K2fly Limited (ASX: K2F) is an ASX-listed technology company and consulting systems integrator engaged in solving problems for its clients primarily operating in asset intensive industries (Mining, Oil & Gas, Rail, Facilities Management, Water, Electricity, and Gas). The company supplies an excellent combination of people, products and strategic alliances (with global tech companies such as GE(USA), Esri (USA) and SAP (Germany), that are helping the businesses to digitally transform and achieve process improvement.
K2fly is focussed on generating high-margin SaaS business revenue and operates via three key business segments–
$1 million capital raised in Placement:
On 18 September 2019, K2fly announced to the market that it had received firm commitments from institutional and sophisticated investors to raise approximately $ 1,000,000 (before costs) via placement of 6,250,000 shares at an issue price of $ 0.16 per share. The issue price represented a discount of 5.9 % to K2F’s last closing price and a discount of 12.6% to the 30-day volume weighted average price (VWAP). The shares will be issued within the company’s existing 15% placement capacity; therefore, shareholder approval was not required. Also, a placement fee of 6% is payable on funds raised to Canary Capital Pty Ltd, which acted as the Lead Manager to the placement.
The funds raised from the placement will be directed towards implementation of the recently announced RCubed contracts, anticipated new contract wins and to deliver further sales growth for the business.
K2F’s RCubed Business Going Strong:
The RCubed SaaS-based Software solution was added to the company’s suite of SaaS-based offerings, which previously had only the Infoscope solution, which focuses on stakeholder engagement, spatial intelligence and offering clients a smarter way to manage land, deliver Environmental Social and Governance (ESG) obligations, risk & compliance.
The agreement was signed in early June 2019 when K2fly finalised the acquisition of South Africa-based Prodmark Pty Ltd and its associated entities, including the RCubed Resources and Reserve Reporting software.
RCubed supports different reporting codes, including:
- NI43101 and
across 5 key global stock exchanges being TSX, ASX, NYSE, LSE and JSE. The transaction involved AUD 450,000 in advance payment along with an allowance for retaining the key operating staff for the next three years (including performance incentives).
Since then, K2fly’s journey with RCubed has been impressive as the company onboarded its first French multinational client, Imerys SA, for the deployment of the RCubed solution across its mineral sand operations (80 locations across 25 countries). The implementation cost for the contract was more than AUD 150K in the 1st year with annual recurring revenues to follow thereafter.
More recently, K2fly reported winning a significant contract from Glencore Canada, a subsidiary of the Swiss multinational Glencore plc, for the implementation of RCubed solution across Glencore Canada’s reporting lines for its Zinc Resources and Reserves at 56 sites in 7 countries. (Contract implementation cost: AUD 250,000 in the first year with recurring revenues to follow with contract renewal annually).
The contract with Glencore Canada demonstrates the existing demand for the RCubed solution and highly prospective business opportunities concerning the same.
In addition, K2F also recently announced that Newcrest had signed a contract for the software and implementation of RCubed. To acquire new name clients of the calibre of Imerys, Glencore and Newcrest within a 3-month window was impressive indeed.
Suite of SaaS-Based Solutions:
The combined strength of Infoscope and RCubed has little or no competition in the market, which has in turn placed the company in a strong position when it comes to the Energy and Resources sector who may now conveniently fulfil their Environmental, Social and Governance (ESG) obligations, and maintain the social license to operate.
Recently, in its latest Investor Update released on 9 September 2019, K2fly reported that its Annual Recurring Revenue from the SaaS business has been growing at a CAGR of 140%. As per the company’s latest Q4 FY19 financial update, the total invoices raised for the three months ended 30 June 2019 (Q4 FY19) amounted to $ 1.49 million, up 52% over the prior corresponding period (PCP) with the total invoices raised for full year FY19 reaching $ 4,144,000, reflecting a growth of 61% over $ 2,574,000 reported in FY18.
More on K2fly’s Q4 FY19 results may be READ here. A snapshot of the company’s business performance is given below.
Current Client Base:
The K2fly client base has been expanding through all three of its business segments, and includes several substantial, asset-intensive companies.
K2fly has a market capitalisation of around AUD 13.56 million with ~ 75.35 million shares outstanding. On 20 September 2019, the K2F stock price settled the day’s trading at AUD 0.180.
In addition, K2F has delivered impressive positive returns of 38.46% Year-to-date, 50% in the last six months, and 5.88% in the last three months.
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