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Spot on, antelope. As you say SAAS revenues take time to build and can then go exponential. That's why in order to optimise a return holders need to be patient. I hope AS isn't forced into making an early sale because of pressure from short-term traders who form a large part of the shareholder make-up of Tern. On top end sector multiples then it would mean a poor return. Waiting until late 2022 would probably mean a substantial uplift in valuation.
I am keen to see the DA results and, as you say, given they only switched to an SAAS revenue model about a year or so ago (I think) then some investors are not going to understand how that takes time to take off and will be disappointed. I am aware that pretty much all of the portfolio companies don't really like the spotlight and scrutiny that comes with a major investor having a public listing. So AS comes in for some unfair criticism.
Also, it's pretty much a given that Tom Winnifrith will scrutinise every word and complain about every rns put out by Tern to regulators regarding whether it is material or not. Unfair though it may be, I suspect AIM regulators are fearful of Winnifrith and who knows Tern might be impeded for this reason from putting out more announcements than they are otherwise would.
What investors need to know is how SAAS revenues are likely to grow in order to put a current and future value on DA and it's frustrating that we can't get that insight. We will over time although detail will be limited as DA publish abridged accounts. Short-term investor pressure makes it a more difficult task for Tern to wait to see if a significant uplift in DA value can be achieved from (over time) significant SAAS revenues. The reference to Q4 and 'handsome multiples' by AS won't help matters. It won't be popular but a buy and hold for say Q4 2022 exit is in my view a more realistic approach unless someone is skilled at trading the volatility. There will of course be significant fluctuations both up and down before then given Tern is really a traders share.
Woof, nice to see a sensible post. The possible valuation of DA is what excites everyone. But what it might be valued at now, on Tern's books, doesn't reflect what it's likely to sell for. Because the latter price would include goodwill, and most importantly, future potential. Assuming the tech is uniquely good, as statements from the likes of MS and Entrust imply, then what could such projections comprise? It's SAAS, which makes things doubly hard. You mention a need for contracts, but SAS sales are probably not contract based, and income from such sales grow exponentially and over time. When DA releases its results shortly, I'll bet many people will be disappointed because from an SAAS revenues point of view, it's early days.
The lack of insight as to the revenue split between contracts and SAAS sales is part of this irritating lack of transparency. It's even conceivable that there are no contracts to announce because all sales are SAAS, although I doubt it as I suspect KS is being white labelled.
I believe that those SAAS revenues will become very substantial indeed. And when DA is sold, the valuation will reflect this potential. The debate then is about DA's current valuation on Tern's books. Surely there's a logical disconnect if it's valued either on NAV or current earnings if everyone knows it'll be sold for far more than either of these.
Device Authority is still at too early a stage for selling imo. It's not profitable as otherwise it could be valued on an EBITDA multiple of 75 or more. Best guess is some advance on £2m revenues with their revised SAAS model. I say some because neither Tern or Device Authority have released contract news. Let's call DA's revenues £3m which is a 50% increase. The sector average for cybersecurity valuations is 9.3 x revenues. Let's call it £3m. So that produces a valuation for DA (for Tern) of £17.1m being 57% of £30m.
Add an extra amount for the partnerships and the IP but ultimately DA needs to start to announce contracts with decent cash figures for it to be sold for a significant sum.
https://ma-review.com/cyber-security-an-insight-into-the-sector/
https://finerva.com/report/cybersecurity-2021-valuation-multiples/
Albert Sisto comes into a lot of stick for not releasing a lot of information but I believe it is f Darren Antill who wants to progress things away from the scrutiny of public markets.
Tern is very hard to value as things are so opaque. The one holding we can value is Wyld. If DA is valued ( based on a premium to industry valuation metrics) at say £30m then add in £20m for the others holdings then the £60m current valuation for Tern is about right or at a slight premium until Tern give more transparency on revenues for all the portfolio holdings.
Fundamental VR were picking up some contracts with decent sums attached but these seem to have dried up as well.
InVMA - good solid company. Revenues? In profit. Tern just do not give out enough information for a sensible valuation to be made.
Talking Medicines is early stage and pre-revenue. It's had some good investment so they need to start picking up some contracts to highlight the business model works.
Wyld - disappointed with the application for nursing homes but it's the the satellite opportunity that will drive the valuation.
I welcome others making serious attempts to value (either higher or lower) a very opaque company. Let's not ramp or deramp. There is too much of that for this stock. Do we rely on industry metrics (revenues) for valuations or are there special factors for DA that mean it should be valued more highly?
DA being the glue of IOT security and 'awesome' are pleasing words to hear about DA but that status needs to lead to contracts and enhanced revenues.
Tern holders need to know if the revenues are growing from all the partnerships announced. We won't get that information so a guess at Tern's valuation is all that can be done for now.
I believe the valuation for Tern is about right until there is some update that one or more of the portfolio companies is getting some serious revenue growth. More transparency and portfolio updates are needed and about one every quarter. Old nav valuations are silly but so are the extreme end valuations that ignore the sector valuation metrics. They may come b