
|8,890
|5,135
|2,869
|1,551
|811
|410
|201
|95
|44
|}
|}


Line 499: Line 619:
|-
|-
|What's the estimated current size of the total addressable market?
|What's the estimated current size of the total addressable market?
|$2,975,000,000
|$119,000,000,000
|Here, the total addressable market (TAM) is defined as the global automotive market, and based on a number of assumptions<ref group="Note" name="Note01" />, it is estimated that the size of the market as of today (30th May 2022), in terms of revenue, is $2.975 trillion.
|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.
 
 
If the TAM is defined as the global energy market, then research suggests that the estimated size of the market is $6.777 trillion.<ref name=":16">https://www.ucl.ac.uk/bartlett/sustainable/sites/bartlett/files/an_exploration_of_energy_cost_ranges_limits_and_adjustment_process.pdf</ref>
|-
|-
|What is the estimated company lifespan?
|What is the estimated company lifespan?
|60 years
|50 years
|Supply@ME Capital employs around 110,000, making the company a large organisation (more than 10,000 employees), and research shows that the average lifespan of a large corporation is around 50 years.<ref>Stadler, Enduring Success, 3–5.</ref>
|Research shows that the average lifespan of a large corporation is around 50 years.<ref>Stadler, Enduring Success, 3–5.</ref>
|-
|-
|What's the estimated annual growth rate of the total addressable market over the lifecycle of the company?
|What's the estimated annual growth rate of the total addressable market over the lifecycle of the company?
|3%
|3%
|Research shows that the growth rate of the global automotive market (i.e. the total addressable market) is similar to the growth rate of global gross domestic product<ref>http://www.robertpicard.net/files/econgrowthandadvertising.pdf</ref>, which has averaged (medium) around 3% per year in the last 20 years (2001 to 2022)<ref>https://www.macrotrends.net/countries/WLD/world/gdp-growth-rate</ref>.
|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)<ref>https://www.macrotrends.net/countries/WLD/world/gdp-growth-rate</ref>.
|-
|-
|What's the estimated company peak market share?
|What's the estimated company peak market share?
|10%
|1%
|We estimate that especially given the leadership of the company, the peak market share of Supply@ME Capital is around 10%, and, therefore, suggests using the share amount here. As of 31st December 2021, Supply@ME Capital's current share of the market is estimated at around 1.8%.
|We estimate that especially given the experienced, founder-led team 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?
|Which distribution function do you want to use to estimate company revenue?
Line 522: Line 639:
|-
|-
|What's the estimated standard deviation of company revenue?
|What's the estimated standard deviation of company revenue?
| 6 years
| 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. $54 billion) and Supply@ME Capital's estimated lifespan (i.e. 60 years) and Supply@ME Capital's estimated current stage of its lifecycle (i.e. growth stage), the we suggest using 6 years (i.e. 68% of all sales happen within 6 years either side of the mean year), so that's what's used here.
|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.
|-
|-
| colspan="3" |'''<div style="text-align: center;">Growth stages</div>'''
| colspan="3" |'''<div style="text-align: center;">Growth stages</div>'''
Line 531: Line 648:
|Research suggests that a company typically goes through four distinct stages of cash flow growth.<ref>Levie J, Lichtenstein BB (2010) A terminal assessment of stages theory: Introducing a dynamic approach to entrepreneurship. Entrepreneurship: Theory & Practice 34(2): 317–350. <nowiki>https://doi.org/10.1111/j.1540-6520.2010.00377.x</nowiki></ref> 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.<ref>Stef Hinfelaar et al.:, 2019.</ref>
|Research suggests that a company typically goes through four distinct stages of cash flow growth.<ref>Levie J, Lichtenstein BB (2010) A terminal assessment of stages theory: Introducing a dynamic approach to entrepreneurship. Entrepreneurship: Theory & Practice 34(2): 317–350. <nowiki>https://doi.org/10.1111/j.1540-6520.2010.00377.x</nowiki></ref> 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.<ref>Stef Hinfelaar et al.:, 2019.</ref>


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.<ref>Dickinson, 2010.</ref> 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 second stage of growth (i.e. the 'growth' stage), and, therefore, it has a total of three main stages of growth. Note, to account for one-off events, the three-year average (median) amount was used to calculate the cash flows.
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.<ref>Dickinson, 2010.</ref> 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?
|What proportion of the company lifecycle is represented by growth stage 1?
Line 548: Line 665:
|40%
|40%
|Research suggests 40%.<ref name=":6" />
|Research suggests 40%.<ref name=":6" />
|-
| colspan="3" |'''<div style="text-align: center;">Growth stage 1</div>'''
|-
|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)<ref name=":7" />, 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)<ref name=":7" />, 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)<ref name=":7" />, 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)<ref name=":7" />, 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)<ref name=":7" />, 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)<ref name=":7" />, 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.
|-
|-
| colspan="3" |'''<div style="text-align: center;">Growth stage 2</div>'''
| colspan="3" |'''<div style="text-align: center;">Growth stage 2</div>'''
|-
|-
|Cost of goods sold as a proportion of revenue (%)  
|Cost of goods sold as a proportion of revenue (%)  
|79%
|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)<ref name=":7">http://people.stern.nyu.edu/adamodar/pdfiles/papers/younggrowth.pdf</ref>, and the margin for its peers is 79%. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.  
|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)<ref name=":7">http://people.stern.nyu.edu/adamodar/pdfiles/papers/younggrowth.pdf</ref>, and the margin for its peers is 35%.  
|-
|-
|Operating expenses as a proportion of revenue (%)
|Operating expenses as a proportion of revenue (%)
|15%
|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)<ref name=":7" />, and the margin for its peers is 15%. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
|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)<ref name=":7" />, and the margin for its peers is 15%.  
|-
|-
|Tax rate (%)  
|Tax rate (%)  
|11%
|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)<ref name=":7" />, and the rate for its peers is 11%.
|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)<ref name=":7" />, and the rate for its peers is 12%.
|-
|-
|Depreciation and amortisation as a proportion of revenue (%)  
|Depreciation and amortisation as a proportion of fixed capital (%)  
|7%
|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)<ref name=":7" />, and the margin for its peers is 7%. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
|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)<ref name=":7" />, and the margin for its peers is 10%.  
|-
|-
|Fixed capital as a proportion of revenue (%)  
|Fixed capital as a proportion of revenue (%)  
|10%
|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)<ref name=":7" />, and the amount for its peers is 10%. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
|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)<ref name=":7" />, and the amount for its peers is 10%.
|-
|-
|Working capital as a proportion of revenue (%)
|Working capital as a proportion of revenue (%)
Line 586: Line 737:
|-
|-
|Cost of goods sold as a proportion of revenue (%)  
|Cost of goods sold as a proportion of revenue (%)  
|62%
|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)<ref name=":7" />, and the margin for its peers is 62%. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.  
|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)<ref name=":7" />, and the margin for its peers is 45%.  
|-
|-
|Operating expenses as a proportion of revenue (%)
|Operating expenses as a proportion of revenue (%)
|13%
|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)<ref name=":7" />, and the margin for its peers is 13%. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
|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)<ref name=":7" />, and the margin for its peers is 15%.
|-
|-
|Tax rate (%)  
|Tax rate (%)  
|14%
|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)<ref name=":7" />, and the rate for its peers is 14%. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
|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)<ref name=":7" />, and the rate for its peers is 12%.
|-
|-
|Depreciation and amortisation as a proportion of revenue (%)  
|Depreciation and amortisation as a proportion of fixed capital (%)  
|4%
|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)<ref name=":7" />, and the amount for its peers is 4%. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
|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)<ref name=":7" />, and the amount for its peers is 10%.
|-
|-
|Fixed capital as a proportion of revenue (%)  
|Fixed capital as a proportion of revenue (%)  
|3%
|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)<ref name=":7" />, and the amount for its peers is 3%. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
|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)<ref name=":7" />, and the amount for its peers is 10%.
|-
|-
|Working capital as a proportion of revenue (%)
|Working capital as a proportion of revenue (%)
|10%  
|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)<ref name=":7" />, and the amount for its peers is 10%. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
|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)<ref name=":7" />, and the amount for its peers is 15%.
|-
|-
|Net borrowing ($000)
|Net borrowing ($000)
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|-
|-
|Cost of goods sold as a proportion of revenue (%)  
|Cost of goods sold as a proportion of revenue (%)  
|99%
|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)<ref name=":7" />, and the margin for its peers is 99%. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.  
|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)<ref name=":7" />, and the margin for its peers is 55%.  
|-
|-
|Operating expenses as a proportion of revenue (%)
|Operating expenses as a proportion of revenue (%)
|15%
|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)<ref name=":7" />, and the margin for its peers is 15%. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
|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)<ref name=":7" />, and the margin for its peers is 15%.
|-
|-
|Tax rate (%)  
|Tax rate (%)  
|0%
|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)<ref name=":7" />, and the rate for its peers is 0%. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
|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)<ref name=":7" />, and the rate for its peers is 12%.
|-
|-
|Depreciation and amortisation as a proportion of revenue (%)  
|Depreciation and amortisation as a proportion of fixed capital (%)  
|37%
|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)<ref name=":7" />, and the amount for its peers is 37%. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
|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)<ref name=":7" />, and the amount for its peers is 10%.
|-
|-
|Fixed capital as a proportion of revenue (%)
|Fixed capital as a proportion of revenue (%)
| 1%
| 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)<ref name=":7" />, and the amount for its peers is 1%. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
|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)<ref name=":7" />, and the amount for its peers is 10%.
|-
|-
|Working capital as a proportion of revenue (%)
|Working capital as a proportion of revenue (%)
| 10%  
| 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)<ref name=":7" />, and the amount for its peers is 10%. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
|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)<ref name=":7" />, and the amount for its peers is 15%.
|-
|-
|Net borrowing ($000)
|Net borrowing ($000)
Line 653: Line 804:


== What are the key risks of investing in the company? ==
== What are the key risks of investing in the company? ==
As with any investment, investing in Supply@ME Capital carries a level of risk. The key risks can be found below. Overall, based on the Supply@ME Capital's market beta (i.e. 8.89)<ref>Research shows that an investment has two main types of risks: 1) non-systematic and 2) systematic. Systematic risk is the risk related to the overall market, and non-systematic risk is the risk that's specific to an individual investment. Evidence shows that taking on non-systematic risk is inefficient, and it's, therefore, best to eliminate it; and in most cases, elimination is fairy easy to do [by holding a diversified portfolio of investments (i.e. around 15 investments)]. Accordingly, when assessing the riskiness of an investment, it’s best to look at the systematic risk only (i.e. ignore the non-systematic risk). A key measure of systematic risk is beta, and a main way to determine the riskiness of an investment is to compare the beta of the investment with the beta of the market, which is 1. For example, Supply@ME Capital's beta is 8.89, and is, accordingly, 989% above the market beta (of 1); assuming that a 'high' level of riskiness is 50% or more above the market beta, then the riskiness of investing in Supply@ME Captial is considered to be 'high' (989%>50%).</ref>, the degree of risk associated with an investment in Supply@ME Capital is 'high'.
As with any investment, investing in Supply@ME Capital carries a level of risk. Overall, based on the Supply@ME Capital's adjusted beta (i.e. 4.61)<ref>Research shows that an investment has two main types of risks: 1) non-systematic and 2) systematic. Systematic risk is the risk related to the overall market, and non-systematic risk is the risk that's specific to an individual investment. Evidence shows that taking on non-systematic risk is inefficient, and it's, therefore, best to eliminate it; and in most cases, elimination is fairy easy to do [by holding a diversified portfolio of investments (i.e. around 15 investments)]. Accordingly, when assessing the riskiness of an investment, it’s best to look at the systematic risk only (i.e. ignore the non-systematic risk). A key measure of systematic risk is beta, and a main way to determine the riskiness of an investment is to compare the beta of the investment with the beta of the market, which is 1. For example, Supply@ME Capital's adjusted beta (5 years, monthly data) is 4.61, and is, accordingly, 561% above the market beta (of 1); assuming that a 'high' level of riskiness is 50% or more above the market beta, then the riskiness of investing in Supply@ME Captial is considered to be 'high' (561%>50%).
 
For estimating an asset's beta, in terms of time period, and frequency of observations, the most common choice is five years of monthly data, yielding 60 observations. One study of U.S. stocks found support for five years of monthly data over alternatives. An argument can be made that the 2 years, weekly data can be especially appropriate in fast growing markets.
 
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-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.
 
The key risks can be found below. For us, currently, the biggest risk to the valuation of the company relates to the company being unable to secure a sufficient amount of inventory finance funders.


