Know About Fatfish Group Limited Before Investing in it
Fatfish is a venture builder that focuses on tech startups for investment. Fatfish originated in Singapore, where it partnered with the government as an incubator for startups. In 2014, Fatfish entered Australia and listed on the ASX. In Australia, Fatfish is focusing particularly on tech startups.
Fatfish aims to invest in businesses that have got the potential to be scaled up for not only the Australian market but also for the global markets. This “seed to exit” plan of Fatfish aims to develop a healthy ecosystem of tech-based startups in Australia, which can put Australia on the world map for tech-based startups.
For any venture builder or investor, prior experience and knowledge are key things that startups consider or rather they should consider before pitching their idea. For instance if a fintech startup pitches their idea to a VC that has got experience in the health sector, then even if the VC agrees to fund the fintech startup. It is not going to do much good for the startup because the VC does not have the required experience to help the startup grow and scale up.
In the case of Fatfish, the company has got experience in the following areas
- Buy now and pay later services
- Online lending
- Online insurance
- Digital entertainment
- Enterprise cloud and software
It can be seen that Fatfish has got expertise in the above mentioned tech related areas. Let us now look at their portfolio to see whether this expertise is matched by the startups they have helped scale up.
Fatfish invested in Smartfunding.sg which is a Singapore based online lending platform for small and medium enterprises. Smartfunding allows SMEs access to term finance and buy now and pay later services.
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Fatberry is a Malaysia based online insurance platform that uses artificial intelligence and machine learning to streamline the online insurance market for clients in Malaysia.
Quickbit is a Sweden based crypto currency retailer.
Cloudaron is a tech based startup that focuses on cloud based services. Cloudaron provides services to other businesses and startups, helping them transition to and develop their own cloud based services.
Vopy is a Neobank enabler, that allows its clients to open up their own Neobank.
It can be seen that all of these startups are tech based, which shows that Fatfish has got the experience it needs to help tech based startups scale up and reach a global audience.
The financials of Fatfish show a shaky picture for the company. The company registered a fall in revenue in the last quarter of 2020 however the net income figure for the same quarter showed a positive figure of almost AUD 8 million. The company had a net loss from June 2019 to June 2020, which was converted to a net profit in the final quarter of 2020.
The reason why the company had a net profit in spite of low revenue was because of the investment income. The annual report states that the reason for low sales revenue was the change in the accounting treatment following the merger of Fatfish with Swedish listed Ableco Investment group. This change in accounting treatment resulted in revenue being stated lower by AUD 0.7 million. With this acquisition, Fatfish has now entered into the Swedish and European markets as well.
The gross profit margin remained 23% whereas the operating margin shot up to 167%, which shows that the company is trying to control its expenditures to ramp up the profitability and it is having a positive effect.
The return on assets has also been good at around 12 for the last quarter. It is important to note that in the third quarter of 2020, many analysts were predicting poor results for Fatfish because back then the company was still making a loss. Analysts were advising the investors not to invest because the return on investment was negative due to the loss being incurred.
However the last quarter of 2020 showed a positive recovery for the company which has resulted in a positive market trend for the stock price.
The cash flow situation is also showing a very positive trend. The company had a negative net operating cash flow, which has been gradually reduced over the last 2 years. It is still in the negative zone but there has been a significant reduction in the negative cash flow from 2019 to 2020.
What Does This Mean For Investors?
Fatfish is in the tech sector and more importantly Fatfish is a venture builder. The tech sector is already seeing rapid growth due to multiple factors that have been discussed previously in our blogs. Fintech, bio tech and all other sectors are merging with the tech sector to create innovative new products.
This means that companies like Fatfish are going to see a lot of potential startups, which they can invest in. The last two years have been slow for individuals who invested in Fatfish because the company was still recovering its losses but the profitability in the last quarter of 2020 shows that the company has made its recovery, that too at a very crucial time.
Consumers around the world are moving to online purchases and Fatfish should see this as a golden opportunity to scout for promising fintech startups and invest in their growth. With its presence in South East Asia, Australia and now Sweden, Fatfish has a good opportunity to invest in startups that are diverse in their nature in all three of these geographical zones.
Investors should therefore keep a close watch on the activities of Fatfish. Their recent acquisition of Abelco shows that the company is committed to its growth both within Australia and in the international markets as well.
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