Fast growing small caps such as iSignthis Ltd (ASX: ISX) are often trying to disrupt the way a current process is done. While their method may well be better than current practise, there is no certainty it will be taken up by the targeted industry. Inertia is a very powerful force.
iSignthis Ltd ISX (ASX) first came to my attention when I read its latest quarterly cash flow report. As you can see below the large jump in revenue from previous quarters is the stand out feature. As I wrote here revenue growth is not the only thing to look for but it does highlight if the company’s product is gaining traction.
From the 4C, it appears that for the last month of the quarter, iSignthis may have actually been cashflow positive, a big achievement for any small cap.
Source: iSignthis 4C report
The question you must be asking yourself by now is what does iSignthis do, and why such a weird name?
To be honest the first time I heard its name I was a bit turned off, but it aptly describes what iSignthis does. Rather than me struggling to describe what they do I suggest watching their clip below.
Now that you understand what iSignthis does, lets take a look at its CEO and his background. This interview was done after iSignthis came onto the ASX back in 2015.
Conclusion
I won’t sugarcoat this, iSignthis operates in a very competitive market. Regtech is one of the fastest growing tech sectors and for a very good reason. When you think about how many transactions are processed around the world everyday, you can start to understand the prize on offer.
I have included a list here of regtech companies that you may like to investigate. While they do not all operate in the same space as iSignthis, it gives you an idea on the scope of the sector.
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Disclosure and warning.
Please Note: None of the above should be considered investment advice. These are my own opinions based on a number of years market experience. Please do your own research and consult a qualified financial advisor if you wish to invest.
At the time of publication Alonzo owned shares in iSighthis. Price at time of publication 15.5 cents.
Update 22/6/2018 ISignthis Ltd (ISX) https://www.asx.com.au/asxpdf/20180622/pdf/43vz7084jkxxt4.pdf
Update 31/7/2018
Cashflow statement 4C
July 31, 2018 9:04 pm
Increased holdings at 21
My thoughts on ISX 4C
Firstly revenue growth is great.
Second expenses are crazy high because they are still working on sorting out problems with their system and spending on new infrastructure. They say the issue will take another 8 to 10 weeks to resolve.
Without these issues ISX should be cash flow positive. They are forecasting expenses to be around $1million less next quarter.
The next bad thing is that with the company reaching $10 million US in annual revenue all performance shares were granted so ISX now has over 1 billion shares!
At 20 cents that gives it a market cap of $200 million. So it’s not cheap at 20 times revenue but revenue is growing fast.
If the issues are temporary and revenue continues to grow then it’s all good. If not and directors dump shares for tax purposes look out below.
31/7/2019 4C This Quarterly absolutely blew my estimates away. I was expecting $3 million for the quarter in revenue and it delivered $6 million. They also had some delays this quarter so the outcome could have even been better. Not cheap for sure but still in the could be something special category.