=== Risk factors specific and material to the group ===
=== Risk factors specific and material to the group ===


* The group is at the early stage of its development, has not generated consistent revenues from its operations to date and is not currently profitable.
* The group is at the early stage of its development, has not generated consistent revenues from its operations to date and is not currently profitable.
* If the group is unable to maintain or increase originations through the platform or if existing customers or IM funders do not continue to participate on the platform, its business, results of operations, financial condition or prospects will be adversely affected.
* If the group is unable to maintain or increase originations through the platform or if existing customers or inventory finance funders do not continue to participate on the platform, its business, results of operations, financial condition or prospects will be adversely affected.
* If the scoring models and processes that the group uses contain errors or are otherwise ineffective, or if customer data is incorrect or becomes unavailable, the group’s business may suffer.
* If the scoring models and processes that the group uses contain errors or are otherwise ineffective, or if customer data is incorrect or becomes unavailable, the group’s business may suffer.
* The group has built value into its business through the TradeFlow Acquisition.
* Any failure of the platform or the group's future platforms, software and technology infrastructure could materially adversely affect its business, results of operations, financial condition or prospects.
* Any failure of the platform or the group's future platforms, software and technology infrastructure could materially adversely affect its business, results of operations, financial condition or prospects.
* The group's ability to protect the confidential information of its customers and IM funders may be adversely affected by cyber-attacks, computer viruses, physical or electronic break-ins or similar disruptions or faults with its systems.
* The group's ability to protect the confidential information of its customers and inventory finance funders may be adversely affected by cyber-attacks, computer viruses, physical or electronic break-ins or similar disruptions or faults with its systems.
* The group may be unable to retain or hire appropriately skilled personnel required to support its operations.
* The group may be unable to retain or hire appropriately skilled personnel required to support its operations.
* The group’s success and future growth depend significantly on its successful marketing efforts, increasing its brand awareness, and its ability to attract new IM funders and customers.
* The group’s success and future growth depend significantly on its successful marketing efforts, increasing its brand awareness, and its ability to attract new inventory finance funders and customers.
* The supply chain financing market is competitive and evolving.
* The supply chain financing market is competitive and evolving.
* Unfavourable general economic conditions may have a negative impact on the results of operations, financial condition and prospects of the group.
* Unfavourable general economic conditions may have a negative impact on the results of operations, financial condition and prospects of the group.
* The group may need additional financial resources to develop the platform for future success.
* The group may need additional financial resources to develop the platform for future success.
* Uncertainties in the interpretation or application of, or changes in, IFRS or local GAAP could adversely affect the "derecognition treatment" for customers that comply with IFRS or local GAAP and accordingly reduce customers’ or IM funders’ participation on the platform.
* Uncertainties in the interpretation or application of, or changes in, IFRS or local GAAP could adversely affect the "derecognition treatment" for customers that comply with IFRS or local GAAP and accordingly reduce customers’ or inventory finance funders’ participation on the platform.
* The ownership and use of intellectual property by the group may be challenged by third parties or otherwise disputed.
* The ownership and use of intellectual property by the group may be challenged by third parties or otherwise disputed.


=== Risk factors specific and material to the ordinary shares ===
=== Risk factors specific and material to the ordinary shares ===


* Shareholders’ interests may be diluted by future issues of Secondary Admission Shares and Further Admission Shares.
* Shareholders’ interests may be diluted by future issues of shares.
* Prospective investors and Shareholders should be aware that there may be possible volatility in the price of the Ordinary Shares.
* Prospective investors and shareholders should be aware that there may be possible volatility in the price of the ordinary shares.
* A Standard Listing affords Shareholders a lower level of regulatory protection than a Premium Listing.
* A standard listing affords shareholders a lower level of regulatory protection than a premium listing.
* Dividend payments on the Ordinary Shares are not guaranteed, and the Company does not intend to pay dividends for the foreseeable future.
* Dividend payments on the ordinary shares are not guaranteed, and the company does not intend to pay dividends for the foreseeable future.
* The group is subject to complex taxation in multiple jurisdictions, which often requires subjective interpretation and determinations. As a result, the group could be subject to additional tax risks attributable to previous assessment periods.
* The group is subject to complex taxation in multiple jurisdictions, which often requires subjective interpretation and determinations. As a result, the group could be subject to additional tax risks attributable to previous assessment periods.
* Changes in tax law or the interpretation of tax law, or the expansion of the group’s business into jurisdictions with less favourable tax regimes, could increase the group’s effective tax rate and in turn adversely affect its business, results of operations, financial condition and prospects.
* Changes in tax law or the interpretation of tax law, or the expansion of the group’s business into jurisdictions with less favourable tax regimes, could increase the group’s effective tax rate and in turn adversely affect its business, results of operations, financial condition and prospects.
* There can be no assurance that the company will be able to make returns to Shareholders in a tax-efficient manner.
* There can be no assurance that the company will be able to make returns to shareholders in a tax-efficient manner.


== How much can I expect to make from an investment in the company? ==
== How much can I expect to make from an investment in the company? ==
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===What's the expected return of 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 negative 24%. In other words, an £1,000 investment in the company is expected to return £760 in five years time. The assumptions used to estimate the return figure can be found in the table below.
We estimate that the expected return of an investment in the company over the next five years is 411%, 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 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 negative 24%), then an investment in the company is considered to be an 'unsuitable' 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.


===What are the assumptions used to estimate the return?===
===What are the assumptions used to estimate the return?===
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| Which valuation model do you want to use?
| Which valuation model do you want to use?
|Discounted cash flow  
|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<ref name=":5">Demirakos et al., 2010; Gleason et al., 2013</ref>, 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).
# By calculating the present value of the investment's expected future cash flows (i.e. discounted cash flow valuation); and
 
#By comparing the investment to other similar investments (i.e. relative valuation).
 
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.
|-
| colspan="3" |'''<div style="text-align: center;">Growth stage 1</div>'''
|-
|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%.
|-
| colspan="3" |'''<div style="text-align: center;">Growth stage 2</div>'''
|-
|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%.
 
|-
| colspan="3" |'''<div style="text-align: center;">Growth stage 3</div>'''
|-
|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%.
 
|-
| colspan="3" |'''<div style="text-align: center;">Growth stage 4</div>'''
|-
|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%.
 
|-
| colspan="3" |'''<div style="text-align: center;">Other key inputs</div>'''
|-
|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.<ref>https://www.newyorkfed.org/mediabrary/media/medialibrary/media/research/staff_reports/research_papers/9809.pdf</ref> 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.
|}
 
{| class="wikitable"
|+ 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<ref name=":5">Demirakos et al., 2010; Gleason et al., 2013</ref>, 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).


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<ref name=":5">Demirakos et al., 2010; Gleason et al., 2013</ref>, 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 on 7th February 2022, 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).  
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?
|Which financial forecasts to use?
| Proactive Investors
| 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.
|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.
|-
| colspan="3" |'''<div style="text-align: center;">Growth stage 1</div>'''
|-
|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%.
|-
|-
| colspan="3" |'''<div style="text-align: center;">Growth stage 2</div>'''  
| colspan="3" |'''<div style="text-align: center;">Growth stage 2</div>'''  
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|-
|-
|What's the current value of the company?
|What's the current value of the company?
|$950.54 billion
|$54.80 million
|As at 5th June 2022, the current value of the Supply@Me Capital company is $950.54 billion.
|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?
|Which time period do you want to use to estimate the expected return?
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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):   
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):   


#The size of the total addressable market (the default size is $3.0 trillion);
#The size of the total addressable market (the default size is $119 billion);
#Supply@Me Capital peak market share (the default share is 10%); and
#Supply@Me Capital peak market share (the default share is 1%); and
#The discount rate (the default time-weighted average rate is 10%).
#The discount rate (the default time-weighted average rate is 16%).


The impact of a 50% change in those main inputs to the expected return of the Supply@ME Capital investment is shown in the table below.
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"
{| class="wikitable sortable"
|+Supply@ME Capital investment expected return sensitive analysis
|+Supply@ME Capital investment expected return sensitive analysis
!Main input
!Main input
!50% worse  
!10% worse  
!Unchanged
!Unchanged
!50% better
!10% better
|-
|-
|The size of the total addressable market
|The size of the total addressable market
|N/A
|To be added
|(24%)
|411%
|N/A
|To be added
|-
|-
|Supply@ME Capital peak market share
|Supply@ME Capital peak market share
|N/A
|To be added
| (24%)
|411%
| N/A
|To be added
|-
|-
|The discount rate
|The discount rate


|N/A
|To be added
|(24%)
|411%
| N/A
|To be added


|}
|}


== Appendix ==
== 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===
===Relative valuation approach===
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====What's the expected return of an investment in the company 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 five years is 4.4x. In other words, an £1,000 investment in the company is expected to return £4,400 in five years time.  The assumptions used to estimate the return figure can be found in the table below.
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 4.4x), 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 141%), then an investment in the company is considered to be a 'suitable' one.


====What are the assumptions used to estimate the return figure?====
====What are the assumptions used to estimate the return figure?====
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| Which type of multiple do you want to use?
| Which type of multiple do you want to use?
| Growth-adjusted EV/sales  
| 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<ref group="Note" name="Note15" />, rather than the EV/sales multiple.  
| 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?
|In regards to the growth-adjusted EV/sales multiple, for the sales figure, which year to you want to use?
Line 822: Line 1,084:
|-
|-
|In regards to the growth-adjusted EV/sales multiple, what multiple figure do you want to use?
|In regards to the growth-adjusted EV/sales multiple, what multiple figure do you want to use?
|100x
|43x
|In our view, Supply@ME Capital's closest peer is [[Apple, Inc.|Apple, Inc]]. [[Apple, Inc.|Apple, Inc]] trades on a multiple of 100x.
|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?
|Which financial forecasts to use?
Line 830: Line 1,092:
|-
|-
| What's the current value of the company?
| What's the current value of the company?
|$688 billion
|$54.80 million
|As at 21st May 2022, the current value of its company at $688 billion.
|As at 28th November 2022, the current value of the Supply@Me Capital company is $54.80 million (or £45.30 million).
|-
|-
|Which time period do you want to use to estimate the expected return?
|Which time period do you want to use to estimate the expected return?
|Between now and one year time
|Between now and one year time
|Research suggests that when using the relative valuation approach, it's best to estimate the expected return of the company between now and one year time.
|Research suggests that when using the relative valuation approach, it's best to estimate the expected return of the company between now and one year time.
|}
The Supply@ME Capital platform connects buyers and sellers (of inventory), and, therefore, acts as a marketplace. The medium adjusted EV/sales multiple of Bloomberg-defined marketplaces is 6.18x.
{| class="wikitable"
|+Marketplace peers
!Company name
!Primary exchange
!Market capitalisation ($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
|}
|}


Line 841: Line 1,204:
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 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 50x); and
#The growth-adjusted EV/sales multiple (the default multiple is 42x);
#The Year-one sales forecast (the default forecast is $1 million); and  
#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 300%)
#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.
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.
Line 855: Line 1,218:
|-
|-
|The growth-adjusted EV/sales multiple
|The growth-adjusted EV/sales multiple
|
|To be added
|
|141%
|
|To be added
|-
|-
|The Year-one sales forecast  
|The Year-one sales forecast  
|
|To be added
|
|141%
|
|To be added
|-
|-
|The Year 2 to Year 4 sales growth forecast
|The Year 2 to Year 4 sales growth forecast
|
|To be added
|
|141%
|
|To be added
|}
|}


=== Key principal activities ===
=== Major shareholders ===
 
=== The Platform ===
The group is a fintech company providing a inventory monetisation (IM) service to companies in a wide range of industrial sectors utilising the platform, which comprises a unique combination of software modules, exponential technology components (such as AI, IoT) and Blockchain), dedicated legal and accounting frameworks and business rules/methodologies delivered via a hybrid ICT architecture.
 
Specifically, the ICT architecture envisages the use of two cloud environments (Microsoft Azure for warehoused goods monetisation and Amazon Web Services for the in-transit model delivered by TradeFlow) plus an external integration with distributed ledger frameworks.
 
Diagrammatic illustration of the Platform:
 
[[File:Diagrammatic illustration of the Platform.jpg]]
 
Source: 2021 Annual Report
 
The stakeholders of the platform are:
 
* the Fund, via dedicated compartments and their StockCos, the trading vehicles who purchase inventory from corporate clients;
* potential IM funders, who can invest in the Fund and/or act as direct lenders to the StockCos;
* TradeFlow acting as investment advisory company of the Fund;
* corporate clients, as commercial counterparties of the StockCos or directly of the Fund; or
* banks, as white-label users of the Platform as a service (underpinning their inventory based and/or backed financial products directly provided by the banks to their clients).
 
