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Revenues in 2021 grew an amazing 143% to CN$104 million despite lockdowns, supply chain issues and delays. The company expanded into new verticals, added an insurance product and importantly bought the Cubeler platform that runs its operations in order to roll it out in new countries. This all happened while remaining cash flow (ex-changes in working capital), free cash flow, and adjusted EBITDA positive. However, to grow even faster, the company needs cash to fund working capital.
2021 didn’t turn out according to plan due to the removal of Tenet (OTC:PKKFF) from NASDAQ and the long time it has taken to return. The stock has still not returned to NASDAQ and there is no timetable for that to happen, if at all. We have never seen this happen before. To recap — in an unusual move, NASDAQ allowed Tenet to list and trade on its exchange for about a month when the SEC turned around and decided it really needed more information. As a result, Tenet was delisted from NASDAQ and returned to the OTC where it still trades in the US. The uplisting was to be followed by a capital raise that in turn was needed to fund the company’s recently purchased Heartbeat insurance platform and the Canadian Business Hub. Without the raise there was no funding and no money to fund Heartbeat which was looking to be able to use $11 million. Heartbeat was then expected to add $11-15 million dollars in revenues with margins of 30-35% in 2021. According to its filing, the company now expects the revenues and profits from insurance expected in Q4 2021 to shift to Q2 2022. The launch of the Canadian Business Hub was also delayed by lack of capital. It was expected to be live in Canada by the end of 2021.
Tenet will be reporting its Q1 2022 results in the next two or three weeks. At that time, we expect the company to further discuss how it is going to raise cash and/or list on other exchanges in light of the NASDAQ delay. We also expect a guidance update based on the slippage in funds, as well as the lockdowns in China and how those might impact revenues and EBITDA going forward. We expect to adjust our forecasts then.
Tenet has lofty plans to expand globally and connect business hubs in many countries. These hubs will allow companies to trade with each other, find financing, sell products and services, and even communicate with each other via its business oriented social network. The company plans to invest heavily to bring this vision to fruition and we look forward to hearing its strategy in the coming weeks.
With CN$18.8 million on cash on hand and a fully diluted share count of 118.3 million this puts its US market cap at US$222 million and its enterprise value at US$207 million. Using company guidance of US$262 million for 2022 estimated revenues, the stock is trading at 0.8xs EV to sales versus its peers who now trade at 2.6 times. The valuations for the fintech space have come down hugely. We expect that current guidance could change, and given events have to happen to reach company guidance that have not yet happened we are using lower estimates. Using a revenue expectation of US$170 million, that yields an EV to Sales of 1.2 times 2022 estimated revenues.
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