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A Quick Take On Trident Digital Tech Holdings
Trident Digital Tech Holdings Ltd. (TDTH) has filed to raise $50 million in an IPO of its American Depositary Shares representing underlying Class B ordinary shares, according to an SEC F-1 registration statement.
The firm provides digital transformation services to small and medium enterprises in Singapore.
TDTH is a tiny firm with highly variable revenue on a small base and is generating increasing losses.
I’ll provide an update when we learn more IPO details from management.
Trident Digital Overview
Singapore-based Trident Digital Tech Holdings Ltd. was founded to assist the SMB market in Singapore with e-commerce enablement, digital optimizing and automation to improve their online capabilities.
Management is headed by founder, Chairman and CEO Mr. Soon Huat Lim, who has been with the firm since 2021 and has more than thirty years of business experience in a variety of relevant industries.
The company’s primary offerings include the following:
-
Business consulting
-
IT customizations.
As of June 30, 2023, Trident Digital has booked fair market value investment of $36,342. Shareholders have also advanced the firm $7.5 million in advance subscription payments from investors, including Trident Digital Tech Ltd., Trident Group Holdings, Tri Wealth, Soon Tai Lee and Yat Hong Lo.
Trident Digital Customer Acquisition
The firm pursues small and medium-sized clients across numerous industries but has focused on the industries of ‘e-commerce, food and beverage, fintech, healthcare and service, wholesale and retail’.
As of June 30, 2023, the company has served more than 200 clients in its history.
Selling expenses as a percentage of total revenue have risen sharply as revenues appear to be decreasing, as the figures below indicate:
|
Selling |
Expenses vs. Revenue |
|
Period |
Percentage |
|
Six Mos. Ended June 30, 2023 |
52.7% |
|
2022 |
19.1% |
|
2021 |
18.8% |
(Source – SEC.)
The Selling efficiency multiple, defined as how many dollars of additional new revenue are generated by each dollar of Selling expense, has fallen to 0.0x in the most recent reporting period, a negative signal, as shown in the table below:
|
Selling |
Efficiency Rate |
|
Period |
Multiple |
|
Six Mos. Ended June 30, 2023 |
0.0 |
|
2022 |
2.5 |
(Source – SEC.)
Trident Digital’s Market & Competition
According to a 2023 market research report by Mordor Intelligence, the Singapore market for ICT (Information and Communications Technology) is forecasted to grow by 8.2% from 2023 to 2028.
The main drivers for this expected growth are the launch of digital advancement projects, a continued rollout of 5G wireless standard capabilities, and government prioritization of the sector.
It is estimated the entire island of Singapore will have full 5G coverage by the end of 2025.
Also, the chart below shows previous government spending in Singapore on ICT initiatives:
ICT Spending By Singapore Govt. (Mordor Intelligence)
The digital solutions industry in the city-state of Singapore is fragmented, with low barriers to entry and a diverse customer base.
Trident Digital Tech Holdings Ltd. Financial Performance
The company’s recent financial results can be summarized as follows:
-
Falling top line revenue (annual basis)
-
Reduced gross profit and dropping gross margin
-
Increasing operating losses and cash used in operations.
Below are relevant financial results derived from the firm’s registration statement:
|
Total Revenue |
||
|
Period |
Total Revenue |
% Variance vs. Prior |
|
Six Mos. Ended June 30, 2023 |
$ 481,165 |
1.3% |
|
2022 |
$ 1,262,899 |
92.2% |
|
2021 |
$ 657,092 |
|
|
Gross Profit (Loss) |
||
|
Period |
Gross Profit (Loss) |
% Variance vs. Prior |
|
Six Mos. Ended June 30, 2023 |
$ 91,596 |
-4.8% |
|
2022 |
$ 262,210 |
30.8% |
|
2021 |
$ 200,447 |
|
|
Gross Margin |
||
|
Period |
Gross Margin |
% Variance vs. Prior |
|
Six Mos. Ended June 30, 2023 |
19.04% |
-1.2% |
|
2022 |
20.76% |
-31.9% |
|
2021 |
30.51% |
|
|
Operating Profit (Loss) |
||
|
Period |
Operating Profit (Loss) |
Operating Margin |
|
Six Mos. Ended June 30, 2023 |
$ (1,906,312) |
-396.2% |
|
2022 |
$ (1,256,486) |
-99.5% |
|
2021 |
$ (97,463) |
-14.8% |
|
Comprehensive Income (Loss) |
||
|
Period |
Comprehensive Income (Loss) |
Net Margin |
|
Six Mos. Ended June 30, 2023 |
$ (1,826,559) |
-379.6% |
|
2022 |
$ (1,166,971) |
-92.4% |
|
2021 |
$ 29,661 |
4.5% |
|
Cash Flow From Operations |
||
|
Period |
Cash Flow From Operations |
|
|
Six Mos. Ended June 30, 2023 |
$ (2,380,926) |
|
|
2022 |
$ (609,946) |
|
|
2021 |
$ 244,100 |
|
|
(Glossary Of Terms.) |
(Source – SEC.)
As of June 30, 2023, Trident Digital had $4.0 million in cash and $11.0 million in total liabilities.
Free cash flow during the twelve months ending June 30, 2023, was negative ($3.1 million).
Trident Digital Tech Holdings Ltd. IPO Details
Trident Digital intends to raise $50 million in gross proceeds from an IPO of its American Depositary Shares representing underlying Class B ordinary shares, although the final figure may differ.
No existing shareholders have indicated an interest in purchasing shares at the IPO price.
Public Class B shareholders will be entitled to one vote per share, and the Class A shareholder, founder and Chairman, Mr. Lim, will be entitled to 60 votes per share.
Immediately after the IPO, the firm will be a ‘controlled company’ per Nasdaq’s rules.
Management says it will use the net proceeds from the IPO as follows:
Proposed Use Of IPO Proceeds (SEC)
Management’s presentation of the company roadshow is not available.
Regarding outstanding legal proceedings, management said the firm may be subject to legal claims but that, in its opinion, the claims would not have a material adverse effect on its operations or financial condition.
The sole listed bookrunner of the IPO is US Tiger Securities.
Commentary About Trident Digital’s IPO
TDTH is seeking U.S. public capital market investment to fund its working capital requirements and corporate growth initiatives.
Trident Digital Tech Holdings Ltd.’s financials have produced dropping top line revenue (annual basis) from a tiny base, lower gross profit, dropping gross margin and higher operating losses and cash used in operations.
Free cash flow for the twelve months ending June 30, 2023, was negative ($3.1 million).
Selling expenses as a percentage of total revenue have risen sharply; its Selling efficiency multiple fell to 0.0x in the most recent reporting period, a negative result.
The firm currently plans to pay no dividends and to retain future earnings, if any, for reinvestment back into the firm’s growth and working capital requirements.
The company is incorporated in the Cayman Islands, so public investors would only have an interest in the Cayman Islands company and would not hold a direct interest in the operating entities.
Moreover, the firm has elected to be an “emerging growth company,” which means it can produce less information for public investors. Such companies have generally underperformed other companies in recent years.
The firm’s recent capital spending history indicates it continues to spend on capital expenditures despite negative operating cash flow.
The market opportunity for providing digital transformation services is expected to grow at a moderate rate of growth in Singapore.
It is likely the firm will seek to expand geographically outside of Singapore to operate in larger markets in the Asia Pacific region.
Business risks to the company’s outlook as a public company include its tiny size, highly variable revenue growth on a small base, and increasing losses.
I’ll provide an update when we learn more Trident Digital Tech Holdings Ltd. IPO information.
Expected IPO Pricing Date: To be announced.
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