The platform’s road-map envisages that data sources have a key role for the platform, triggering the value-added service provided by the group (whether inventory data analysis or IM provided by the Fund. Accordingly, data ingestion services have a critical role in the overall platform operations. Additionally, the inventory register and trading modules are able to produce the data analysis and support the creation of the security package in favour of the IM funders involved in each IM deal.
 
The monitoring component of the platform is constructed by business rules (which support the creation of specific key risk and performance indicators) and are expected to be underpinned by software modules able to enable the user to visualise early warnings, trigger inspections (to report digitally) and track the action plan/remediation plan agreed with the corporate client. The Platform’s road-map further envisages the adoption of IoT frameworks in order to improve the effectiveness and the efficiency of the monitoring and inspections activities.
 
TradeFlow uses a dedicated suite (TradeFlow+) made of multiple software modules reflecting the expertise of the team in the trade finance space, delivering a unique non-credit approach aimed at monetising inventory in-transit (import/export transactions where the buyer is supported to optimise its supply chain relationship).
 
=== The revenue model ===
Over recent months, the group has clarified and fine-tuned its overall business model, distinguishing the pure FinTech business (the platform being the group's people and software) from the inventory funding structure. In this regard:
 
* the platform has, by definition, an intrinsic value and accordingly can also be used by other operators (such as banks or other debt funders) to improve inventory backed or based facilities. The company considers it to be an enabler of each transaction. For this reason, the group officially launched its white-label initiative at the end of August 2020, invested further time in upgrading ICT architecture, selected and started new tech streams, while leveraging and understanding the components used by TradeFlow Capital within its TradeFlow+ system; and
* the areas of improvement suggested by IM funders in the last year regarding the introduction of an equity (first loss) line in the capital structure of each IM transaction was addressed with the launch of the Fund compartments, which can work as an equity provider and/or on a standalone basis (the Fund able to deliver by itself an IM transaction).
 
As such, the group is now focused on establishing and growing the following active, and future, revenue streams:
 
* '''"Captive" IM platform servicing ("C.IM"):''' revenue generated through the use of the platform to facilitate IM transactions performed by the Fund and its IM funders. This revenue is generated by the group’s operating subsidiaries, and in the future is expected to be supplemented by Tijara Pte Limited, a technology subsidiary company of TradeFlow. Revenue is expected to be earned in relation to the following activities:
** origination and due diligence (pre-IM); and
** monitoring, controlling and reporting (post-IM).
 
During the year ended 31 December 2021, the group recognised £0.3m of C.IM revenue relating to due diligence fees. During the six month interim period ended 30 June 2022, the C.IM revenue relating to due diligence fees was nil. When fully delivered, this stream is expected to generate revenues of approximately 1-3% of the gross value of the inventories monetised (purchase price plus VAT).
 
* '''"White-label" IM platform servicing ("WL.IM"):''' revenue to be generated through the use of the platform by third parties who choose to employ the self-funding model. When delivered, this stream is expected to generate recurring software-as-a-service revenues of approximately 0.5-1.5% of the value of each IM transaction (the amount of funding provided). No WL.IM revenue was recognised by the group during the year ended 31 December 2021 or during the six month interim period ended 30 June 2022.
* '''Investment Advisory ("IA"):''' the revenue stream currently being generated by TradeFlow in its capacity as investment advisor to its well-established funds, as well as its anticipated role as investment advisor to the Fund going forward. This stream is expected to generate recurring revenues of approximately 1.25% of Assets Under Management for which TradeFlow acts as advisor. Additionally, TradeFlow could receive a further performance incentive fee of up to 15% of the profits generated by the Fund, based on performance. During the year ended 31 December 2021, the group recognised £0.2m of IA revenue, representing TradeFlow’s addition to the group’s revenue from 1st July to 31st December 2021. During the six month interim period ended 30th June 2022, the group recognised £0.2m of IA revenue.
 
=== Operational and principal activities ===
 
==== Recently introduced significant new products or services ====
Since 31th December 2021 (being the date to which the last published audited financial statements for the company and the group were made up), the group announced the execution of a strategic alliance agreement on 28th June 2022 (the "VeChain Agreement") with the VeChain Foundation ("VeChain"), a blockchain enterprise service provider focused on supply chain and sustainability, to fund the first inaugural IM transaction and kick off the "Web3" stream.
 
The objective of the VeChain Agreement is to create a sustainable Web3 environment that will allow direct participation in the IM journey combining traditional finance with the blockchain space. According to Messari research, the top 100 digital assets in circulation capitalise over US$1.2 trillion, of which approximately 60% are currencies, like Bitcoin, and stablecoins, like Tether.
 
The VeChain Agreement has two phases, both in terms of investment opportunities and technology development.
 
In Phase One, a proof-of-concept real transaction involving a client company already selected by SYME from its existing Italian portfolio, with the VeChain Foundation serving as provider of its VeChain Thor blockchain and non-fungible token ("NFT") investor.
 
Following the successful completion of the first transaction and an assessment of the innovative process designed to link digital assets to the real economy, Phase Two will build up an "IM Platform 3.0" with an expected roadmap of Web3 features, including the issuance of NFTs, digital ownership and B2B marketplaces, decentralised finance (DEFI) and, overall, a governance protocol. For this phase, to be completed by end of December 2022, it’s expected the IM transactions will be also funded by further multiple liquidity providers (crypto asset managers and direct IM investors through liquidity pools partnerships).
 
The commitment budgeted by VeChain within the VeChain Agreement to directly subscribe the Inventory (NFT-based) Monetisation Transactions is up to US$10m, of which approximately US$1.6m immediately releasable to fund the available eligible inventory of the first Italian client selected and the rest, during the Phase Two, for one or more further client companies, also including the current UK portfolio.
 
==== Recent commercial developments ====
On 12th September 2022, the company announced the execution of the group's first IM transaction in connection with Phase One of the VeChain Agreement. The client company to this inaugural IM transaction is a well-established business with significant market presence in Europe (mainly in Italy), Africa and the United States. The client company is involved in the design and manufacture of industrial and specialised vehicles as well as electronic systems, electrical wiring, and other components.
 
The inaugural IM transaction has been structured as follows:
 
* a StockCo, an overview of which was given in the SYME Business Model Canvas in the 2021 Annual Report, entered into the commercial contractual package, with a duration of three years, with the client company to execute the inaugural IM transaction. The total value of the initial warehoused goods to be monetised is approximately €1.6m;
* with reference to the fully owned SYME subsidiaries:
** Supply@ME Italy, acting as originator and servicer, signed an operating agreement with StockCo which includes an annual inventory servicing fee and, additionally, will charge the client company an up-front origination fee;
** NewCoTech, owner of the IM intellectual property rights and acting as platform provider, has signed a license agreement with the StockCo and will charge an annual platform fee. The platform will be used by the client company to upload inventory to be monetised (and, accordingly, minting the NFTs), integrate and transfer the Enterprise-Resource-Planning data to allow the necessary monitoring and inspection activities by the StockCo, supported by Supply@ME Italy; and
** StockCo, in turn, mints NFTs to be subscribed by VeChain under the VeChain Agreement. Each NFT represents a basket of rights over the inventory, including the opportunity to achieve monthly returns generated by the inventory trading activities performed by the StockCo and the right of the NFT holder, as ultimate owner of the goods, to take possession of the physical goods if certain conditions are met.
 
 
 
Major shareholders
 
The table below shows those who hold 3% or more of the company's share capital, as of 14th October 2022.
The table below shows those who hold 3% or more of the company's share capital, as of 14th October 2022.
{| class="wikitable"
{| class="wikitable"
Line 959: Line 1,249:
|13,95%
|13,95%
|}
|}
Note, the total number of issued share capital is as follows: 56,617,688,143 ordinary shares.
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?
 
===Other===
Dividends
 
To date, the company has not declared or paid any dividends on the Ordinary Shares. The Company’s current intention is to retain earnings, if any, to finance the operation and expansion of the Group’s business, and does not expect to declare or pay any cash dividends in the foreseeable future.
 
Interesting/useful extract/information
 
Trade finance is the backbone of international trade for entities ranging from a small businesses to multi-national corporations. An estimated 80 percent of world trade relies on this form of finance (WTO, 2017). Despite its systemic importance and rapid growth, data availability is only partial. During the 2008 financial crisis, policy makers, notably the G20 recognized that the absence of comprehensive trade finance data posed a significant hurdle for policy-makers to make informed, timely decisions. This paper proposes a standalone dataset to reflect the scope, dynamic and recent innovations of the trade finance market to support macroeconomic policy analysis. 
 
Blockchain and smart contracts are considered a “game changer technology that can transform trade finance processes.<ref>See for instance: TradeIX <nowiki>https://tradeix.com/</nowiki> Rewiring Trade and Working Capital Finance.</ref>
 
There is, therefore, a close relationship between a company’s management of supply chain activities and its financial performance.
 
=== Working Capital is the Starting Point for Trade Financing ===
The working capital ratio (current assets/current liabilities) indicates whether a company has enough shortterm assets to cover its short-term debt. Balanced cash management in a business is essential because insufficient cash and no alternative funding means there are not enough funds to meet obligations such as buying raw materials or paying wages and overheads. Too much cash, on the other hand, means a company has idle funds for which it foregoes investment. Holding too much inventory has implications for the financial performance of a business in the form of costs for storage, handling, insurance, etc., and cash tied up that could be used otherwise. The right balance is a trade-off between liquidity versus profitability. As illustrated in the diagram below, suppliers need to get paid as early as possible, while buyers want to pay as late as possible. When the cash collection of suppliers slows down, suppliers have limited practical alternatives. They can extend the credit line or take out short-term debt with their local bank; they can use the accounts receivable as collateral to raise cash; or extend their payables. Depending on the size, location, and credit-worthiness of the suppliers, only limited options may be available—if alternative financing is not feasible, they may need to slow down their business. The underlying friction between suppliers’ and buyers’ objectives was severely magnified during the 2008 financial crisis.
 
[[File:Working Capital is the Starting Point for Trade Financing.png]]
 
Source: IMF Staff.
 
 
 
Micro, small and medium-sized enterprises, especially in developing countries, are often faced with a mixture of structural constraints and are required to set aside large collaterals against trade loans or pay high fees. Long waiting times, the combination of costs with high coordination efforts, foreign currency risks and time restrictions, make L/Cs cumbersome especially for this group of enterprises. The availability of trade finance often depends on the extent to which the local banking sector is developed and internationally networked.<ref>Brandi, C. and B. Schmitz, (2015).</ref>
 
L/Cs and other short-term pre-shipment trade loans and guarantees ensure payment for suppliers, on time and for the correct amount, before the actual change of ownership occurs and financial assets and liabilities are created. This is in contrast to trade credit and advances, when financial instruments are created concurrently with the change of ownership. Once the conditions of the L/C are met, the supplier receives payment, and the buyer receives the documents needed to claim ownership.
 
Rejected trade finance requests from SMEs, and the global financial and economic crisis, exposed an incomplete trade finance market with demand exceeding supply, alarming new businesses, market observants and political leaders.<ref>See: ICC. 2017. which notes that “Fintechs, many in startup phase, have identified significant opportunities in the financing of international trade, and have the potential to play an important role … [to] close, the global trade finance gap [of $1.6 trillion] because it is increasingly clear that banks will be unable to materially do so.”</ref>
 
SCF solutions refer to instruments allowing the largest company of a supply chain to use its superior credit rating to give its lower-rated suppliers access to financing at more favourable rates than they would obtain otherwise. Benefits include lengthening payment terms for buyers and shortening them for suppliers, thus improving working capital for both. New SCF solutions are offered by SCF providers (Fintechs) or directly by banks that have SCF in their service portfolio.
 
SCF is enabled through integrated technology platforms – SCF portals– that make it possible to extend payment terms to buyers while accelerating payment to suppliers (see Figure 3). Suppliers of all sizes upload their invoices directly to the portal or send their invoice using specific accounting software. The buyer approves the invoice for early payment by the SCF provider and the full invoice amount less a financing fee is transferred to the supplier’s bank account. At maturity of the invoice period (with or without extension), the buyer will pay the due amount directly to the finance provider (if the supplier has sold the invoice) or to the supplier’s bank account (if the supplier has not sold the invoice).
 
Programs are connected with multi-funding sources to deal with multiple currencies and jurisdictions as well as to work with non-investment-grade or unrated companies. Globally operating banks see SCF as an important new area of their activity and focal point of current research and development. It is expected that the Internet of Things (IoT) and smart contracts will allow real-time tracking of goods which could become a powerful big data source for real-time data.
 
