Kyckr Ltd (ASX: KYK) is a reg-tech company focussing on KYC and AML compliance that acts as a source of intelligence on companies. They cover over 170m organisations, and their solution ensures that information is completely accurate when clients are onboarded. The way they access the data is through company registries, databases and searches, which are then uploaded to one database that Kyckr can sell to clients.
Kyckr has been on a tear after Wisetech bought a 19.6% stake at 6.6c/share
One benefit of Kyckr’s model is the company’s SAAS style revenue. The company can continually develop its product offering, and will have more money to invest in the platform as more revenue comes in. This enables Kyckr to continually improve it’s offering by connecting with more databases and getting more data on companies. Profit margins are also very high over the long term, because variable costs are low which results in most revenue flowing straight through to the bottom line. SAAS companies often take a long time to get going but have high margins when they are established, which is why investors like them. The company can also help ensure that new clients onboarded are actually registered. Many of their clients were providing services to bankrupt companies that would never be repaid, and this solution would help those companies avoid that outcome as soon as it is known the company is liquidating.
The main disadvantage with Kyckr is the fact that their value proposition is not as hard to replicate as it is for most other SAAS companies. This means that the company could easily face increased competition in the future, which is something investors should be aware of. The company is also burning through around a tenth of their market capitalisation every year, so they will need to ensure good sales execution and keep the share price up to stop the positions of existing investors being diluted.
This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)
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