What is the company?
BigTinCan (ASX:BTH) is a fast-growing company in the enterprise content management software space. The Boston and Sydney headquartered company sells software largely into the US market and specifically to companies that have large sales forces. BigTinCan’s sales enablement software distributes the most relevant sales and learning content, freeing-up sales representative time, boosting their overall productivity, and improving sales conversion. The software sits in the cloud and is designed specifically for mobile environments. It facilitates collaboration amongst sales representatives, while bringing machine learning and artificial intelligence (AI) capabilities to their clients’ sales and learning content. How long have you held the stock?
We first invested in BigTinCan in September 2017 and have subsequently added to our position. What do you like about it?
BigTinCan has strong organic growth, expanding its annualised recurring revenue (ARR) by 41% to $15.3 million in the 30 June 2018 year. We like BigTinCan’s software-as-service (SaaS) subscription model, which has a high level of recurring and predictable revenue. The platform is highly scalable and has a strong emphasis on mobile technology and AI, which are themes investors have difficulty gaining exposure to on the ASX. We also like BigTinCan’s sophisticated approach to its own sales, utilising both a direct sales force and channel partners, like mobile giants AT&T and Verizon. How is it better than its competitors?
The leading competitor in sales enablement software is a US company called Seismic, which saw 106% growth in the June Quarter 2018. We are also closely watching Belgium company Showpad, which expects revenue growth of 100% in 2018. With both these competitors being privately owned, it’s difficult to get a clear picture of this market. However, we do appreciate this is a fast-growing software category. The sales enablement solution category is expected to see considerable growth in coming years. It is currently estimated to be a US$780 million market, and is expected to be worth US$5 billion by 2021, according to Aragon Research. We view industry consolidation as a positive signal with Seismic, Showpad, and BigTinCan either acquiring competitors and/or moving into the closely adjacent sales learning space. What do you like about its management?
We like to invest in founder-led companies, with BigTinCan having significant management share ownership. We also appreciate that the company has cash flow breakeven in its sights, with cash burn being manageable within current resources. What is your target price?
We believe 45 cents is a fair price target for BigTinCan today, based upon conservative enterprise values to sales metrics compared with global SaaS peers. At what point would you sell it?
We would never shy away from crystalising gains but believe BigTinCan has a strong runway to grow its business in 2019 and 2020, organically and inorganically. How much has it added to your overall portfolio over the last 12 months?
We have not held BigTinCan for the full 12-month period to 30 June 2018, but the stock contributed 8 basis points towards overall portfolio performance, appreciating 83.3% since our initial investment. We have added to our position recently. Where do you see value?
We see value being crystallised in a number of ways. The company is trading on a FY19 Enterprise Value/Revenue multiple of around 2.5x, which is a significant discount to listed SaaS peers today, which can close in time. This company was only listed on the ASX in March 2017 and given its micro-cap status of ~$85 million capitalisation and limited sell side research coverage, it’s still not on many investor radars. We believe that with continued growth in ARR, in combination with targeted acquisitions, the BigTinCan share price will be re-rated. We also believe crossing into cash flow breakeven status will create additional investor interest in this name. Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regard to your circumstances.
BTH Price at posting:
33.0¢ Sentiment: Buy Disclosure: Held
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