In developing economies, supply chain financing could enable financial intermediaries to provide funding to SMEs without having to accept their risk, basing the risk assessment on the creditworthiness of the onboarding buyers. The African Development Bank estimated that Africa has an unmet demand for trade finance of more than US$90bn and Asia of $425bn annually.<ref>6 See African Development Bank. Second Trade Finance in Africa Survey Report: Trade Finance in Africa: Overcoming Challenges. Cote D’Ivoire. 2017.</ref>
 
[[File:Supply Chain Financing.png]]
 
Source: IMF Staff.
 
Special cases of SCF are (i) loan or advances against inventory – an asset-based financing instrument where the finance provider obtains title over the goods as collateral (e.g., Finetrading); (ii) inventory repurchase (repo) agreements, or buy-back agreements where the buyer/supplier temporarily “sells” its inventory to a financing entity, and “buys’ it back after a predetermined time; however, the inventory stays on the balance sheet and the funds received are recorded as liability until the repurchase takes place within the pre-agreed upon period.
 
Finetrading, in contrast, is not considered a financial transaction because the Finetrader acquires the goods and not the claim. Finetrading combines ‘Finance’ and ‘Trading’ especially by SMEs. The Finetrader takes ownership and pre-finances the goods on behalf of the buyer for a defined financing period. For the buyer, the benefits are reduced inventory and improved working capital, while the supplier gets paid immediately. Finetrading is a trade finance tool typically provided by intermediaries other than banks.
 
'''Secondary markets'''
 
Because of the difficulties SMEs often face with obtaining credit through regular channels, securitization (in addition to SCF) could enhance the financial base by enabling risk-transfer from banks to a wider pool of investors beyond the banking sector. Depending on the size of the market, SCF and securitization may also contribute to a decrease in financial stability.
 
Currently, there is no comprehensive global dataset separately covering trade finance statistics.
 
trade finance encompasses a wider range of instruments at the financiers’ disposal (see Figure 4)—these financial instruments require additional breakdowns to the standard financial account classifications and components.
 
Traditional L/Cs are not included in the macroeconomic statistics because they are considered contingent instruments, therefore off-balance sheet and not recorded as financial assets. Therefore, extensions are required to the current macro-statistical frameworks to facilitate an accurate measurement of domestic and cross-border trade finance.
 
Most Used Instruments in Traditional Trade and Supply Chain Finance
 
[[File:Most Used Instruments in Traditional Trade and Supply Chain Finance.png]]
 
Source: Source: ICC Global Survey on Trade Finance 2018
 
 
The G20 acknowledged that international statistics produce insufficient data on trade finance and asked to “coordinate and establish a comprehensive and regular collection of trade credit in a systematic fashion.”
 
To fill the data gap during the latest global financial crisis, the IMF and the Bankers' Association for Finance and Trade (BAFT) conducted four ad hoc surveys of banks between 2008 and 2010 on volume, prices, and drivers of trade finance.<ref>Asmundson, I., Dorsey, et al. Trade and Trade Finance in the 2008-09 Financial Crisis. IMF WP/11/16 <nowiki>https://iccwbo.org/publication/global-survey-2018-securing-future-growth/</nowiki>: 251 banks participated in the 2018 Global Survey, from 91 countries.</ref>
 
=== New Supply Chain Finance (SCF) Instruments ===
'''SCF Definition Established by the Global Supply Chain Finance (GSCF) Forum'''
 
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.
 
SCF is typically applied to open account trade and is triggered by supply chain events. Visibility of underlying trade flows by the finance provider(s) is a necessary component of such financing arrangements which can be enabled by a technology platform. […]
 
[The buyers and sellers] often have objectives to improve supply chain stability, liquidity, financial performance, risk management, and balance sheet efficiency. SCF is not a static concept but is an evolving set of practices.
 
'''Accounts Receivable Centric''' 
 
SCF Category Accounts or trade receivables refer to the outstanding invoices that a supplier has vis-à-vis the buyer of its goods and services. Receivables are recorded separately on the balance sheet as short-term claims. Using a receivables purchase program, the supplier sells all or parts of these outstanding claims to a financial intermediary or SCF service provider which takes full legal and economic ownership (and not just a security interest in the collateral); in return, it provides the supplier with working capital in form of advance payments less the financial service charge (called discount), reducing the days sales outstanding (DSO) and providing much needed liquidity the company can work with. 
 
The following three techniques on the market are seller (supplier)-led programs. 
 
(1) '''Receivables Discounting''' (Annex Figure 1) allows suppliers with outstanding short-term invoices mostly vis-à-vis multiple buyers to sell their receivables to a financial provider at a discount. This instrument is usually reserved to investment-grade suppliers that have a minimum credit rating. This allows the finance provider to offer this program on a full or partly “without recourse”<ref>Without recourse means: without subsequent liability. As a legal term, it signifies that the finance provider (and not the seller) of an asset is assuming the risk of non-payment of the asset.</ref> basis; i.e., the supplier can remove the accounts receivables<nowiki>''</nowiki> completely or partly from its balance sheet, and the finance provider bears the risk in case the buyers fail to perform their payments. A trade credit insurance can limit the risk exposure of the finance provider. This financing transaction between the supplier and a finance provider can be made with or without the knowledge of the buyers; and depending on the situation in some cases, the buyers may be asked to validate their accounts payables. 
 
[[File:Receivables Discounting.png]]
 
Source: IMF Staff.
 
At maturity, the buyers pay the amounts of the invoices into the bank account (i) of the supplier, with limited access rights of the supplier; (ii) of the finance provider (the finance provider does not have to be a bank); or (iii) of the supplier without restriction, adding an additional element of risk for the finance provider.
 
The buyer benefits from extended credit terms in a stable supply chain environment. The supplier profits from increased short-term liquidity. And the finance provider provides services in a relatively stable non-speculative financial environment.
 
(2) '''Forfaiting''' (Annex Figure 2) is an export-oriented form of supply chain finance where a forfaiter (finance provider) purchases from the supplier, without recourse, future payment obligations and trades these as negotiable debt instruments in the form of '''bills of exchange, promissory notes, or Letters of Credit (L/Cs)''' on the secondary forfaiting market. These payment instruments are legally independent from the underlying trade and require a guarantee by a third party (normally the buyer’s bank).
 
[[File:Forfaiting.png]]
 
Source: IMF Staff.
 
In the secondary market, forfaiters deal with financial investors. In the primary market, the supplier approaches the forfaiter before signing the contract with the buyer. The buyer obtains a bank guarantee and provides the documents that the supplier requires to complete the forfaiting. After receiving 100 percent cash payment against delivery of the payment (debt) obligation, the supplier has no further interest in the transaction, because the forfaiter must collect the future payments plus forfaiting costs (included in the invoice price) via the guarantor from the buyer. Forfaiting involves mostly medium-to-long-term maturities, and is most commonly used in large, international sales of capital goods.
 
Forfaiting helps suppliers trade with buyers of countries with high levels of risks, and obtain a competitive advantage by being able to extend credit terms to their customers. While the without-recourse-sale eliminates all risks for the supplier, the forfaiter charges for credit risks as well as for covering the political, commercial, and transfer risk related to the importing country, which is also linked to the length of the loan, the currency of transaction, and the repayment structure. The costs are higher than commercial bank financing, but more cost effective than traditional trade finance tools. Forfaiting is only used in international trade financing.
 
(3) '''Factoring''' (Annex Figure 3) targets the domestic and international market, whereby the latter often includes two “factors,” one in each country. The suppliers, often SMEs, receive around 80 percent of the invoice value from the factor as advance payment, and a remaining, but discounted, value when payment is due by the buyer. The fees and discounts are borne by the supplier in return for the factor’s services of advancing funds and managing the collecting of the receivables from the buyer. Because factoring is available with and without recourse, depending on the circumstances in the market, the factoring institution may add a credit insurance. Factoring provides suppliers with working capital, albeit discounted, allowing them to continue trading, while the factor receives margins from rendering the service.
 
[[File:Factoring.png]]
 
Source: IMF Staff.
 
'''Asset-based financing linked to the physical supply chain is not a new concept.''' There are a variety of traditional techniques for accessing finance both pre- and post-shipment. However, traditional factoring is often not fit for purpose for small businesses, as it typically entails long-term, complex contracts with fixed volumes.<ref>World Economic Forum. 2015.</ref> The innovations with SCF are the automated business processes and e-invoicing tools that are based on a central technology platform simultaneously accessed by buyers, sellers, and SCF providers.<ref>This overall elevated collaboration between the parties to the financial transaction and the visibility of the underlying trade flows may be the reason why SCF outperforms traditional financing. Additionally, SCF is based on buyer-led financing (financing provided by large buyers to their smaller suppliers) rather than supplier-led financing. Once the supplier has agreed, the buyer approves the invoice, and a cascade of processes takes place on the SCF provider’s platform.</ref>
 
(4) '''Reverse Factoring, also known as Approved Payables Finance''',<ref>This SCF program currently has various names; most commonly, “reverse factoring.” There may be slight differences in the execution of the programs.</ref> is a buyer-led and arranged financing program for designated suppliers in the supply chain (Annex Figure 4). The buyer’s creditworthiness allows the supplier to receive an early discounted payment for the accounts receivables, typically without recourse. The buyer will later pay the due amount directly to the finance provider. Buyers can be large and medium-sized and at times even near non-investment grade (given, an established buyer-finance provider relationship exists); however, buyers only arrange the financing, they are not part of the financing transaction. As with previous cases, the assets are changing ownership from the suppliers to the financial intermediary. The early financing is for 100 percent of the receivables less a discount, which is lower than with conventional trade financing. As before, the buyer receives an extended term for payment in a secured supply chain environment.
 
[[File:Approved Payables Finance.png]]
 
Source: IMF Staff.
 
(4a) '''Dynamic Discounting''' is a variation to (4), where buyers use their own funds in to decide how and when to pay their suppliers in exchange for a discount on the purchased goods. The earlier the payment, the larger the discount. The buyers can use their own access liquidity to generate additional income, while the supplier can optimize the days outstanding and the working capital.
 
Dynamic discounting is a typical example where Fintech companies<ref>For instance: PrimeRevenue. What is Dynamic Discounting? <nowiki>https://primerevenue.com/what-is-dynamicdiscounting/</nowiki>.</ref> entered the market as providers of web-based platforms that allow both parties to upload, view, and approve invoices for early payment. For the buyers, there is no additional cost; the suppliers are charged a fee once they request early payment of the approved invoices.
 
Overall, in this category of Accounts Receivable Financing the financial claims move from the suppliers’ books to the SCF providers (the service provider or directly to the finance provider); hence, no new financial debt is created in the books of the suppliers for receiving early payment, in return for new liquidity. On the creditor side, SCF programs<ref>For instance: PrimeRevenue. “Supply Chain Finance 101 What is Supply Chain Finance?” <nowiki>https://primerevenue.com/what-is-supply-chain-finance/</nowiki>.</ref> can be self-funded by the buyers, or composed of a mixed program where financing is shared by the buyers, capital markets, and financial institutions.
 
'''Loan/Advance based SCF category'''
 
The second SCF category is based on loans and advances, where financing is usually provided in return for rights to a collateral, and the loan is recorded as a liability in the beneficiaries’ balance sheet.
 
(5) The new edge to an existing instrument called '''Distributor Financing''' (or Channel Financing) is that large Multinational corporations [MNCs (as suppliers)] are using this instrument increasingly for expanding into emerging markets. The MNCs support the financing of a geographically important (network of) established distributors against their retail inventory, and the distributors repay their debt once the inventory is sold. Although the finance provider (e.g., local bank) is providing the funds and taking on the risks, often MNCs subsidize the financing by absorbing part of the interest margins or engaging in other forms of risk-sharing arrangements, and through reputational support. MNCs directly benefit from their suppliers’ sales of goods to these distributors (buyers), and indirectly, because a sound supply chain allows end-customers to profit from products that can be delivered without delay. Distributor Financing has limited impact on MNCs balance sheets compared to foreign direct investment. Therefore, Distributor Financing can be an alternative to direct investment and preferred to establishing inventory-carrying subsidiaries abroad. Through the engagement of the MNCs, distributors profit from better loan prices and bridging liquidity gaps. The collateral for the finance providers is usually an assignment of rights over the inventory.
 
(6) With '''Loan or Advance against Receivables''' (Annex Figure 5), the financial intermediary provides advances or loans to suppliers that are collateralized with future or current receivables, while collateralization may be formalized or accepted informally. The suppliers repay the loans upon maturity and interest on an accrual basis.
 
[[File:Loan or Advance Against Receivables.png]]
 
Source: IMF Staff.
 
