Future First Technologies Ltd: Upgrading Forecasts & Valuation on Asset Vision Guidance

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 address in this report. 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).

FY21 result better than forecast, incorporating guidance
Future First Technologies beat our forecasts for FY21 with Asset Vision the key driver of the better than expected result. We have upgraded our Asset Vision forecasts to reflect the company’s revenue and gross profit guidance provided in its investor presentation (1 Sept). With recent contract extensions such as that announced last month with Transport for New South Wales (announced 17 August), Asset Vision derived a large part of its revenues from an annual recurring revenue base over several year contracts. FFT is forecasting Asset Vision delivers revenues of $3.3m in FY22 rising to $12.3m in FY25. This was ahead of our forecasts and we have adjusted accordingly.

DCF valuation is $0.31/share (previously $0.24/share)
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 $0.31/share, fully diluted for share earnouts. On the current share count, the valuation is $0.35/share. Our valuation was previously $0.24/share.