So who are Supply@Me Capital (LSE:SYME) and why all the excitement back in August? This stock had a great summer, jumping from 0.05p to 0.74p. Not bad and it has become the darling of small cap investors ever since. But will it go higher?
Supply@Me is a fintech stock which has set out to be an inventory data monitoring business. It wants to make it easier for companies to manage data, be it in the ERP space, banking, smart sensors integration, or enhancing the digital workplace. These are a LOT of bases for a small company to be covering. The ERP market alone is massive.
Supply@Me Capital inventory monetisation
Where it might have an edge is in what it calls ‘inventory monetisation.’ It is trying to pioneer a securitisation scheme based on Special Purpose Vehicles that is seeking to create a new asset class, called inventory.
Inventory has value and, hypothetically, it could be securitised. At the end of the day, it is not a million miles away from the commodities market, which started out with farmers having inventory (e.g. crops) and futures contracts being used to turn that inventory (or future inventory) into something that can be traded.
Ultimately, a company can have costly, unused inventory on its premises that it might want to find another buyer for. We are living in a world where supply chains are becoming more efficient all the time, and ERP is playing a bigger role in this.
Supply@Me has an online platform that aims to leverage blockchain and innovative legal structures to help companies to source and move inventory with a much higher level of confidence. The company says its target client is a business with around €100m in revenue and that it has an average target size for each inventory monetisation of €15m.
The aim is to get banks and other firms to recommend the Supple@Me service to their end customers. At the end of June it confirmed that it has 97 such customers. In the interim results in March, it admitted that COVID had slowed expansion projections, which, given the overall global disruption to supply chains, comes as no surprise.
On the numbers, Supply@Me Capitalsaw turnover in the 12 months to 31 March of £416,000, up from £241,000 the previous year. It had a profit of £26,000. This is a small, small fintech.
A captive banking arrangement
Despite the coronavirus, Supply@Me is making headway. It says it has a new funding agreement with a captive bank.
“Supply@Me needs funders in order to monetise inventory,” explained Alessandro Zamboni, CEO of Supple@Me. “The demand pipeline is huge and we have been working on a strategic project to ensure unlimited funds.”
The new bank creates a funding machine for the new platform. It does not affect the balance sheet of the company but creates instead a funding partner to finance all the issuances from Supply@Me. This removes previous funding issues that investors have been historically concerned about. Supply@Me will remain independent and could potentially offer a new securitisation round, with the captive bank committed to subscribe to all the outstanding issuances, acting like a lender of last resort.
The bank can support Supply@Me Capital not only for its Italian client portfolio, but for international clients as well.
Since the big surge in August, the Supply@Me share price has come off slightly, shifting from its 52 week high of 1.1p to today’s 0.52. Note, however, that the 52 week high was back in March. Supply@Me shares fell off a cliff during the early stages of the pandemic, but seem to have rallied as activity has returned to European supply chains.
One to keep an eye on, as it is an innovative concept and we can see how this could readily plug into the existing ERP infrastructure. Hopefully we will hear more on this captive banking arrangement in weeks to come.