Spenda Ltd (Previously Cirralto) - SaaS Platform Simplifies SME Finance
Spenda Ltd (previously Cirralto)
SaaS platform simplifies SME finance
Spenda Ltd (ASX:SPX), previously known as Cirralto (ASX:CRO), has a long history in business financial services software development. The Spenda platform, launched in February 2020, has developed to become an integrated applications, payments and lending platform. SPX is reporting a large pipeline of customer leads for the software and services delivered through Spenda as Australia opens post-COVID lockdowns. Businesses are looking to simplify processes and payments systems, with Spenda offering a competitive platform integrated with major accounting and payments providers. SPX launched the full payment applications suite on Spenda in May 2021. This was a key event in a transformative period when SPX signed key agreements with Mastercard and Visa, completed the acquisition of three complementary software and lending service providers, and saw customer numbers more than double to 494 Spenda licences. The company is now launching a range of non-bank lending offers currently funded via equity prior to the imminent announcement of a debt warehouse to fund expansion in business lending products aimed at transaction facilitation. SPX provides a platform that simplifies end-to-end transactions for businesses and provides transparency to allow secure lending offers to expand.
Business model
Spenda Ltd operates a Software-as-a-Service (SaaS) model for licensing of the components of the Spenda platform. Businesses have several ways to take up the service with the ability to choose which modules will be turned on – point of sale, inventory management, e- commerce, procurement and service management. Payments services are then available for wholesale and retail B2B and B2C use. Utilising the ledger-to-ledger dataset provided by these transactions, SPX can securely offer on-demand lending, pay later, early settlement discounts and trade finance to its business customers to enable further revenue growth. Visa’s BPSP (Business Payments Solutions Provider) and Mastercard’s BPA (Business Payment Aggregator) agreements upgrade the company’s ability to acquire customers and improve margins.
Pipeline and funding to drive growth – positive Q2
Spenda’s platform is now enabled to deliver business services and add customers efficiently and quickly. The company intends to ramp up customer acquisition into 2022 and, with the intended launch of a debt warehouse, expand the lending offer as payment services customer numbers rise. SPX is currently focusing on agribusiness transactions (both domestic and international), trade and cashflow financing, and technology-related businesses where platform standardisation offers an entry. Q2 FY22 results show strong growth with a client loan book of $8.1m yielding an average 18.7% to December 31. SPX lent $25.5m and was repaid $23.5m. Loans were primarily sourced via an agricultural trade transaction, new farm funding arrangements, the eBev wholesale alcohol supply platform and the Whola wholesale clothing platform.
Valuation is at an early stage with upside from results
The fintech sector is currently a diverse group with different niche focuses and stages of corporate development. Similar listed early-stage companies include Douugh (ASX:DOU), Earlypay (ASX:EPY) and Ioupay (ASX:IOU). We feel Spenda is likely to see price/book multiple expansion from the current 1.2x as revenues grow in the next 12 months. Quarterly results will be a key information point for this process.
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