I think the [email protected] Capital (LSE: SYME) share price has tremendous potential. This is something I have flagged in previous articles when looking at the size of the company’s total addressable market. The size of the inventory finance market, where the fintech firm focuses its efforts, is over $1trn. [email protected] is one of the leading players in the European market for inventory financing.
[email protected] Capital share price suspension
Unfortunately, market sentiment towards the business has been hurt recently by the company’s own mistakes. After changing its financial reporting calendar, management had to request a temporary suspension of trading in the company’s s shares, pending publication of its 31 December 2019 year-end accounts and its 2020 interim results for the six months ended 30 June.
Trading was restored at the beginning of March, and according to management, the underlying business hasn’t been affected. However, a trading suspension is a big red flag. It should be something companies try to avoid at all costs.
This has made me think that if management has made this fundamental mistake, what other errors are hidden away in the cupboard?
That said, aside from this issue, it looks as if the rest of the business is firing on all cylinders. That’s why I’m excited about the outlook for the [email protected] Capital share price.
The group recently announced that it had signed heads of terms to acquire the leading, Singapore-based fintech-powered commodities trade enabler, TradeFlow Capital Management Pte Ltd.
What’s more, according to [email protected]’s interim results to June 2020, its number of client companies increased from 82 at the end of the first quarter of 2020 to 165 by the end of the year.
Meanwhile, the gross origination of client companies increased 30% between September and the end of December 2020. Turnover in the six months to 30 June 2020 increased to £368k, up from £11k in the same period a year ago. This resulted in a gross profit of £368k, the same as the turnover figure. But after including all administrative expenses and exceptional costs, the group reported a loss for the period of £2.1m.
Looking at these results, I’m excited to see what the future holds for the company. If growth continues, the outlook for the [email protected] Capital share price seems incredibly bright.
Risks and challenges
However, much depends on the company’s ability to continue to attract lenders to its platform. Supply has done a solid job of attracting borrowers and creditors to its platforms so far. There’s no guarantee this trend will continue.
What’s more, the company is losing money and relies on shareholders to keep the lights on. If investor sentiment towards the enterprise falls substantially, it may become harder for the business to raise funding. That could jeopardise its future.
Overall, I’m cautiously optimistic about the outlook for the [email protected] Capital share price. As such, I would add the stock to my portfolio, but only in a limited way considering the enterprise’s risks and challenges.
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Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.