House of 8commons: ‘Govt deal could double fintech’s share price’

House of 8commons: 'Govt deal could double fintech’s share price'

Date of Report: Market close on Tuesday, 15th March
ASX: 8COPrice: A$0.14

52 Week Range: $0.110 - $0.240

Market Cap: $31.01M

Sector: Software & Services

Every second week we invite a leading fund manager to present at The Insider: Meet the Fund Manager. In October, Luke Winchester, from Merewether Capital, selected 8common as one of his three favourite stocks after the business successfully inked a deal to become the sole provider of travel expense management services to the Federal Government.

8 October, 2021

19 January, 2022

The Insider: Meet the Fund Manager sessions are a great way to hear directly from leading fund managers. They share their approach to investing, favourite companies and their market view for the year ahead.

The Insider: Meet the CEO sessions feature a selection of company leaders who provide a succinct overview of big things their companies are doing. 

Australian payment management software provider 8common has the potential to double its share price over the course of the next few years, says Merewether Capital’s Luke Winchester.

The company, which was founded in 2014, provides expense and disbursement management software to government agencies and large enterprises, with its two core products – Expense8 and CardHero – helping to control employee expenses and expenditure.

8common’s offering has been rolled out to Australian government bodies at both state and, significantly, federal level – with ~150,000 active users in government alone.

In July last year, 8common inked a deal with the Federal Government to become the sole provider of travel expense management services through GovERP – the government’s Enterprise Resource Planning platform.

Securing this mandate, Mr Winchester said, was a “company-making deal” for the business.

“They previously had about 27 federal government departments that were using the Expense8 solution, but they’ve won a tender to roll out that solution for the remaining federal government departments,” he said.

“It adds about 110,000 users at $60 revenue per user, and a minimum $7 million in implementation revenue, but it could actually come in a bit higher than that.”

The company’s share price, Mr Winchester added, has the potential to double in the next few years.

Andrew Bond, CEO of 8common, noted that this government mandate not only means most federal government agencies will be required to use Expense8, it also throws open the door to some of the government’s more commercial enterprises to join the platform.

“There are 168 entities in federal government, 90 of those are mandated to use this GovERP panel; of those, 27 of those agencies are already customers of ours, so that’s 63 agencies that will be onboarded,” he said in January.

“Then there are 78 entities that are what we call ‘opt in’, so they have the ability to tack on to all-of-government arrangements.”

Importantly for the company, government users typically have a higher average revenue per unit (ARPU) than non-government clients.

“It’s roughly twice the ARPU; 2-3 times the ARPU in federal government than in some of the other segments due to the fact they use more of our solution,” he said.

Click here to view more videos from Luke Winchester’s  Meet the Fund Manager’ session, or click here to view the full ‘The Insider: Meet the CEOs’ session.

The CEOs of all the companies chosen as Fund Manager favourite stocks are invited to present at our Meet the CEO series. Reach does not assume responsibility for the accuracy or completeness of any information provided, and the views expressed are not reflective of Reach Markets position.

Any advice contained within this presentation is general advice and does not consider your personal circumstance, you should consider whether it’s appropriate for you.

The information we are giving you is for educational purposes only. “Investing is about understanding your risk” and every time you invest in the share market there is a risk of loss.

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The CEOs of all the companies chosen as Fund Manager favourite stocks are invited to present at our Meet the CEO series. Reach does not assume responsibility for the accuracy or completeness of any information provided, and the views expressed are not reflective of Reach Markets position.
Any advice contained within this presentation is general advice and does not consider your personal circumstance, you should consider whether it’s appropriate for you.
The information we are giving you is for educational purposes only. “Investing is about understanding your risk” and every time you invest in the share market there is a risk of loss.