BUD: Where are we? May 2018, page-297

what you are all wrestling with is a basic difference in how you think about comps imo

there is a suite of relatively  small margin building energy monitoring specialists on the asx - most of which  have been negative cashburn for 4-5 years though some are now going cash burn neutral off client bases of 1000s of clients

their qtry revenues generally go $900k, $1m, $1.2m.

bud's an open platform data aggregator and analytics firm with its near term earnings built primarily on projections for Ohm   - which is all utility monitoring  including energy, water, gas, light, temperature, carbon footprint - and Thor - a bespoke client

the primary point of difference is generally open ended vs close ended data source capture and bespoke monitoring, feedback

BUD's been funded and premised on delivering Ohm and BUD analytics into a v large/ quasi global market penetration of clients at a higher margin than those energy mgt specialists for what it will be arguing is a much more flexible architecture and so greater mgt value

a value investor would say the energy specialist firms have
- lower cash burn,
- lower earnings potential, and as a result
- lower market cap

simplistically they are lower risk, lower multiple propositions

The funds that have back BUD have funded it to deliver a much bigger ambit.

This is why I said the other day BUD;s been funded with the biggest shotgun aimed at finding adopters.
Its like an iphone vs a samsung

But BUD has to prove it really has an 'iphone'.  Dont take the analogy too literally - its a b2b solution takeup will never be iphone like

Currently its qtrly annualised revenue rate has gone dec qtr $1.3m, $2m, ??

Its burning $3.5m a qtr - predicated on finding what imo is  a +$20m annual revenue rate in ~2 yrs

But its unproven theory - and the markets been marking the stock back as it debates whether that market exists

BUD's precisely like those big unicorn private investor vehicles - its valuation reflects the speculation on a major global  income stream being secured.   Youd expect those 3 instos who funded $23m did their due diligence before making such a major bet and have a clear understanding of the specific market differentiation vs the energy mgt specialists

So if you;re try to evaluate as a value investor its not investment grade ie its not yet positive cashflow

As ive pointed out before, PNV is a $300m mkt cap med tech story with almost identical bottom up metrics to bud - its burning $3m+ a qtr for ~$2m revenue to deliver a globally sold skin graft and related solution, with $25m cash

How these 'global exposure' tech growth stocks get priced is purely a function of institutional investor support.  they dominate the trade flows and dictate the sp

the share price isnt a function of small bore p/e comps - unless they lose insto support

and thats entirely based on insto belief on the big play premise

whereas companies with 1000s of clients that make $100 margin will never attract their support because they generally have little scope to deliver earnings growth to drive premium multiples

those are basically industrial stocks that will generally always trade at 5 to 10 p/e - unless they can revolutionise the speed at which the can scale client adoption

the challenge before BUD is to prove it deserves the higher margin higher multiple the market is pricing it on

the right slide of q318 to q418 income flows hurt that belief, as have several other items

so this next qtrly imo will be the real litmus test.

the current selling into tax period will likely reverse partially  from next week if instos sold to crystallise gains or losses then want to re-enter for the quarterly results

the state one research imo is not worth referring to imo - it was an arms length note that i doubt had any input from the company.  I seriously doubt BUD expects to have $35m cost of goods sold next year.

anyway - the point is the bottom up value investors dont think like top down global growth equity investors

what the sp of a stock - whether BUD or any other does - turns on how much it attracts support from either camp

thats why apple, fb etc have done so well - they get money from both

BUD 's sp performance in next month or so will probably tell you whether its retained that insto support for its big growth thesis

its recent earnings dangled the promise it may be able to j-curve - but its needs to prove it

if it does - it cannot be classed with the energy mgt specialist stocks. they wont ever be seen or valued on the same basis by the instos