Can ASX Stock Dominate Asia Pacific With Blockchain Acquisition Strategy?
PUBLISHED: 25-10-2017 10:20 a.m.
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Blockchain and Distributed Ledger Technology (DLT) has arrived.
DLT is in its early stages, however global management consulting firm Bain and Company estimates that across global financial markets, annual expense and capital cost savings from DLT could amount to 1 to 3 basis points of total global assets under management, or about $15 billion to $35 billion.
If you’ve been tracking the progress of ‘blockchain’, you would have seen that this cutting-edge slice of fintech is already improving the lives of financiers and online e-commerce customers.
The power of blockchain lies in the concept of Decentralisation — conducting the same processes as before, but with the aid of an entirely new infrastructure that’s designed to improve security, reduce processing speeds and deliver capability to usher in a new generation of digitally-optimised companies.
One recently listed ASX company with cash reserves of $3.7 million following a $1.6 million placement has set its sights on investing in this thrilling new technology.
Following a board and management restructure, today’s company has shifted its business strategy to acquisitions and strategic investment in blockchain companies building enterprise and consumer facing solutions.
Today’s company which is trading at approximate cash value now has a solid management team that is fully-focused on taking this company forward through a tightened emphasis on value generation.
It is a speculative stock at this stage, so investors should seek professional financial advice if considering this company for their portfolio.
In particular, the company is focusing on acquisitions in mobile commerce products such as security and Blockchain based business processes to complement its current product offerings in the talent acquisition and human resources spaces.
Currently the company has two apps: a mobile platform app which helps businesses to recruit, engage and communicate with their employees and WooBoard, a peer-to-peer recognition platform which encourages employees to acknowledge and celebrate great work by their colleagues.
Further to this, the company has a targeted focus on cloud-based SaaS Solutions for enterprises, their employees, customers and supply chains and is focusing on significant new opportunities in Asia Pacific markets.
In a nutshell, this company is looking to grow its portfolio of products through acquisitions based on market data, and will target opportunities in the fast growth ASEAN / APAC regions. This includes synergistic SaaS products, as well as Blockchain based business process applications (BaaS).
This new strategy is supported by a key industry figurehead that has achieved results at previous tech stocks. Matthew Hamilton comes to the company with extensive blockchain industry experience and will help this Software-as-a-Service (SaaS) solutions provider to recognise blockchain-based acquisition opportunities.
If you thought Software-as-a-Service (SaaS) was a step in the right direction towards better collaboration and efficiency synergies on every corner, then Blockchain-as-a-Service (BaaS) promises to take this journey to the next level in terms of scalability and application. Think hospitals, infrastructure projects, telecoms and even mining — all these functions and industries stand to be the first to benefit from what BaaS has to offer.
Today’s company has compiled a succinctly blockchain-focused business model with its commander-at-arms, DLT, enabling a powerful array of new features such as crowdfunding, asset-digitisation, cryptography and better connection speeds.
It has a clearly defined growth strategy in place with an eye to expand penetration and uptake with existing customers, expand distribution channels to accelerate revenue generation in existing markets and pursue new opportunities in the Asia Pacific.
As blockchain technology gradually moves from peripheral beta-testing to mainstream acceptance and implemented in a range of sectors (not just finance) — we think this tech stocks’ strategy of acquiring strong companies in the DLT space, and incubating them all the way to generating revenues could be a great value-driver for early investors.
We all knew a day would come when blockchain and Distributed Ledger Technology landed on commercial shores. Having swept up the world’s imagination with its unique set of operating conditions, blockchain/DLT are now starting to resemble the online boom back in 1990s.
Back then, the explosion of online connectivity and interaction was hailed as a market catalyst that would raise the fortunes of everybody because of the multifaceted benefits online connectivity provided. As you’ve seen, all that has worked out rather well.
Reffind (ASX:RFN) represents a reasonably-priced entry into cutting-edge blockchain/crypto technology that has the world talking.
Blockchain technology has opened the floodgates to an ensemble of functionality, that’s already making waves in several business sectors. Crowdfunding, asset digitisation, higher-grade security and greater efficiency-as-standard — are just the first smattering of new tech solutions to be unleashed into the market over the coming years.
Looking back in hindsight, the Internet has proved a revelation for the world enabling an entire new generation of products, industries, and a new way of thinking.
The same concept applies to blockchain technology. Blockchain/DLT have matured as marketable bits of fintech that are now coming to the boil.
RFN is jumping into this space at just the right time, especially when you consider it is one of only a handful of listed Aussie companies active in this sector.
So, let’s look through RFN in greater detail, to see how it stacks up
RFN is a company with a low valuation and strong cash position that is strategically entering the blockchain/DLT space. The interesting thing about this company is that it does not develop blockchain/DLT in its own right. Instead, RFN looks for strong early-stage companies for investment/acquisition.
