Read on Twitter
2% position initiated in $TRIT
Quick summary of key points
Offers Kratos, a blockchain-enabled, commodity trading and trade finance digital platform
Management projects:
63% revenue CAGR and 64% EBTIDA CAGR from FY20-23e
70% EBITDA margin
11.7x FY21e EV/EBITDA
16.3x FY21e P/E
Quick summary of key points
Offers Kratos, a blockchain-enabled, commodity trading and trade finance digital platform
Management projects:
63% revenue CAGR and 64% EBTIDA CAGR from FY20-23e
70% EBITDA margin
11.7x FY21e EV/EBITDA
16.3x FY21e P/E
I highly recommend anyone interested dive into the management presentation here before initiating a position: https://ir.triterras.com/company-information/presentations
This is going to be a very long thread, as there are some major risks.
Triterras is based in Singapore, but is listed on the NASDAQ.
This is going to be a very long thread, as there are some major risks.
Triterras is based in Singapore, but is listed on the NASDAQ.
To understand Triterras, you have to understand trade finance, specifically for commodities.
Physical commodities are bought and sold internationally, and then shipped overseas. This is a LONG process that takes 150-180 days from the day of purchase to the day the buyer pays
Physical commodities are bought and sold internationally, and then shipped overseas. This is a LONG process that takes 150-180 days from the day of purchase to the day the buyer pays
Obviously sellers don't want to risk not being paid, so physical commodity traders normally step in to match buyers and sellers and facilitate the shipping process.
Traders typically pay 10-15% down, and borrow 85-90% from a lender to pay the seller.
Traders typically pay 10-15% down, and borrow 85-90% from a lender to pay the seller.
Problem: This is a paper-intensive process where fraud is rampant due to documentation discrepancies that arise from manual handling along the supply chain. Due to the above fraud and high capital reserve ratio required for trade finance, lenders are wary of lending <10M loans.
The WTO estimates traders face a $1.5 trillion annual shortfall of trade finance availability because lenders, who face the same costs on a 100M loan and a 5M loan, will only lend to their largest trading partners.
Triterras wants to dominate this <10M space.
Triterras wants to dominate this <10M space.
Before discussing how Kratos solves the above issues, it is crucial to know financing for international trade is a $40 trillion business projected to grow at a 4% CAGR through 2026. However, Triterras isn't joining this market. It is radically changing it.
Triterra's platform Kratos is built on the ethereum blockchain, enabling it to drastically reduce the instances of fraud in trade finance conducted on Kratos because all transactions are recorded on a shared digital ledger.
Fraud mitigation was one of the original reasons blockchain was developed, and Kratos is a near perfect use case for it.
Kratos eliminates the need for paper, and its decentralized nature virtually ensures the system won't experience any downtime or fail.
Kratos eliminates the need for paper, and its decentralized nature virtually ensures the system won't experience any downtime or fail.
Kratos charges 30bps for any goods traded (trade operations + risk management module), and 130bps for any amount financed (trade finance module). They partnered with Marsh to offer a credit insurance module in Sept., and a logistics module launched in Oct. but it is not monetized
In development, is a supply chain finance module (launch in Feb. 2021), which will allow them to tap into various parts of the supply chain and to authenticate documents at the source. This should have huge volumes as well.
There is 180M in cash on the BS to fund M&A as well.
There is 180M in cash on the BS to fund M&A as well.
Kratos uses Know Your Customer (KYC) identification, which is an extensive on-boarding process to ensure companies on the platform are legitimate.
10 lenders have been on-boarded with 17B in AUM, which is more than enough to cover 2022 numbers without adding any lenders.
10 lenders have been on-boarded with 17B in AUM, which is more than enough to cover 2022 numbers without adding any lenders.
More lenders are on the way, but this does provide a decent sense of security for those questioning the growth and profitability in management's projections.