(7) '''Loan or Advance against Inventory''' (Annex Figure 6) is an asset-based financing instrument in form of a credit line for suppliers and buyers along the physical supply chain to raise funds “instead of locking unused value inside a warehouse.” The finance providers obtain title over the goods as collateral and utilize on-site inspections and property insurance for risk mitigation. Furthermore, finance providers base their lending on the inventory’s appraised value, which is usually lower than the market value, and finance about 80 percent of this amount. For finished goods or work-in-progress, finance providers may also require purchase orders (on behalf of the buyers) or purchase contracts (on behalf of an end customer). The transactions are settled regularly at the time inventory is used for production or sold off to customers. Although inventory financing is more expensive than other SCF instruments, for a certain market, it still provides advantageous terms, such as the ability to accumulate inventory and optimize working capital for lower rates than conventional bank financing.
 
[[File:Loan Against Inventory.png]]
 
Source: IMF Staff.
 
(7a) '''Financing of “toll manufacturing”''' of the inventory is a variation of (7); toll manufacturing is what the System of National Accounts (SNA) calls “manufacturing services on physical inputs owned by others” (as opposed to contract manufacturing, where the manufacturer owns and provides the raw materials).
 
(7b) '''Inventory repurchase (repo) agreement or buy-back agreement''' is a special case of inventory financing when the buyer/supplier temporarily “sells” its inventory to a financing entity, and “buys’ it back after a predetermined time. What appears to be a sale and buy-back is in fact not recognized as a true sale by the accounting bodies. Therefore, the inventory stays on the balance sheet and the funds received are recorded as liability until the repurchase takes place within the pre-agreed upon period (usually 30, 60 or 90 days).
 
(8) '''Pre-Shipment Financing''' (sometimes called “Packing credit”) is illustrated in Annex Figure 7). A manufacturer receives financial assistance for purchasing raw materials, processing, and packing the finished goods for exporting. Although the financial transaction is between the manufacturer and the finance provider, the creditworthiness and reliability of the buyer play a role in negotiations, and so does the manufacturer’s reputation to perform and deliver. A prerequisite for granting the financing may often be (i) a specific kind of L/C from the buyer and their bank or a confirmed and irrevocable purchase order (PO) for the export of goods; (ii) the documents relating to the raw materials may be pledged to the finance provider as collateral; and (iii) the granting of inspections to the finance provider during the manufacturing cycle.   
 
[[File:Pre-shipment Finance.png]]   
 
Source: IMF Staff.       
 
Although trade credit contracts are common, the cost of finance to small firms to fund the working capital gap is much higher compared to large firms because of their typically higher credit risk. And in practice the timing of the payment may be longer than a typical 30-day term, especially when the buyer is a large corporate-sized firm and the supplier is an SME, due to the greater bargaining power of the former (Fabbri and Klapper, 2016; Cho et al., 2019). The timing of the payment may be stretched out even further by practices of late or extended payments by some large buyers to hold onto cash longer, or improve their financial performance (Randall and Farris, 2009; Paul and Boden, 2011).   
 
Payback inventory finance is costlier than factoring or invoice discounting (Tanrisever et al., 2017).   
 
Much less attention has been given to SMEs, who are often claimed to be the main beneficiaries of SCF arrangements.           
 
'''Working capital gap or Cash Conversion Cycle (CCC) (Adapted from Richards and Laughlin, 1980, p. 35)'''           
 
[[File:Working capital gap or Cash Conversion Cycle (CCC).png]]           
 
 
 
The lower the Cash Conversion Cycle (CCC), the better, all other things being equal. Firms can reduce their working capital gap or CCC by 1) lowering inventories held; 2) reducing accounts receivable by requesting customers to pay early or shorten customer payment terms; and/or 3) increasing accounts payable by paying their suppliers late or extending supplier payment terms (Randall and Farris, 2009).
 
Reverse factoring is currently the most popular and most cited SCF mechanism due to its potential to help reduce payment tensions between buyers and suppliers in managing cash flow and working capital (Randall and Farris, 2009). Nevertheless, reverse factoring may not be the right financing option for every business. This popular SCF practice is currently available to large corporate firms and their strategic suppliers, but there are several SCF mechanisms that can be used to finance working capital gaps.
 
According to Gelsomino et al. (2016a), both trade credit and working capital management are closely linked to SCF.
 
Trade credit is a form of short-term finance with no interest, extended by a supplier to its buyer primarily to win business or enhance sales (Fabbri and Klapper, 2016). Trade credit accounts for about 40 percent of the current liabilities of firms (Borde and McCarty, 1998).
 
Trade credit would be a practical source of short-term finance for downstream supply chain members if the supplier were a large company that had cash reserves (i.e. internal source) or had relatively easy access to inexpensive bank credit (i.e. external source). However, many suppliers are SMEs (Small and Medium-sized Enterprises), but still have to provide trade credit to large buying firms in order to win business, build relationships with buyers, or signal the quality of their goods and the strength of their financial status (Peel et al., 2000). Such providers, therefore, need finance (SCF) to fund the gap.
 
Credit terms or payments terms can vary widely among different industry sectors, generally ranging from 30 to 90 days.
 
Key SCF actors
 
SCF arrangements typically involve either two or three main actors. The two main parties in SCF relationships are primary supply chain members: suppliers (sellers) and buyers. The third actor is an external funder, a bank or a non-bank financial institution such as the recently collapsed Greensill Capital (Ramnarayan, 2021). In recent years, another actor ─ a technology (platform) provider ─ has played an increasingly significant role in SCF arrangement. The main role of technology providers, generally known as FinTechs (financial technology firms), is to provide an online transaction platform (i.e. an SCF platform) to facilitate the exchange of information between buyers, suppliers and, external funders, especially in two SCF arrangements ─ reverse factoring and dynamic discounting, as displayed in Table 2-2 (Deutsche Bank, 2018). A fifth potential actor is a credit insurer who provides credit risk mitigation in some SCF arrangements such as distributor finance (Global Business Intelligence Corp, 2012).
{| class="wikitable"
|+Platform providers (Adapted from Deutsche Bank, 2018, p. 23-24)
! rowspan="2" |Platform provider (Fintech)
! colspan="3" |SCF mechanism
|-
!Reverse factoring
!Dynamic discounting
!Distributor finance
|-
|TradeIX
|
|
|√
|-
|Kyriba
|√
|√
|
|-
|Demica
|√
|
|
|-
|Taulia
|√
|√
|
|-
|Orbian
|√
|
|
|-
|PrimeRevenue
|√
|
|
|}
Banks may own the platform or utilise a third-party platform provider. For example, Barclays and PrimeRevenue are partnering to offer reverse factoring to Barclays’ customers such as the Co-op food company (PrimeRevenue, 2020). The potential benefit of using a third-party platform provider is that corporate customers can choose between using their own funds, or single or multiple external funders. Alternatively, some firms may develop their own platforms (PrimeRevenue, 2014). Table 2-3 shows the three types of platform used to facilitate SCF transactions together with the involved SCF actors. The table comes from the cited source, and it is not completely clear what the relationships is between the corporate firm and platform provider in the case of ‘in-house development platforms’.


===Economic links to cash flow patterns ===
{| class="wikitable"
{| class="wikitable"
|+Types of platforms with examples of SCF actors (Adapted from PwC, 2018, p.3 )
|+Economic links to cash flow patterns
!Type of platform
!Firm
!Platform provider
!Funder
|-
|Bank proprietary platforms
|Nestle
|
|Citi
|-
|
|Unilever
|
|Santander
|-
|Third-party platform
|Sainsbury’s
|PrimeRevenue
|RBS
|-
|
|Co-op
|Demica Citadel
|Multiple
|-
|In-house developed platform
|Carrefour
|
|Santander, BNP Paribas, Unibanco
|-
|-
|
!Cash flow type!!Introduction!!Growth!!Shake out!!Mature!!Decline
|Metro Group
|
|Deutsche Bank
|}
The basic mechanics of the common SCF mechanisms, as explained later in Section 2.5, are based on a simplified model of a single bank providing funding. In practice, there are several funding models available through a combination of funders (banks or non-banks) and platform providers (in-house or outsourced). These funding models are outlined in Table 2-4.
 
Using a longitudinal case study of a focal firm, Motorola, Blackman et al. (2013) explore the concept of FSC and find that sharing financial data with suppliers helps generate cost savings for both parties and improves the payment process as well as reducing risk. Two studies emphasize collaboration and the network features of SCF.
 
Regarding reasons to adopt SCF, the primary objective is to extend payment terms or Days Payable Outstanding (DPO) (Van der Vliet et al., 2015; Liebl et al., 2016). Some firms aim to reduce risk in supply chains (Caniato et al., 2016; Liebl et al., 2016) while only a few adopt SCF for the purpose of process simplification (Liebl et al., 2016).
 
The results show the benefits for the buyers in providing three SCF practices: around 70% of the total benefits come from inventory finance, 29% from RF while only 1% from dynamic discounting (Gelsomino et al., 2019). This is in line with Huff and Rogers (2015) who find that a change of inventory strategy (Days Inventory Outstanding: DIO) has a larger impact on financial performance than change of payment terms (Days Sales Outstanding: DSO or Days Payable Outstanding: DPO).
{| class="wikitable"
|+Key similarities and differences among SCF mechanisms: factoring, invoice discounting, reverse factoring, and distributor finance
!
!Factoring
!Invoice Discounting
!Reverse factoring
!Distributor finance
|-
|-
|
|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;" |+/-
|
|
|
|
|}
{| class="wikitable"
|+Consolidated Statement of Comprehensive Income for the Year Ended 31 December 2021
!
!Year ended 31 December 2020
!Year ended 31 December 2021
|-
!
!(£'000)
!(£'000)
|-
|Revenue
|1,147
|538
|-
|Cost of sales
|(739)
|
|-
|Gross (loss)/profit
|
|
|-
|Administrative expenses
|(1,904)
|(4,165)
|-
|Other operating income
|53
|
|-
|Operating loss before deemed cost of listing and acquisition related costs and impairment charge
|(1,443)
|(4,431)
|-
|Deemed cost of listing
|(1,376)
|
|-
|Transaction costs
|
|(2,009)
|-
|Amortisation of intangible assets arising on acquisition
|
|(391)
|-
|Acquisition related earn-out payments
|
|(1,410)
|-
|Impairment of charges
|
|(2,573)
|-
|Operating loss
|(2,819)
|(10,814)
|-
|Finance costs
|
|(1,341)
|-
|Loss before tax
|(2,819)
|(12,155)
|-
|Income tax
|(145)
|(332)
|-
|Loss for the year
|(2,964)
|(12,487)
|}
{| class="wikitable"
|+Consolidated Statement of Financial Position as at 31 December 2021
!
!As at 31 December 2020<ref>To more accurately reflect the nature of certain items in the balance sheet, the prior year comparatives include the a reclassification of bank borrowings of £22,000 from Trade and other payables to Long-term borrowings. In addition, the prior year comparative deferred tax asset balance of £422,000 has been reclassified from Trade and other receivables to non-current assets to comply with IAS 1 (“Presentation of Financial Statements”.</ref>
!As at 31 December 2021
|-
!
!(£'000)
!(£'000)
|-
|Non-current assets
|1,236
|7,895
|-
|Intangible assets and goodwill
|2
|17
|-
|Tangible assets
|422
|
|-
|Deferred tax asset
|1,660
|7,912
|-
|Total non-current assets
|
|
|-
|Current assets
|
|
|-
|Trade and other receivables
|1,113
|896
|-
|Cash and cash equivalents
|552
|1,727
|-
|Total current assets
|1,665
|2,623
|-
|Total assets
|3,325
|10,535
|-
|Current liabilities
|
|
|-
|Trade and other payables
|3,373
|3,500
|-
|Derivative financial instruments
|24
|
|-
|Loan notes
|
|5,732
|-
|Total current liabilities
|3,397
|9,232
|-
|Net current liabilities
|(1,732)
|(6,609)
|-
|Non-current liabilities
|
|
|-
|Long-term borrowings
|22
|1,284
|-
|Provisions
|358
|340
|-
|Deferred tax liabilities
|
|1,104
|-
|Total non-current liabilities
|380
|2,728
|-
|Net liabilities
|(452)
|(1,425)
|-
|Total equity
|(452)
|(1,425)
|}
{| class="wikitable"
|+Consolidated Statement of Cash Flows for the Year Ended 31 December 2021
!
!As at 31 December 2020<ref>In addition, to better reflect the nature of certain cash flow items the prior year comparatives include a reclassification of bank borrowings of £22,000 from Trade and other payables to Long-term borrowings.</ref>
!As at 31 December 2021
|-
!
!(£'000)
!(£'000)
|-
|Cash flows from operating activities
|
|
|-
|Loss for the year
|(2,819)
|(10,814)
|-
| colspan="3" |Adjustments for non-cash costs relating deemed cost of listing and acquisition related costs and impairment charge
|-
|Deemed cost of listing in reverse acquisition
|1,376
|
|-
|Acquisition related transaction costs
|
|1,900
|-
|Acquisition related earn-out payments
|
|1,410
|-
|Amortisation of intangible assets arising on acquisition
|
|391
|-
|Impairment charges
|
|2,573
|-
|
|1,376
|6,274
|-
|Other non-cash adjustments
|16
|(70)
|-
|Other depreciation and amortisation
|203
|396
|-
|Increase to provisions
|40
|52
|-
|Decrease/(increase) in accrued income
|
|(46)
|-
|Decrease/(increase) in trade receivables
|(717)
|505
|-
|Increase/(decrease) in trade and other payables
|296
|77
|-
|Other decreases/(increases) in net working capital
|686
|(158)
|-
|Net cash flows from operations
|(919)
|(3,784)
|-
|Finance costs paid in cash
|
|(2)
|-
|Income taxes paid in cash
|(19)
|(89)
|-
|Other collections
|6
|
|-
|Net cash flow from operating activities
|(932)
|(3,875)
|-
|Cash flows from investing activities
|
|
|-
|Cash from reverse acquisition of Abal plc
|93
|
|-
|Acquisition of property, plant and equipment
|(2)
|(7)
|-
|Acquisition of intangible assets
|(1,026)
|(1,020)
|-
|Cash consideration on acquisition of Tradeflow, net of cash acquired
|
|(3,523)
|-
|Net cash flows from investing activities
|(935)
|(4,550)
|-
|Cash flows from financing activities
|
|
|-
|Increase/(decrease) in long-term borrowings
|22
|
|-
|Net cash inflow from Mercator loan notes
|
|6,629
|-
|Other finance costs paid in cash
|
|(25)
|-
|Cash inflow from Negma convertible loan notes
|
|5,000
|-
|Cash repayment to Negma convertible loan notes
|
|(2,016)
|-
|Proceeds from issue of ordinary shares, net of allowable issue costs
|2,230
|
|-
|Net cash flows from financing activities
|2,252
|9,588
|-
|Net increase in cash and cash equivalents
|385
|1,163
|-
|Foreign exchange differences to cash and cash equivalents on consolidation
|24
|12
|-
|Cash and cash equivalents at 1 January
|143
|552
|-
|Cash and cash equivalents at 31 December
|552
|1,727
|}
Peers
 
