Ann: Patersons initiates research coverage, page-2

Great overview from Patersons in May...
(They gave it a Spec BUY)

http://www.kyckr.com/wp-content/uploads/2016/11/Patersons-Securities-Know-your-Kyckr-May-2017.pdf

Research Note

RESEARCH NOTE – PATERSONS SECURITIES LIMITED

KYCKR LIMITED
KNOW YOUR KYCKR

Investment Highlights

 Kyckr Limited (KYK) is focused on commercialising its business to
business Know Your Client (KYC) software products and services,
which aligns clients’ customers books with the most current
information available in the relevant business registries globally. KYK
has access to over 180 registries, giving it the competitive advantage
in terms of information depth. It has also proven its ability to secure
and increase recurring revenue via the agreement with Bank of
Ireland. The latter bodes well for the success of the large opportunity
evident in the Citigroup roll-out. Thus, we believe KYK is nearing an
inflection point in its commercialisation strategy and initiate with a
Speculative Buy recommendation.

 Product Differentiation:
The world of KYC compliance currently has very
little automation, KYK’s products and services automate the ‘cookie cutter’
tasks performed by expensive, error prone human resources and systems.
Its automated solutions can cleanse customer’s corporate books ensuring
that primary source information brings about a KYC compliant book, cross
checking with global registries. This step can highlight any KYC compliance
issues. Finally, the KYK Company Watch solution monitors relevant
registers for changes to its customers’ corporate books, informing their
customers of any changes of interest as part of their KYC obligations and
risk management interests.

 Current Opportunities:
We believe KYK currently has an extensive
opportunity pipeline, and is actively engaging with to financial services and
other relevant industries globally. To date, it has announced relationships
with Bank of Ireland, MYDATA, Elavon and Citigroup. KYK has shown a
history of increasing its revenue from engaged customers like Bank of
Ireland and we believe it can do so with greater returns for more global
customers such as those mentioned above and others, as they execute on
their opportunity pipeline. Revenue from Citigroup and MYDATA is
expected to be generated from late FY17 / early FY18.

 Market Overview: Global financial organisations currently spend on
average c.$60m each on KYC and compliance due diligence annually, with
only a small percentage of the cost related to software associated with the
KYC process. However, the growing size of compliance departments has
seen institutions look at software solutions to complement or replace
current manual procedures. While we still expect the average cost of
compliance to increase, we believe each dollar increment will allow the
institutions more utility and deeper compliance. The market for KYC and
Anti-Money Laundering (AML) software has grown from US$450m in 2010
to $720m in 2016. Additionally, the market is expected to grow at 17% year
on year until at least 2020, representing the market in which KYK directly
operates.

 Financial Overview: In the half year to December 2016, KYK generated
$0.58m in revenue and reported an EBITDA loss of $1.6m with a Net loss
of $1.9m. Revenue has subsequently increased, with $0.46m of revenue
generated in the March quarter. The current revenue run-rate is c.$2.0m a
year; with additional revenue opportunities set to come online from the
second half of 2017. Therefore, we expect c$1.5m in revenue for the full
year FY17, but expect a significant increase in revenue in FY18.

 Balance Sheet: As at 31 March 2017, KYK had cash on hand of $2.95m.
Currently, despite the Company generating revenue, it is still running at an
operating cash flow loss. The current corporate overheads (including staff
and admin costs) are $0.9m a quarter or $3.6m a year. Thus, at current
levels we believe KYK has sufficient capital runway for the next 12 months.

 This represents an introduction to the Company, its products and the
market in which it operates. We will look to provide full financial estimates
and a valuation post FY17 results

Full report in the link above.