One more thing to note, Triterra came public via a the SPAC Netfin, whose CEO is Rick Maurer (more on him later)
One more thing to note, Triterra came public via a the SPAC Netfin, whose CEO is Rick Maurer (more on him later)
Let's talk about management
Founder and CEO Srinivas Koneru has a bit of an interesting past that should be discussed
Founder and CEO Srinivas Koneru has a bit of an interesting past that should be discussed
Koneru was a co-founder (along with Rick Maurer) in Exxova, which is the IT services business mentioned in Koneru's company bio. His bio claims he exited in 2010, which is backed up by the Netfin registration doc here: https://www.sec.gov/Archives/edgar/data/1819876/000121390020024301/ff42020_netfinholdco.htm
Why does this matter? Well, Exxova has some horrible glassdoor reviews, all from after 2010, ( https://www.glassdoor.com/Overview/Working-at-Exxova-EI_IE344139.11,17.htm) and is no longer operating from what I can tell.
There was a major turnover in leadership in 2009, before Koneru's exit in 2010.( https://www.prweb.com/releases/exxova/july2009/prweb2705624.htm)
There was a major turnover in leadership in 2009, before Koneru's exit in 2010.( https://www.prweb.com/releases/exxova/july2009/prweb2705624.htm)
The one source I found which raises a red flag about this is a product announcement with a quote from Koneru in 2012: https://www.prweb.com/releases/2012/11/prweb10073778.htm
Also, there is no mention of Exxova directly in Koneru's bios anywhere, but rather that he grew the company substantially from 2005-2010.
Also, there is no mention of Exxova directly in Koneru's bios anywhere, but rather that he grew the company substantially from 2005-2010.
Furthermore, Koneru's next venture, Rhodium (a commodity trading platform who is largely responsible for helping Triterras get off the ground) was sued in Sept. for failing to pay $3.16M to Maybank. https://www.bloombergquint.com/markets/singapore-trader-rhodium-sued-by-maybank-for-3-million-payment
Netfin was going to merge with both Triterras and Rhodium, but axed the deal with Rhodium so there was no balance sheet exposure to commodities.
What to make of all of this?
Well, Koneru's past is at least a yellow flag, as is Maurer's relationship with Koneru.
What to make of all of this?
Well, Koneru's past is at least a yellow flag, as is Maurer's relationship with Koneru.
I am much less concerned about the Rhodium lawsuit than Exxova, as the lawsuit is relatively small.
CFO Alvin Tan has a very strong background with palm oil trading and spent 15 years at Cargill
COO John Galani came from Universal Mining Group (Delta Trading) and spent 10 years at Genesis Holdings
Both were at Rhodium since 2015, so the lawsuit does affect them.
COO John Galani came from Universal Mining Group (Delta Trading) and spent 10 years at Genesis Holdings
Both were at Rhodium since 2015, so the lawsuit does affect them.
Netfin CEO Rick Maurer has an extensive PE background,
and his only thing to note is the previous relationship with Koneru. Maurer and Koneru can have a relationship and still partner to take public a great company. It likely gives him confidence Koneru will run Triterra well.
and his only thing to note is the previous relationship with Koneru. Maurer and Koneru can have a relationship and still partner to take public a great company. It likely gives him confidence Koneru will run Triterra well.
The main issue is their prior venture (Exxova) ended poorly.
IMO, the lack of mention of Exxova by name in both of their bios I attribute to not wanting to associate your name with a company that went under, especially if they both left well before that happened.
IMO, the lack of mention of Exxova by name in both of their bios I attribute to not wanting to associate your name with a company that went under, especially if they both left well before that happened.
Further adding to my confidence is the reputable backgrounds of the COO and CFO, as well as the strength of their product offering.
From what I can find, there is no debating the strength of Kratos. My decision to invest is driven by the impact Kratos can have on trade finance.
From what I can find, there is no debating the strength of Kratos. My decision to invest is driven by the impact Kratos can have on trade finance.
At 11.7x FY21e EV/EBITDA vs. ~18x for comps with much lower growth rates, I believe the risks (namely management's past and maybe margin erosion from competitors) are baked in. If management executes, both value and growth investors should be interested at this price.
Long $TRIT
Long $TRIT
