Future First Technologies Ltd: Adjusting for Additional Shares from Rights Issue

Business model
FFT generates its revenue from its fully-consolidated entities, Asset Vision and farmbuy.com. In the near term, Asset Vision’s revenues and earnings will be the key driver of earnings and profitability. Asset Vision operates a SaaS model, generating enterprise contracts with corporates and government to digitally manage assets. Its contracts are usually 3-5 years in duration. Asset Vision’s business began with state and local government responsible road authorities and their road maintenance contractors, with its cloud-based asset management platform delivering a simpler way to manage road inspections, schedule maintenance and capital works and optimising the authorities’ asset register. The platform now spans assets across rail, buildings, utilities and parks and open spaces. The company has provided guidance on Asset Vision’s revenues and gross profit out to FY25, which we have applied to our forecasts. Farmbuy.com delivers an online marketplace for rural property agencies, buyers and sellers, attracting more than 1m unique visitors a year and on track to deliver an annualised revenue run-rate of more than $1m by December 2021. Fambuy.com recently launched a sister website, goregional.com.au to help Australians make the move to regional areas, showcasing 12,000+ regional properties for sale or lease and integrating with seek.com.au (ASX:SEK) to display 70,000+ regional jobs and has partnered with FarmGate Auctions to launch Farmbuy Livestock (announced 18 August).

Rights issue to deliver working capital, farmbuy.com reviewed
Future First Technologies is seeking to raise $6.4m in a one-for-three, non-renounceable rights issue, the proceeds of which will be used for working capital, sales and marketing and integration expenditure within Asset Vision/EagleSoft as well as pursue potential future strategic acquisitions. The company has also announced a formal strategic review of the farmbuy.com assets to assess a range of commercial and restructuring operations to unlock value in that business.

DCF valuation is $155m (previously $149m)
We use the discounted cashflow methodology to value FFT using a WACC of 14.5% (beta 1.9, terminal growth rate of 2.2%) and this derives an equity value of $155m or $0.24/share, fully diluted for share earnouts. On the current share count, the valuation is $0.27/share. Our valuation was previously $0.31/share due to fewer shares on issue pre rights issue. Within our base case valuation, Asset Vision accounts for $0.232/share, farmbuy.com $0.047/share and corporate ($0.046/share).