9 Spokes (ASX: 9SP) has developed a SaaS application platform designed for SMEs. The platform offers third-party applications and a central dashboard which businesses may use to monitor associated services and business performance.
9 Spokes also provide enterprise channel clients tailored versions of the platform so they may offer it to their customers. Channel partners include Barclays Bank (UK), Suncorp Group (ANZ), and Deloitte (Aus & UK).
Following a $25m IPO, the company made its ASX debut in June 2016. Since its float, the stock has traded between a low of $0.125, and a high of $0.21. In this time, 9SP has:
- Released its “Direct” platform in the UK
- Launched tailored dashboard platforms for Deloitte (UK), Barclays and Suncorp
- Seen a notable increase in user adoption and activity
- Entered into advanced discussions with numerous prospective channel partners, including a major North American bank
- Announced plans to enter the US market via its “Direct” platform
- Secured contracts providing a minimum recurring revenue of NZ$3m per annum for 6 years
The company recently reported cash receipts of NZ$1.4m for the quarter ending March 31, 2017.
Foster Stockbroking recently published an updated research report for 9SP.
Citing the upcoming national rollout of Barclays’ platform, and an increase in marketing campaigns over the coming weeks, the analyst believes overall user adoption is set to increase.
The broker expects Barclays may sign 20,000 clients to provide a catalyst for adoption growth. They are also predicting a total of 175,000 users by mid–2019, but have noted difficulties in providing an accurate forecast.
One of the primary growth prospects for 9 Spokes highlighted by Foster Stockbroking is the company’s business development pipeline across existing and new geographies. This includes the US where 9SP’s “Direct” platform is supporting efforts.
The broker maintains an optimistic outlook that additional contract wins may materialise within 3–6 months and provide terms more favourable than the Barclays contract. In these circumstances, the analyst believes 9 Spoke’s addressable market could increase from 2m subscribers to 6m.
In its valuation, Foster has noted the company’s previous cash outflow forecasts were conservative, while also assuming 10% penetration among Barclays’ SME clients (with 3 apps each). Other contracts are modelled at the bottom end of the range, and there is no provision for new channel partners.
The broker maintains a buy recommendation on 9SP with a valuation of $0.47.
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