That’s equivalent to 60 year-old Altron’s current market cap, yet Suppple has only been trading a few months. From Moneyweb.
South Africa has had its share of tech successes on the global stage. Mark Shuttleworth’s sale of Thawte Consulting to VeriSign in 1999 for R3.5 billion, then worth about $575 million, comes to mind. Today, that would be equivalent to about $1 billion (R18 billion).
We might throw Tesla founder Elon Musk into the mix, however queasy he is about his South African roots.
Another area where SA appears to lead the world is using tech to facilitate engagement between government and citizens. We saw this during Covid when GovChat (part-owned by Capital Appreciation) allowed millions of South Africans to apply for social relief grants and receive medical test results from laboratories.
The founders of GovChat, Professor Eldrid Jordaan and Goitseone Konopi, have since moved on from GovChat, and in 2022 formed Suppple as a software-as-a-service (SaaS) company which was listed last week on the Luxembourg Stock Exchange at around £2 (R48) a share – giving it a market valuation of close to £200 million (R4.8 billion).
That’s roughly the same market cap as Altron, a company that has a 60-year trading history.
That seems an astonishingly rich valuation for a company with revenue just shy of R900 000 since trading started in November 2023.
Jordaan concedes the valuation may seem inexplicable for those taking a historical rather than a forward look at the numbers. The prospectus explains that the shares are valued at 7.5 times projected sales over the next five years, and that investors in tech tend to place high emphasis on future earnings potential.
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“The 7.5x multiple is often used as a benchmark in the technology sector, reflecting the industry’s unique characteristics. Investors in the sector are accustomed to this metric,” says the prospectus.
There’s nothing particularly unique about software catering to government-citizen engagement, but Suppple believes it is way ahead of the competition – even those IT titans who have attempted to make inroads into this space – with stats unrivalled anywhere in the world, as GovChat clocked 9.5 million active users just a few years after the platform was created.
Says Jordaan: “When it comes to valuations, you must compare apples with apples. Suppple is not a South African company. We are headquartered in the UK though our operational team is based in SA.
“For valuation purposes, we are probably closer to the likes of Meta or Google (Alphabet). We had independent valuators [that] gave us double the valuation we are going for, but we chose a more conservative approach. Our valuation comes from our existing contracts plus our business pipeline.”
Jordaan points out that WhatsApp was acquired by Meta (then Facebook) in 2014 for about $20 billion, without a credible business model in place.
“SA companies are not recognised overseas for tech. Hopefully, the world will understand that innovation coming out of SA is as good as Silicon Valley.”
Jordaan says the Luxembourg Stock Exchange has a deserved reputation for attracting innovative companies. “That’s one of the reasons we chose this exchange. It gives us access to cheaper capital than is available in SA, and gives us an international profile that we need for the type of business we are in.”
Muscle
Suppple has developed a ‘no-code chatbot’ and data platform, backed by AI, that enables government and businesses to easily build and deploy chatbots for interactive conversations with citizens and customers.
To better understand the company’s valuation, Jordaan points to the number of existing contracts and the business pipeline:
- The Consumer Goods Council of South Africa and GS1, where Suppple’s software is able to verify 500 billion products across the supply chain, helping to reduce fraud and counterfeit goods;
- US-based call centre provider Resolv, where Suppple’s software is being used for point calling, skip tracing, collections, and customer service solutions utilising chatbots;
- The African Civic Engagement Academy, a US-funded online training programme for mid-career civil society and public leaders in sub-Saharan Africa;
- The Dakar city government in Senegal, where Suppple’s tools are used for social welfare management and distribution; and
- Kenya, where it is providing services to citizens of the Nairobi and Mombasa county governments.
Jordaan adds that the company is about to release an AI-powered healthcare solution in Cairo later this month, and will make this available to African Union members thereafter.
Scope
Revenue may be tiny today, but it won’t remain that way for long, according to Jordaan and his advisory team. The company was profitable from the first day of trading, with a gross margin of 85%. The entire team is 27-strong, but that will grow as the business scales. The listing will allow the company to raise £10 million (R240 million) to expand into new markets.
The largest shareholders are the founders, Jordaan (52%), Konopi (34.1%), and MSM Properties (6%). Suppple will have to increase its free float to around 25% to meet Luxembourg’s listing requirements either through the sale of existing shares or dilution through the issue of new ones.
Jordaan says discussions are underway with the Industrial Development Corporation (IDC) to finance future capital growth needs, as well as the Public Investment Corporation (PIC) as a potential shareholder.
There is huge and growing demand for better data, better analytics and better interaction with citizens, allowing for democracy to flower between elections held every four years.
Government departments have huge databases of information that rarely connect with each other.
The future, which may not be far away, will allow citizens to access multiple services using just their ID numbers, and for government departments to extract far better intelligence about the state of the country and its citizens.
Suppple says it intends to show them how it’s done.