Supply chain finance
{| class="wikitable"
|+Supply chain finance peers
!Bloomberg ticker
!Company name
!Primary exchange
!Market capitalisation ($)
!Adjusted EV/sales
|-
|9959 HK  Equity
|Linklogis Inc
|Hong Kong
|7,424,976,896
|
|-
|TRE SJ Equity
|Trencor Ltd
|Johannesburg
|954,440,704
|
|-
|NISN US Equity
|NiSun International Enterprise
|Nasdaq Capital Market
|18,756,078
|
|-
|SSIF LN Equity
|Secured Income Fund plc
|London
|7,899,053
|
|-
|XPTFX US Equity
|Federated Hermes Project & Trade Finance Tender Fund
|Nasdaq Global Market
|
|
|}
{| class="wikitable"
|+Working capital finance peers
!Bloomberg ticker
!Company name
!Primary exchange
!Market capitalisation ($)
!Adjusted EV/sales
|-
|CGCL IN  Equity
|Capri Global Capital Ltd
|Natl India
|130,470,649,856
|
|-
|LOFC SL Equity
|LOCL Finance PLC
|Colombo
|117,433,139,200
|
|-
|BDFIN BD Equity
|Bangladesh Finance And Investment Co., Ltd.
|Dhaka
|8,301,219,328
|
|-
|GILF IN Equity
|Gilada Finance & Investments Limited
|BSE India
|284,496,288
|
|-
|VANI IN Equity
|Vani Commercials Limited
|BSE India
|186,088,832
|
|-
|UFCI OM Equity
|United Finance Co SAOG
|Muscat
|22,345,242
|
|-
|PROB MB Equity
|BC Procredit Bank SA
|Moldova
|
|
|-
|ILFC NK Equity
|International Leasing & Finance Company Ltd.
|Nepal Stock
|
|
|-
|AEFL NK Equity
|Alpic Everest Finance Company Ltd.
|Nepal Stock
|
|
|-
|EBL NK Equity
|Everest Bank Ltd.
|Nepal Stock
|
|
|}
{| class="wikitable"
|+Inventory peers
!Bloomberg ticker
!Company name
!Primary exchange
!Market capitalisation ($)
!Adjusted EV/sales
|-
|4733 JP  Equity
|OBIC BUSINESS
|
|336,301,850,624
|
|-
|VENTANA CI Equity
|VENTANAS
|
|170,808,934,400
|
|-
|072700 KF Equity
|DOUZONE HOLDINGS
|
|127,448,203,264
|
|-
|ZOFRI CI Equity
|ZOFRI
|
|97,343,832,064
|
|-
|600153 CH Equity
|XIAMEN C & D-A
|
|43,064,098,816
|
|-
|9629 JP Equity
|PCA CORP
|
|30,307,201,024
|
|-
|EBAY US Equity
|EBAY INC
|
|24,441,364,480
|
|-
|4659 JP Equity
|AJIS CO LTD
|
|22,070,188,032
|
|-
|9145 JP Equity
|BEING HOLDINGS C
|
|10,591,254,528
|
|-
|4428 JP Equity
|SINOPS INC
|
|7,595,841,024
|
|-
|KULC HB Equity
|KEY-SOFT COMPUTE
|
|6,899,999,744
|
|-
|CLASB SS Equity
|CLAS OHLSON-B SH
|
|5,238,159,872
|
|-
|NETBAY TB Equity
|NETBAY PCL
|
|4,960,000,000
|
|-
|SPSC US Equity
|SPS COMMERCE INC
|
|4,757,506,048
|
|-
|9326 JP Equity
|KANTSU CO LTD
|
|4,641,994,752
|
|-
|9060 JP Equity
|JAPAN LOGISTIC S
|
|4,502,673,920
|
|-
|300531 CH Equity
|SHENZHEN UROVO-A
|
|4,371,670,016
|
|-
|HTTBT TI Equity
|HITIT BILGISAYAR
|
|3,603,150,080
|
|-
|3840 JP Equity
|PATH CORP
|
|2,797,461,504
|
|-
|300240 CH Equity
|JIANGSU FEILIK-A
|
|2,691,648,256
|
|-
|9327 JP Equity
|E-LOGIT CO LTD
|
|2,352,000,000
|
|-
|USAC US Equity
|USA COMPRESSION
|
|1,804,090,240
|
|-
|CPCS IN Equity
|COMPUCOM SOFTWAR
|
|1,705,147,776
|
|-
|WABC US Equity
|WESTAMERICA BANC
|
|1,641,661,696
|
|-
|SVLL IN Equity
|SHREE VASU LOGIS
|
|1,605,240,064
|
|-
|OBASE TI Equity
|OBASE BILGISAYAR
|
|1,363,180,032
|
|-
|ACVA US Equity
|ACV AUCTIONS-A
|
|1,238,821,376
|
|-
|PUBM US Equity
|PUBMATIC INC-A
|
|812,146,880
|
|-
|LINK TI Equity
|LINK BILGISAYAR
|
|742,499,968
|
|-
|DKSH MK Equity
|DKSH HOLDINGS M
|
|696,848,704
|
|-
|JETCON JA Equity
|JETCON CORP LTD
|
|636,014,976
|
|-
|EINC CN Equity
|E AUTOMOTIVE
|
|308,959,968
|
|-
|Y CN Equity
|YELLOW PAGES LTD
|
|260,843,024
|
|-
|SIF SP Equity
|SING INV&FIN
|
|230,133,616
|
|-
|OSP2 GR Equity
|USU SOFTWARE AG
|
|202,582,576
|
|-
|AGR GR Equity
|AGROB IMMOBILIEN
|
|159,435,920
|
|-
|SRL US Equity
|SCULLY ROYALTY L
|
|117,450,952
|
|-
|540 HK Equity
|SPEEDY GLOBAL HO
|
|87,600,000
|
|-
|GMNG CN Equity
|GAMELANCER MEDIA
|
|62,834,980
|
|-
|FCAP IN Equity
|FRONTIER CAPITAL
|
|62,355,248
|
|-
|UGRO US Equity
|URBAN-GRO INC
|
|48,388,860
|
|-
|BEST US Equity
|BEST INC - ADR
|
|40,232,960
|
|-
|ALPRG FP Equity
|PROLOGUE - REG
|
|20,101,946
|
|-
|GRNQ US Equity
|GREENPRO CAPITAL
|
|8,663,394
|
|-
|KSPN US Equity
|KASPIEN HOLDINGS
|
|3,289,285
|
|-
|UP CN Equity
|UPSNAP INC/CANAD
|
|843,211
|
|-
|TKX CN Equity
|TRACKX HOLDINGS
|
|694,363
|
|-
|ONCI US Equity
|ON4 COMMUNICATIO
|
|9,916
|
|-
|ERBB US Equity
|AMERICAN GREEN I
|
|6,370
|
|-
|CIMPCA CR Equity
|ILG INT - COMM A
|
|
|
|-
|ACBCQ US Equity
|ALBINA COMM BNCP
|
|
|
|-
|CLTY US Equity
|CELERITY SOLUTIO
|
|
|
|-
|DLAD US Equity
|DEALERADVANCE IN
|
|
|
|-
|SMAA US Equity
|SMA ALLIANCE INC
|
|
|
|-
|ENAB US Equity
|ENABLE HOLDINGS
|
|
|
|-
|SYME LN Equity
|SUPPLY@ME CAPITA
|
|
|
|-
|AXCP US Equity
|ALLIXON INTERNA
|
|
|
|-
|AJIA US Equity
|AJIA INNOGROUP H
|
|
|
|-
|HSI/H CN Equity
|H-SOURCE HOLDING
|
|
|
|-
|TAATFFB KY Equity
|TA-ASIA TRD 2-B
|
|
|
|-
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Latest revision as of 16:54, 27 January 2023

  • 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[1] 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.[2] 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[3].
  • 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, mainly given the stage of the business lifecycle that the company is in currently.
  • 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.

OperationsEdit

How did the idea of the company come about?Edit

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 (i.e. an early-stage inventory-intensive company). Researching into how to do that, he realised that one of the best ways is to raise funds (i.e. funding), in particular funding related to the inventory of a business (i.e. inventory-related funding).[4] He also realised that there are many company owners that feel the same way as him, with profit maximisation one of the fundamental assumptions of economic (and business) 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?Edit

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

What's the company's main offering(s)?Edit

Flagship offering/audienceEdit

Who’s the target audience of the company’s flagship/first product?Edit

The primary audience is companies that are 1) inventory-intensive (i.e. manufacturing companies) and 2) willing and able to take higher levels of risk [(for higher levels of return), such as early-stage companies (i.e. companies that are less than two years old)] (i.e. early-stage inventory-intensive companies).[5]

What's a major problem that the target audience experience?Edit

"The widespread belief ... is that the lack of finance constitutes the main obstacle to the growth of [small-and medium-sized enterprises]." European Bank for Reconstruction and Development.[6]

As indicated in the above quote, a major problem that the target audience experience is a lack of profits, more specifically a lack of financing.

Indeed, the Federation of Small Businesses, a lobby group for the UK’s smallest companies, said a survey of members founds 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?Edit

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.[2] 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[3].

Note, with a true sale inventory agreement, there is no legal obligation to return the finance, thereby reducing the financial risk of the fundraising company.

Secondary offering/audienceEdit

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). Because the finance on the Supply@Me Finance platform 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), the platform is allowed to be used by Muslims (i.e. Muslim-permissible inventory finance platform). Indeed, the Supply@ME platform has been approved as being compliant within the principles of Sharia, Islamic law, thereby making the platform one of the first shariah-compliant inventory finance platforms.

Which are the main competitors of the product?Edit

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. early-stage inventory-intensive businesses) and providing or aiming to provide the same core benefit (i.e. more/maximum business profits, in particular more efficient financing), 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 Supply@ME platform are TraxPay, Demica and Novuna. A detailed comparison between Supply@ME and its main competitors are shown in the table below.