The following table details its business plan:
The focus is to identify and acquire one or more entities and pursue blockchain commercialisation via one of three avenues: Architecture, Platforms and Customer-focused products.
As you can see from above it is doing this in three ways: organic growth, completed acquisition and new target acquisition.
RFN is strategically focusing on cloud-based Software as a Service (SaaS) solutions for enterprises, their employees, customers and other supply chain stakeholders — for now.
However, the market innovation is the additional capabilities offered by blockchain. This means that RFN can actively evolve the current SaaS free-for-all, into a higher calibre solution capable of serving a wider range of customers and enterprises.
APAC: a growing SaaS market
RFN is focusing its efforts on the ASEAN and APAC region.
Because the company has identified major opportunities here, particularly for its core product offerings in the Cloud-based SaaS and BaaS sectors.
Interestingly, the Asia Pacific tech market is forecast to grow by 6% in 2018, and while not as vast as the US and European markets which has two of the largest growing tech spends, it is likely to quickly catch up.
For RFN this means potential growth of its own services as the key elements of its business technology strategy will feed into one of the fastest growing categories in the Asia Pacific in 2018 with anticipated software spend to be approximately to be $129 billion .
Of course how much of the market it is able to attract is yet to be seen, so investors should seek professional financial advice for further information when considering this stock for their portfolio.
Furthermore, cloud technology is set to reach 20% of software spend (but just 3% of all tech spend) in APAC by 2018.
Cloud platform services are in fact growing at the fastest rate of all tech spending in the APAC region.
Just think that in Indonesia approximately 70% of internet traffic originates from mobile devices and its spend will focus on eCommerce and mobile software technology and Singapore – the biggest tech market in the region – is looking to aggressively increase its automated solutions at an industry level.
Consider that Malaysia, Thailand and Singapore will account for 74% of total tech purchases in the region and you have a potentially huge market to tap.
RFN would also be buoyed by the further trend that sees US and Australian SaaS vendors providing regularly updated applications for companies and individuals in the region.
The growth is being driven by companies looking to increase expenditure to improve engagement, communication, education, rewards and loyalty from employees, customers and supply chain partners to improve efficiencies and revenues.
It is also being driven by companies looking to improve their customers’ mobile commerce experiences.
Where does RFN fit in here?
Well, it sees this as a natural complement to its existing SaaS product offering and business model and it is ready to roll its SaaS and BaaS-based products and services into the region.
A quick look at RFN’s services
We’ve spoken a great deal about the market opportunity, but what about the services RFN is hinging its money-making ability on?
Here’s a look at what RFN is offering its clients.
- Referral product offering: RFN will help customers maximise referrals and create detailed reporting among other things. Essentially it can work as a human resources manager to supercharge an employee referral program.
- RFN’s survey product offering allows customers to quickly survey their employees, give real time feedback, assist with team management and know who is engaged within the team among other relevant operational processes.
- Rewards and loyalty product offering. RFN’s rewards and loyalty product offering allows companies to reward and recognise team members, create activity reports, track behaviour against company values. It is rewards made easy and looks something like this:
- Educate product offering: This enables companies to deliver short form video via mobile induction training, product training and compliance, track viewing patterns and allow people to train when and where they want.
As you can see, RFN has a comprehensive suite of products and services all underpinned by its flagship WooBoard, a peer to peer recognition platform acquired in 2015 which encourages employees to acknowledge and celebrate the great work of its colleagues.
The WooBoard platform is currently being rebuilt, with the first round of product enhancements due this quarter.
RFN is now looking to complement these products through further acquisitions in the SaaS and BaaS spaces, particularly as blockchain and DLT become a legitimate business practices.
The dawn of Blockchain-as-a-Service (BaaS)
To give you an example of where DLT is coming from, take a look at the following illustration:
The entire premise behind the technology is Decentralisation.
Through decentralisation, networks tend to be more secure, more accessible and less prone to unforeseen failures. Nothing is ever perfect, but ledger technology is a huge improvement on previous architecture and is already rolling out across various sectors.
As a few examples, companies like Uber and AirBnb have taken decentralised business models to the next level and carved out multibillion dollar niches on the back of disruption to the centralised status-quo.
Here’s an example of how blockchain is already having an impact, at such an early stage of development:
For a deeper understanding of how blockchain technology works in practise, check out this with-and-without comparison for the average user:
The fundamental improvement is an across-the-board evolution in how data is received, processed, stored and recalled by its users.
For RFN, the key focus point is to enter the market by making selective, value-accretive acquisitions in the best teams, working on the most viable offerings for this new technology.
Look, even the market juggernauts are it at:
Given the company’s sudden impetus in moving into blockchain and DLT, RFN is now at the crossroads of its future because the next few months are likely to yield significant business changes that will likely affect the company for years to come.
