We’re all sick of the word “blockchain”. There’s been a whole lot of cash (and hot air) expended on something that hasn’t really moved the needle in financial services.
As the parlance goes, it’s the quiet ones you need to watch; Supply@ME Capital PLC (LSE: SYME) has done the unthinkable and produced a blockchain-powered offering that could truly upend capital financing. The platform matches companies in need of cash with investors looking for solid returns, and in the middle is a securitization scheme with distributed ledger technology at its core. The best bit is they have done it without much fanfare, creating an unmissable opportunity for investors.
The process works via a “true sale” of a client company’s stock inventory to special purpose vehicles (SPV) incorporated by SYME. The SPVs are created from the inventory and form part of a securitization transaction for the client companies hunting for cash. SYME takes a slice of around 7% on each transaction, while the client company buys its own inventory back over time. A diversification of assets and fresh yield is on the table for investors, while for client companies, it’s immediate liquidity that allows them to buy more stock, warehousing, land, whatever they need to grow. The inventory remains in the client’s warehouse the entire time. It is all logged on the ledger, which instantly notifies of any change and protects against loss.
M&A target.
Unlike others in the digital monetization space, SYME is a service provider, not a lender, and there is no risk to its own balance sheet. It is not bound by financial regulation like banks or loan companies. Businesses from all walks have been playing around with blockchain for several years, with little success. Digital currencies went out of fashion, then came around again in the form of tokens and central bank currencies. While all that was happening, SYME perfected its offering and came to market with a tamper-resistant, unchangeable ledger. The proposition is extremely simple, and is a genuine reason to get excited about blockchain. Security and reassurance for all parties in a digital monetization securitization chain are enormously valuable, SYME is an obvious M&A target for incumbent lenders in the coming years.
AIM performance.
Now we’ve bored you with the technological bits, let’s get to why SYME is such a captivating bet; the price. SYME set the AIM on fire in August, soaring past £1.25 during the height of the coronavirus lockdown and leaping 1100% in a single day. Things have flattened since then, but the potential for more rolling lockdowns across Europe over the busy Christmas period has manufacturers in a flap. Down at £0.35 it’s a no brainer. Watch SYME hit £10.05-£10.85 inside six months.
SYME has doubled its client base, trebled the amount of assets under management held by its clients, and has pushed into two jurisdictions that will see it blast off in Q12021. Ultimately, global market swings have done little to blow SYME off course, if anything the business exceeded expectations through the pandemic. There is little to suggest we won’t see a repeat in 2021.
This is a low-cost offering; the company has very few overheads being so technologically-driven. The prospect of repeat business is strong, and the technology is so straightforward there are few worries about scale. It can cater to companies of almost any size, and while at the moment it is making itself busy hoovering up SME business there is nothing stopping SYME working with multinationals.
The current roster of client companies is healthy, and each went through a strict onboarding process to ascertain the terms of how they will buy back their inventories. An emphasis on emerging markets and established financial hubs ensures the firm is entrenched in busy jurisdictions; London, the Middle East and US.
Oil and Gas.
Of everything it has achieved this year, shifting operations to London, the IPO, launching in the US, the decision to create a Shari’a compliant product is perhaps the shrewdest decision of all, and goes to brave, bold leadership decisions. A new wave of financial regulation is being drafted up to strengthen the Middle East’s attractiveness as a region following several years of scandals. Traditional lenders are predicted to pull back and employ heightened risk strategies as they seek to reduce the threat of fines and sanctions, opening the door for alternative capital monetization solutions to serve the market.
Aside from the obvious values of partnering with banks in the region, becoming a recognized service provider to the Middle East’s oil and gas sector would fire SYME into the big leagues.
So finally, a blockchain solution worth more than headlines and water cooler chatter. SYME has the lot; an alluring pipeline, low-cost, high value services, and the kind of product that flies where others sag during market downturns. Our 12-month valuation of SYME is between £10.35 and £11.35.