Competition analysis
Supply@ME TraxPay Demica Novuna Marco Polo Network Kyriba Taulia Orbian PrimeRevenue LiquidX 360 TradeShift HSBC business loan
Is the product targeted toward early-stage, inventory-intensive companies? Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Is the platform focused on providing financing (i.e. finance platform)? Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Does the product provide financing related to inventory (i.e. inventory-related financing)? Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Does the platform truly sell the inventory (i.e. true sale inventory finance platform)? Yes No No No No No No No No Yes No No
Is the platform compliant with Sharia law (i.e. Sharia-compliant inventory finance platform)? Yes No No No No No No No No Yes No No
What is the average total price of financing inventory using the platform (i.e. inventory finance price)? High Medium Medium Medium Medium Medium Medium Medium Medium High Medium Low

Finance price/costEdit

With inventory financing, the default liability is restricted to the company’s inventory only, rather than to the whole business. As a result, the risk to the financier is higher than traditional financing (i.e. business loans), and, therefore, the finance price/cost is higher (than traditional financing).

Furthermore, with equity financing, there is no legal obligation to return the finance[7]. Consequently, the risk to the financier is higher than debt financing, and, therefore, the finance price/cost is higher (than debt financing). With the finance arrangement provided by Supply@ME Capital, the finance comes from the selling [and then at a later stage (e.g. 90 days), buying-back, at a higher price (than the sold price)] of inventory[2], and, therefore, the arrangement is more like an equity financing arrangement (rather than loan/debt financing arrangement). Accordingly, we expect the cost/price of the financing (that is provided by Supply@ME Capital) to be higher than both traditional financing and non-traditional financing [i.e. (on-balance sheet) inventory repurchase (repo) agreement[8]], thereby making the Supply@ME Capital financing one of the more/most expensive forms of financing.

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

The main way that Supply@ME expects to make money from its platform is via finance arrangement fees, which is around 2% of the finance that the company helps to arrange. For example, if $10,000,000 worth of inventory finance is facilitated/arranged via the platform, then Supply@ME will make $200,000 on the arrangement (i.e. $10,000,000 x 2% =$200,000).

Another way that the company expects to make money is by securitising the inventories, selling the securitised-inventories to investors (the investors are expected to receive a coupon of 4-6% per annum) and then charging a fee to the investors for Supply@ME collecting payments and monitoring the security (i.e. servicing fee). The company expects the servicing fee to be between 6% and 8% of the value of the security. So, if, for example, the total value of the securitised-inventories is $100 million, then Supply@ME will make $7 million in servicing fees (i.e. $100,000,000 x 7% =$7,000,000).

What’s the size of the company target market?Edit

Total Addressable MarketEdit

Here, the total addressable market (TAM) is defined as the global finance arrangement market, and based on a number of assumptions, it is estimated that the size of the market as of today (27th November 2022), in terms of revenue, is $965 billion.

It can be argued that the TAM of the company is the global working capital securitisation servicing market, and it is estimated that the size of the market as of today (27th November 2022), in terms of revenue, is $385 billion.

Serviceable Available MarketEdit

The serviceable available market (SAM) is defined as the global inventory finance arrangement market, and based on a number of assumptions, it is estimated that the size of the market as of today (27th November 2022), in terms of revenue, is $48 billion[9].

Serviceable Obtainable MarketEdit

Here, the serviceable obtainable market (SOM) is defined as the Italy inventory finance arrangement market, and based on a number of assumptions, it is estimated that the size of the market as of today (27th November 2022), in terms of revenue, is $1.2 billion.

What's the business strategy of the company?Edit

Product developmentEdit

The price of the finance (i.e. the finance cost) is a key factor in the demand of the finance (and, therefore, the profitability of Supply@Me Capital). In other words, the lower the finance cost, the higher the finance demand, and vice versa. Consequently, we expect product development to be focused on just that (i.e. lowering the finance cost), as well as improving the accessibility of finance, in particular via the following main areas, in order of importance (from highest to lowest):

A suitably large inventory-related database and machine learningEdit

A key ingredient to lowering the finance cost is inventory-related data. That is to say, the more inventory-related data to which an inventory-finance provider has access, the lower the finance cost (and, ultimately, the higher the finance demand). Accordingly, we believe that building a suitably large database of inventory-related data is key for the success of a company in the inventory-finance space, and, therefore, that’s where Supply@Me Capital needs to focus its energy. Indeed, a study by the International Monetary Fund (IMF) detailed that "the absence of comprehensive trade finance data posed a significant hurdle ... to make informed, timely decisions".[10] For us, therefore, a key milestone is the hiring of a chief technology officer (CFO) and senior data scientist (i.e. someone who has around five years experience with Python or another similar programming language), which we estimate will cost the company around >£100,000 per year each.

Internet of thingsEdit

One key way to gather lots of useful information about inventory is to add sensors to the inventory and track the inventory over a communication network, such as the internet [i.e. via the Internet of things (IoT)[11]]. Indeed, the aforementioned IMF paper mentioned that the IoT will allow the real-time tracking of goods, which could become an important source of (big) data.[10]

Smart ContractsEdit

Another way to lower the finance cost is to execute events (and actions) according to the terms of a contract (or an agreement) automatically, via something called Smart Contracts[12].

Distributed ledger technologyEdit

Evidence suggests that recording inventory-related information (i.e. inventory finance transactions) on a distributed ledger[13], such as blockchain, will result in inventory-intensive companies financing their inventory much more efficiently[10][14], ultimately leading the companies to improve/maximise their profits[3]. Accordingly, for us, the implementation of distributed ledger technology is a key milestone.

Other types of financeEdit

We expect that once the company has captured a large enough share of the inventory-related finance market (say 10%), the company will then move to other, broader areas of finance, such as non-inventory-related assets (such as accounts receivables) and the business as whole (i.e. business loans and equity).

Sales and marketingEdit

As touched upon earlier in this report, we expect Supply@ME Capital to initially target Italy-incorporated, early-stage inventory-intensive companies.

The company has developed one of the first Shariah-compliant inventory finance platform, and, it, therefore, makes sense to target people who follow Shariah (i.e. Muslims). According to the 2016 World Islamic Banking Competitiveness Report, Saudi Arabia, Malaysia, United Arab Emirates, Kuwait, Qatar, and Turkey represented over 87% of the international Islamic banking assets.[15]

Accordingly, we imagine that once the company has captured a large enough share of its initial market (say 10%), the company will then move to other geographically markets (i.e. Saudi Arabia) and target audiences (i.e. Islamic inventory-intensive companies), with the aim of going global.

Who are the key members of the team?Edit

The company is led by the person who believes in the mission of the company the most: the creator of the company mission (i.e. Alessandro Zamboni). Between them, the members of the team have helped companies raise a significant amount of finance and build some of the world's most renowned digital platforms.

DirectorsEdit

Alessandro Zamboni – Chief Executive Officer and Executive Director

Alessandro is a director who specialises in the financial services industry and related strategic and digital models. Since 2008, he has been managing the delivery and the sales operations of a consulting company specialising in Regulatory & Internal Controls for Banks and Insurance Firms. He founded TAG, the former parent company of Supply@ME S.r.l., in 2014. He holds a BA degree in Economics from the University of Turin.

Albert Ganyushin – Independent Chairperson and Non-Executive Director

Albert was appointed as independent chairperson and a Non-Executive Director in 2022 following a long career in capital markets. Since 2017, he has served as Head of Capital Markets at Dr. Peters Group with responsibility for international institutional business, including investment management, capital markets, financing and investor relations. Prior to joining Dr. Peters Group, between 2010 and 2016, he worked in leadership roles in the listings business of NYSE Euronext Group after a career in investment banking that started with Deutsche Bank A.G. (London Branch) in 2000. He graduated with an MBA degree from London Business School in 2000 and began his professional career as a management consultant with Accenture in London in 1995.

Enrico Camerinelli – Independent Non-Executive Director

Mr. Camerinelli keeps abreast of market trends and business practices by taking an active part in projects launched by the United Nations Economic Commission for Europe, the World Bank, the World Trade Board, and the Council of Supply Chain Management Professionals. He regularly attends major industry events as invited guest speaker and writes on specialized magazines and papers. He holds an MSc in Electronic Engineering from Università degli Studi "La Sapienza", Rome, Italy.

David Bull – Independent Non-Executive Director

Mr. Bull, a Chartered Accountant, is a technology-driven experienced financial services professional with a banking and financial services digitisation mindset. He has held a number of senior board roles within banking, asset finance, treasury and credit management institutions, including several years as Chief Financial Accountant at The Bank of England, and is currently non-executive director of Epsion Capital Limited, an independent corporate advisory firm based in London. He holds a BSc (First Class) in Mathematics and Statistics from the University of Bradford.

Andrew Thomas – Independent Non-Executive Director

Andrew has over 20 years' experience in various business advisory roles and during this time has worked across the US, UK, EU and APAC regions, acquiring expertise of onshore and offshore fund structuring and oversight, particularly in relation to regulatory issues. He also has extensive experience in mitigating ESG risks while helping organisations to maximise ESG opportunities. He holds BA in History and Politics from the University of Exeter.

Dr. Thomas (Tom) James – Executive Director

Tom is an Executive Director, and the CIO, CEO and co-founder of the Trade Flow Funds and FinTech solutions. He has over 30 years of commercial expertise in the commodity and energy industry and is the business and system architect for this unique and innovative digitised trade finance solution for bulk physical commodity transactions. He has experience of senior regulated roles in financial institutions (including Bank of Tokyo Mitsubishi UFJ, Credit Agricole and Credit Lyonnais) and various trading firms including BHP Billiton, covering a full range of functional areas including trade finance, project finance, investment banking, supply chain/operations, derivatives, physical markets, and fund management. During his career he has operated in many countries in Africa, Europe, Middle East, and Asia Pacific. He has authored over nine books in the energy and commodity trading and risk management field and served as Chair Professor and Adjunct Professor at various universities around the world and is a former member of the United Nations FAO Commodity Risk Management Advisory Group, and a former Senior Energy Advisor to the United States Department of Defense (TFBSO). He holds a PhD in Practices for the Global Commodity Markets within the Functional Disciplines of Trading and Risk Management and a Masters in Energy Price Risk Management from Middlesex University London.

John Collis – Executive Director

John is an Executive Director, and is co-founder of the Trade Flow Funds and FinTech solution where he holds the position of Chief Risk Officer (CRO). As well as overseeing the development of the fund’s critical legal infrastructure and working with leading counsel on its enforceability, John has overseen the classification of the specialist intellectual property developed and acquired by TradeFlow and its licensing. John is a commercial lawyer with expertise in regulatory, compliance, structuring, and transactional matters. John operated his own law firm from 2003, specialising in international commercial work. John has written and lectured about the rule of law, Eurasia Economic Union, CSTO, and International Commercial Enforcement. Before becoming a lawyer, John worked for Ernst & Young, he was educated at Oxford University and is chairman of Hertford College RFC.

Senior managementEdit

Amy Benning – Chief Financial Officer

Amy gained Chartered Accountancy qualifications in New Zealand while working with KPMG on a range of clients across various industry sectors. On moving to the United Kingdom, Amy worked briefly with BP’s shipping arm, before moving to PwC’s London Capital Markets Team where she spent 12 years focusing on technical accounting, mergers and acquisitions and initial public offerings for a wide range of clients. In 2018, Amy moved to Alfa Financial Software Holdings plc, a developer and provider of software for the automotive leasing sector company with ordinary shares admitted to a Premium Listing and to trading on the Main Market. As Finance Director, Amy was responsible for the team managing accounting, reporting (internal & external), corporate governance, audit, systems, process improvement, controls and transactional accounting. Amy joined the Group in June 2021. She holds a BCA in Accountancy, a BSc in Genetics, Biochemistry and Molecular Biology and a post-graduate diploma in Professional Accounting from Victoria University of Wellington, New Zealand.

Stuart Nelson – Group Head of Enterprise Risk Management

Stuart is an experienced credit risk analyst, with global experience of assessing the risk of financing solutions across multiple asset classes. Having begun his career at JPMorgan in the EMEA Emerging Markets Team in 2000, he then spent almost two decades in leadership roles at S&P Global Ratings. During his time at S&P, he managed multiple teams across the European office network in London, Milan, Frankfurt, Madrid and Paris, focusing on the assessment of asset securitisation in all sectors, with oversight of ratings on securities of more than €50 billion equivalent over that period. From 2015, he concentrated his attention on the refinement and validation of risk methodologies across a global spectrum of asset classes. He joined the Group in 2020, where he currently monitors all aspects of the risk and operational functions. He holds a Masters in History from the University of Cambridge.