There are always risks with new technologies, but we think backing RFN’s strategy at this early stage could be worthy of consideration given the huge amount of spare capacity and scope for industry development within blockchain. The other aspect is the dearth of similar competition on the ASX. These two factors could be vital in securing value for RFN shareholders.
Although this remains a speculative stock and investors should review all publicly available information and take a cautious approach to any investment decision with regard to this stock.
The Global Blockchain Market
The Blockchain market as a whole, remains in flux and rapid development. However, it can be segmented into various industry verticals with some being more fertile for blockchain applications compared to others.
Banking, financial services and insurance have been the first to embrace blockchain but other industries are now also very interested. Public sector organisations, large businesses and even small businesses, are all slowly waking up to what it could mean for them.
By allowing digital information to be distributed but not copied, blockchain technology created the backbone of a new type of internet — originally devised for the digital currency, Bitcoin, the tech community is now finding other potential uses for the technology.
The media and entertainment vertical is estimated to grow at the highest rate, followed by healthcare and life sciences, according to the ‘Global Blockchain Technology Market 2017-2027’ by Research and Markets.
The report also notes that “North America is expected to hold the largest share of the Blockchain market due to the technological advancements and early adoption of Blockchain in the region”. The APAC market is expected to grow at the highest CAGR between 2016 and 2021.
As with any stock, Funding can often be a crucial component
For any company, having ample funding is a key consideration. But for a company like RFN, gallivanting into the fertile savannah of new-age blockchain technology on the back of an acquisition-led strategy — funding becomes critical.
On this front, RFN is well-funded with $1.6 million raised just last month. RFN is now cashed up with $4 million and is already on the prowl for value-based acquisitions.
For the uninitiated, a ledger is simply a record of something — whether it be trades executed by traders, or financial transactions to buy goods and services – and as the amount of ‘data’ the world now produces continues to grow at parabolic rates, people’s ability to use and understand that data is lagging behind.
What is needed is an efficient way of pooling data, but also, being able to call up any single bit of data as quickly as possible (and securely). These three sets of requirements (speed, security and functionality) are notoriously difficult to get right, but blockchain makes it all the more easier.
Take a look at how some folks may already have one foot in tomorrow’s world:
With the world accelerating towards a future with decentralisation as its principle and digitisation as its bedrock — we think adding blockchain exposure to investment portfolios at this stage, could be one of the most forward-looking decisions ever made.
Think AOL in the early 1990s or Google in the early 2000s — it was the Internet that put the fire under these businesses, and RFN hopes it can repeat the feat with blockchain in the 21 st Century.
Could the introduction of ‘blockchain’ purify existing systems and processes?
It is most definitely a feasible possibility, but by the same token, it will mean distinct change.
The speed with which ‘data’ is being created, unfortunately means it can be easily damaged, lost, hacked or corrupted. Data security could possibly be the greatest challenge of the 21 st Century and constitutes a major pillar in RFN’s intended market positioning. Offering digital security in today’s rapidly evolving digitally-enabled markets is likely to be a money-spinner for whoever develops an effective solution.
Looking at data breach cases in recent times, ranging from Sony to Citigroup, reveals that not only is data sensitive, but it’s bulky to handle too. In cases where data breaches have led to persistent material damage, the consequences have often been terminal.
Blockchain has the potential to not only transform markets, but to terraform them from the ground up — this is the exact moment we are in, and why RFN wants to get exposure to this market as soon as reasonably possible.
Today’s most value-accretive business ideas are not just about disruption and innovation. Yes, this is the underlying premise; but they’re more about solving current problems by developing more sophisticated ways of delivering services everyone wants to use (cloud services, secure banking, online trading, e-commerce and the list could go on.)
Global industries are betting that blockchain will make a huge impact over the coming years. Now that Bitcoin and other crypto-currencies have become a rather prominent ‘thing’ in modern markets, the technology underpinning them is morphing into being deployed in other marketplaces.
Things like crowdfunding, data handling and e-commerce can benefit from BaaS and will likely require blockchain assistance, especially as they scale-up and expand the datasets they are burdened with.
Capitalising on the next step in modern Technology
Despite the fact that blockchain and DLT technology remains relatively new, it already has a strong track record due to the popularity of Bitcoin and crypto-currencies in general.
Blockchain is far from being widely used or implemented, but the trend has begun. All sectors and all consumers are likely to benefit, but the core focus for RFN is the low-lying fruit which will be first to embrace BaaS: finance, energy, media, gaming, real-estate and logistics.
Blockchain has a unique chance to transform the world as we know it. Just like the Internet terraformed all markets and industries in the 1990s, so too will blockchain over the coming decade or more. The good news is that blockchain as a mainstream-ready product is coming, and the great news is that we may have found the ideal venue from which to welcome the blockchain revolution.