9 Spokes International Ltd’s (ASX:9SP) smart dashboard enables businesses to connect their software to one dynamic interface - giving them a single, 360-view across everything from finance and marketing to HR and inventory.
Research and advisory firm MST Access believes that the implications of COVID-19 have further validated 9Spokes’ proposition and make the company more relevant than ever before.
The following is an extract from MST Access’ initiation report:
Lining up the ducks
9Spokes was perhaps before its time when it originated in 2012. Its vision then as it is now was to bring a big business edge to all business, especially SMEs. Put simply, 9Spokes offers modern businesses a management app that brings meaningful data together across a business, its apps, and its banks. Whilst it has perhaps taken a while to get here, we believe that 9Spokes now has the right technology and right partners to enact this vision and over the next 12 months derive more meaningful revenue.
Good for SMEs but even better for providers
The data analysis provided by the 9Spokes technology platform should be very useful to SMEs but ultimately, we believe that its greater commercial application will be from those who service this market. In the beginning this has seen interest from major banks (including OCBC, Bank of New Zealand and Bank of America) and more recently by Visa. In time, other providers outside financial providers may also become partners with the company.
COVID-19 impact is an opportunity for investors
9Spokes path to cashflow breakeven was disrupted by COVID-19, leading to a slowing in sales. Now with a sizeable cash balance which provides an adequate runway for economic recovery postpandemic, the stock has not rallied alongside other COVID recovery stories. It has recently re-platformed its products on Microsoft Azure, launched an auto provisioning tool to assist new customer growth by allowing banks to automatically enrol customers, and expanded its product offerings, with another product set to launch shortly.
We value 9Spokes at A$0.05 probability weighting the DCFs of each of our base, bull and bear case scenarios where we project what the company could be valued at in five years’ time, then discount back. Our DCFs use a WACC of 9.5% referencing peer multiples to validate for reasonableness.
We also note that there are considerable risks to this valuation which are highlighted elsewhere in our risk section. Most importantly whilst the addressable market for 9Spokes is very large, there is considerable execution risks particularly given the small start-up nature of the company currently.
9Spokes is offering a smart app for modern businesses and are guided by the belief that ‘data is knowledge is power’. The 9 Spokes smart dashboard enables SMEs to connect their software to one dynamic interface - giving them a single, 360-view across everything from finance and marketing to HR and inventory to help business reach their goals. Put simply, 9Spokes transform business data into the sharp insights that help steer business decision-making.
The 9Spokes app offers value not only to the SME’s, but also their bank and app partners. 9Spokes recently completed a $10M two-tranche placement to advance platform enhancements, which means that they are now fully funded for two years based on current operations.
9Spokes have also established strong corporate partnerships with Visa (NYSE:V), Microsoft and Fundation, and bank partnerships with Bank of America (NYSE:BAC), Bank of New Zealand, and OCBC, which place 9Spokes in a strong position to achieve their goal of becoming a scalable business-to-business (B2B) software platform. The value of 9Spokes’ distribution model and its partnerships with Visa, Fundation, Microsoft, and financial institutions is in the ability to grow the Group's reach globally, to accelerate the sales pipeline and, ultimately, drive top-line revenue.
The implications of COVID-19 have also further validated 9Spokes proposition and make the company more relevant than ever before. The data and insights that are core to the platform are a foundational bridge between banking and SMB performance. The pandemic-driven change to the way businesses operate coincides with profound changes to lending practices – driven by neo banks and new lending platforms. By adapting to the change caused by the pandemic and focusing on underscoring a real gap in the market, 9Spokes continue to validate their investment of building a bank grade ecosystem. The banking and strategic partners that 9Spokes has established over the past 18 months are critical to this.