Alice Buxton – Chief People Officer

Alice is a human resources leader motivated to help businesses succeed by creating environments which enable individuals, teams and leaders to thrive. She has considerable experience in the Financial Services and FinTech industries. Most recently she built the Global Talent function at Greensill, helping the business grow its workforce from approx. 250 to over 1200 in multiple jurisdictions in just over 2 years. Previously she worked as an Executive Director in Goldman Sachs Human Capital Management Division, focusing on the EMEA Trading floor and Risk, Audit and Compliance teams attracting and developing high potential talent. Before this she worked in Talent Acquisition for Ernst and Young’s London office, recruiting for their risk and advisory business. Alice holds a BSc in Psychology, MSc in Human Resource Management and is a qualified corporate and executive coach.

Mark Kavanagh – Group Head of Operations and Transformation

Mark is an experienced Risk Leader with over 25 years in Credit & Risk functions. Before joining the Group, Mark worked for Greensill Capital as Head of Product Risk. Whilst there, he implemented Accounts Receivable policies and procedures, installed an AR platform, helped Greensill Capital expand territorially, and trained the Credit team on any new product offerings, acquisitions and integrations. Prior to that, he worked for GE Working Capital Solutions (the monetisation arm of General Electric group) for 15 years, heading up their European Credit Team, managing the auto scoring and decisioning system, and ensuring processes were safe and efficient.

Nicola Bonini – Group Head of Origination

Nicola has more than 20 years' experience in balance sheet lending and cashflow finance, gained during her time at some of the UK’s most prominent banking institutions. Previously, she was Vice President and Head of Commercial Finance at Bank Leumi (UK) plc, where she managed a portfolio of companies with turnover of up to £1bn. Before this, Nicola served as Executive Director at Falcon Group UK, where she joined the newly formed UK inventory finance team. Nicola has also held senior, high-profile business development and relationship management roles at major banks, including BNP Paribas, The Royal Bank of Scotland and Bank of Scotland Corporate. Nicola joined the Group in September 2021 to take a leading role in business development, client onboarding and retention. She holds a BA in Business Studies from the University of East London.

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

Most recent full-year resultsEdit

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 resultsEdit

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 resultsEdit

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?Edit

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?Edit

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.[16]
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)[17].
What's the estimated company peak market share? 1% We estimate that especially given the experienced, founder-led team 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)[18], 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.
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.[19] 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.[20]

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.[21] 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%.[22]
What proportion of the company lifecycle is represented by growth stage 2? 10% Research suggests 10%.[22]
What proportion of the company lifecycle is represented by growth stage 3? 20% Research suggests 20%.[22]
What proportion of the company lifecycle is represented by growth stage 4? 40% Research suggests 40%.[22]
Growth stage 1
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)[23], 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)[23], 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)[23], 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)[23], 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)[23], 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)[23], 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.
Growth stage 2
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)[23], 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)[23], 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)[23], 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)[23], 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)[23], 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)[23], 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.
Growth stage 3
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)[23], 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)[23], 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)[23], 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)[23], 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)[23], 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)[23], 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.
Growth stage 4
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)[23], 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)[23], 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)[23], 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)[23], 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)[23], 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)[23], 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?Edit

As with any investment, investing in Supply@ME Capital carries a level of risk. Overall, based on the Supply@ME Capital's adjusted beta (i.e. 4.61)[24], 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[25], 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.

The key risks can be found below. For us, currently, the biggest risk to the valuation of the company relates to the company being unable to secure a sufficient amount of inventory finance funders.

Risk factors specific and material to the groupEdit

  • The group is at the early stage of its development, has not generated consistent revenues from its operations to date and is not currently profitable.
  • If the group is unable to maintain or increase originations through the platform or if existing customers or inventory finance funders do not continue to participate on the platform, its business, results of operations, financial condition or prospects will be adversely affected.
  • If the scoring models and processes that the group uses contain errors or are otherwise ineffective, or if customer data is incorrect or becomes unavailable, the group’s business may suffer.
  • Any failure of the platform or the group's future platforms, software and technology infrastructure could materially adversely affect its business, results of operations, financial condition or prospects.
  • The group's ability to protect the confidential information of its customers and inventory finance funders may be adversely affected by cyber-attacks, computer viruses, physical or electronic break-ins or similar disruptions or faults with its systems.
  • The group may be unable to retain or hire appropriately skilled personnel required to support its operations.
  • The group’s success and future growth depend significantly on its successful marketing efforts, increasing its brand awareness, and its ability to attract new inventory finance funders and customers.
  • The supply chain financing market is competitive and evolving.
  • Unfavourable general economic conditions may have a negative impact on the results of operations, financial condition and prospects of the group.
  • The group may need additional financial resources to develop the platform for future success.
  • Uncertainties in the interpretation or application of, or changes in, IFRS or local GAAP could adversely affect the "derecognition treatment" for customers that comply with IFRS or local GAAP and accordingly reduce customers’ or inventory finance funders’ participation on the platform.
  • The ownership and use of intellectual property by the group may be challenged by third parties or otherwise disputed.

Risk factors specific and material to the ordinary sharesEdit

  • Shareholders’ interests may be diluted by future issues of shares.
  • Prospective investors and shareholders should be aware that there may be possible volatility in the price of the ordinary shares.
  • A standard listing affords shareholders a lower level of regulatory protection than a premium listing.
  • Dividend payments on the ordinary shares are not guaranteed, and the company does not intend to pay dividends for the foreseeable future.
  • The group is subject to complex taxation in multiple jurisdictions, which often requires subjective interpretation and determinations. As a result, the group could be subject to additional tax risks attributable to previous assessment periods.
  • Changes in tax law or the interpretation of tax law, or the expansion of the group’s business into jurisdictions with less favourable tax regimes, could increase the group’s effective tax rate and in turn adversely affect its business, results of operations, financial condition and prospects.
  • There can be no assurance that the company will be able to make returns to shareholders in a tax-efficient manner.

How much can I expect to make from an investment in the company?Edit

What's the expected return of an investment in the company?Edit

We estimate that the expected return of an investment in the company over the next five years is 411%, 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 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?Edit

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[26], 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.
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.
Probability of success (%) 60% Research suggests that a suitable rate for a company in this growth stage (i.e. stage 1) is 60%.
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 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%.
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 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%.
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 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%.
Other key inputs
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.[27] 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.
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[26], 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.
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.
Probability of success (%) 60% Research suggests that a suitable rate for a company in this growth stage (i.e. stage 1) is 60%.
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 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%.
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 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%.
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 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%.
Other key inputs
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.[28] 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 analysisEdit

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

AppendixEdit

Cost of equityEdit

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 approachEdit

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?Edit

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?Edit

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 £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.

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 analysisEdit

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 shareholdersEdit

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 patternsEdit

Economic links to cash flow patterns
Cash flow type Introduction Growth Shake out Mature Decline
Operating - + +/- + -
Investing - - +/- - +
Financing + + +/- - +/-

ReferencesEdit

  1. ↑ Here, inventory refers to the goods and materials that a business holds for the ultimate goal of resale, production or utilisation.
  2. ↑ 2.0 2.1 2.2 With the buyer having no obligation to sell back the inventory and the seller having no obligation to buy back the inventory, the arrangement here is different to a traditional inventory repurchase arrangement, where there is an obligation to sell-back/buy-back the inventory. If the buyer chooses not to sell back the inventory, then the original seller will need to buy the same inventory from another entity; similarly, if the seller chooses not to buy back the inventory, then the original buyer will need to sell the inventory to another entity (or hold onto it). We understand that while there is no obligation for the original buyer to sell back the inventory, the buyer is incentivised to sell back the inventory, because of a more attractive price (than if the buyer was to sell the inventory to another party) or to not sell it at all; similarly, the original seller is incentivised, because it will be logistically very expensive to replace inventory that has also be used (in the production of a final product).
  3. ↑ 3.0 3.1 3.2 https://www.sciencedirect.com/science/article/pii/S0929119914001606
  4. ↑ Huff, J. & Rogers, D. S. (2015) Funding the organization through supply chain finance: a longitudinal investigation. Supply Chain Forum: An International Journal, 16(3), 4-17.
  5. ↑ Typically, companies that are less than two years old find it particularly challenging to raise sufficient or any funds. The finance cost of the Supply@Me Capital type of finance is the highest, and, therefore, we expect the finance form to be used by those who are unable to use the other forms (i.e. those that are less than two years old).
  6. ↑ https://www.sciencedirect.com/science/article/pii/S0883902698000275#FN1
  7. ↑ It's expected that the finance will be returned (with a profit), but there's no legal obligation to do so.
  8. ↑ An inventory repurchase agreement, also known as a inventory repo, inventory RP, or inventory sale and repurchase agreement, is a form of short-term borrowing. The dealer sells inventory to investors and, by agreement between the two parties, buys it back shortly afterwards (e.g. 60 days), at a slightly higher price.
  9. ↑ https://www.pwc.co.uk/business-restructuring/pdf/working-capital-report.pdf
  10. ↑ 10.0 10.1 10.2 https://www.imf.org/-/media/Files/Publications/WP/2019/wpiea2019165-print-pdf.ashx
  11. ↑ The Internet of things (IoT) describes physical objects (or groups of such objects) with sensors, processing ability, software and other technologies that connect and exchange data with other devices and systems over the Internet or other communications networks.
  12. ↑ A smart contract is a computer program or a transaction protocol that is intended to automatically execute, control or document events and actions according to the terms of a contract or an agreement. The objectives of smart contracts are the reduction of need for trusted intermediators, arbitration costs, and fraud losses, as well as the reduction of malicious and accidental exceptions.
  13. ↑ A distributed ledger (also called a shared ledger or distributed ledger technology or DLT) is the consensus of replicated, shared, and synchronized digital data that is geographically spread (distributed) across many sites, countries, or institutions. In contrast to a centralized database, a distributed ledger does not require a central administrator, and consequently does not have a single (central) point-of-failure.
  14. ↑ https://www2.deloitte.com/content/dam/Deloitte/sg/Documents/finance-transformation/sea-ft-crunch-time-iv-blockchain.pdf
  15. ↑ World Islamic Banking Competitiveness Report 2013–14 EY Global Centre of Excellence, Bahrain.
  16. ↑ Stadler, Enduring Success, 3–5.
  17. ↑ https://www.macrotrends.net/countries/WLD/world/gdp-growth-rate
  18. ↑ http://escml.umd.edu/Papers/ObsCPMT.pdf
  19. ↑ 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
  20. ↑ Stef Hinfelaar et al.:, 2019.
  21. ↑ Dickinson, 2010.
  22. ↑ 22.0 22.1 22.2 22.3 http://escml.umd.edu/Papers/ObsCPMT.pdf
  23. ↑ 23.00 23.01 23.02 23.03 23.04 23.05 23.06 23.07 23.08 23.09 23.10 23.11 23.12 23.13 23.14 23.15 23.16 23.17 23.18 23.19 23.20 23.21 23.22 23.23 http://people.stern.nyu.edu/adamodar/pdfiles/papers/younggrowth.pdf
  24. ↑ Research shows that an investment has two main types of risks: 1) non-systematic and 2) systematic. Systematic risk is the risk related to the overall market, and non-systematic risk is the risk that's specific to an individual investment. Evidence shows that taking on non-systematic risk is inefficient, and it's, therefore, best to eliminate it; and in most cases, elimination is fairy easy to do [by holding a diversified portfolio of investments (i.e. around 15 investments)]. Accordingly, when assessing the riskiness of an investment, it’s best to look at the systematic risk only (i.e. ignore the non-systematic risk). A key measure of systematic risk is beta, and a main way to determine the riskiness of an investment is to compare the beta of the investment with the beta of the market, which is 1. For example, Supply@ME Capital's adjusted beta (5 years, monthly data) is 4.61, and is, accordingly, 561% above the market beta (of 1); assuming that a 'high' level of riskiness is 50% or more above the market beta, then the riskiness of investing in Supply@ME Captial is considered to be 'high' (561%>50%). For estimating an asset's beta, in terms of time period, and frequency of observations, the most common choice is five years of monthly data, yielding 60 observations. One study of U.S. stocks found support for five years of monthly data over alternatives. An argument can be made that the 2 years, weekly data can be especially appropriate in fast growing markets. 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.
  25. ↑ Officially, the company was formed on 1st March 2000 (i.e. almost 23 years ago).
  26. ↑ 26.0 26.1 Demirakos et al., 2010; Gleason et al., 2013
  27. ↑ https://www.newyorkfed.org/mediabrary/media/medialibrary/media/research/staff_reports/research_papers/9809.pdf
  28. ↑ https://www.newyorkfed.org/mediabrary/media/medialibrary/media/research/staff_reports/research_papers/9809.pdf
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