Where are we? I'll start by saying that lots of new information has come to light since my last post. Better yet, with all of this new information with which to base an investment decision, you can now purchase shares in BUD at a near 50% discount to when I last posted a thread update!
It's always interesting to remember that "price is what you pay, value is what you get."
(1) My thoughts on the recent 30 April Quarterly: Negatives: - The delay in SaskTel sales commencing in Canada.
- The monetisation of Alternative Data being delayed until January 2019.
- It has finally dawned on me how long it actually takes (9-12months) to onboard a distribution partner. Fortunately, for most of our deals we are either at the end this wait or nearing the end.
Positives: - With the benefit of hindsight, I think we can all appreciate that the CR at 20c was a good move!
- >$25m cash on hand.
- The company is manufacturing additional Ohms.
- Lower than estimated Quarterly costs (despite the ridiculous volume of ASX queries)
- Full steam ahead by the end of this quarter (i.e global distribution of Ohm)
- Europe taking off now (UK, Germany, Spain) – hence all the hiring going on there!
- US sales started (‘US sales efforts have centred on prospects with many hundreds or even thousands of properties in their portfolios. This has included hotel chains, municipalities, real estate services firms, mobile operators and one of the largest cable network operators in the US’) – maybe we will see a large chain with many buildings sign up to Ohms?
- 18% growth is 18% growth – the majority of spec techs I have seen never even make it to the growth stage! (e.g IAM, FBR, TV2, BIG, EDE, GSW [the list goes on…]) – BUD is there, BUD has started doing it – watch this space!
(2)Fundamentals: - Management has stuck to their guns and re-iterated the $70m of forecast revenue over the next 2.5 years.
- They would not make the forecast unless they were confident it was capable, nor would the distribution partners.
- From the Aware Letters, we know that Management’s $70m forecast is conservative compared to the internal forecasts from their distribution partners.
Comments on revenue guidance:
- Traction is building in line with guidance (IMO on track to surpass $70m in 3 years)
- The $70m was based on 1000 ohms from Digicel, 1000 ohms from the UK and 1000 Ohms from Canada. Note, this projection did not include Aus/US/Europe/Global distribution. Note again, management were conservative in this forecast (upside?).
(3) Ohm Install Analysis Current: Oct 17: $415k
Jan 18: $428k
April 18: $505k
Projections: July 18: $800k-$1.3m
October 18: $1.3m-$2m
Comments on Quarterly numbers:
The recent Quarterly reflects:
- Worst case scenario 42 ohm
- Best case scenario 127 ohm
- Median: 85 ohms
So – Digicel installed something like 80 ohms in the quarter (I am unsure exactly at what time in the quarter they started), and they did this without being 'full steam' ahead, which they are as of now. Even at this lower rate, they are on track to deliver over 1,000 ohms in 3 years (equating to ~$12m p.a revenue for BUD).
Notwithstanding any increase in this rate as they are now ‘full steam ahead’, if you project that the UK, US, Australia, Canada, Latin America (x2 for size) and Europe (x3 for size) have at least the same rate of distribution – this comes out to be 10,000 Ohms over the same period, putting the company at some ~$120m of annualised revenue.
Of course, I think BUD will surpass this, and I think BUD will go further. I look forward very much to seeing the growth in the coming July Quarterly!
(3) Capital Structure & Valuations Present value: - At 12cps, using a revenue valuation model, the market has priced BUD at just 350 Ohms.
Do you think BUD can sell just 350 ohms, in which case and notwithstanding Buddy Cloud, Alternative Data, or other revenue from future products, Buddy is fairly priced (with no growth)?
Future value: Here is a table that I made calculating the number of Ohms sold and a corresponding valuation (in $AUD). The calculation uses a price-earnings ratio. (Valuations would be higher if a revenue model was used).
Despite the delays to distribution, with full global distribution commencing this quarter I still think BUD can achieve 10,000 Ohm sales by 2020 (~$3.00/sh?).
(4) Growth is the name of the game! Thanks to @DreadPirateRoberts for this – quote Dave: “As a multi-year, billed monthly SaaS business, this is a cumulative business – ie: for the next several years (ie: while all customers are still in their initial contract periods), the number of paying customers at the end of each month becomes the revenuebase for the next month upon which growth is built.”
Growth is the name of the game. For at least the next 3 years (until it becomes time for contracts to be renewed), BUD’s Quarter on Quarter revenue is only going to grow. How will the market react when every Quarter sees constant 20-100% revenue gains?
(5) Conclusion: Despite the approximate 3 month delay to global distribution commencing (i.e commencing over the coming Quarter rather than already being in full swing), in my opinion nothing has changed and the end goal is the same. The market has completely overreacted sending this from 40c to 10c.
Remember, the instos were happy to put in $23m at 20c, and a further $6m at 20.5c. BUD is now at 12c ($110m EV) and nothing has changed (…except BUD now sell Ohms in Europe ).
(6) Upcoming Events 3 May: Green Schools Conference and Expo (Denver, Colorado) - The Buddy Team will be attending Green Schools Conference and Expo to share smart building strategies and best practices for the school environment.
9 May: Australian Smart Communities Conference - The Buddy team will be joining the Australian Smart Communities Conference as an exhibitor and speaker.
14 May: Internet of Things World 2018 (Santa Clara, California) - The Buddy Team is excited to again be attending Internet of Things World 2018 in California representing what IoT can do in the smart cities space.
23 May: Webinar: How to benchmark and baseline energy use - Join the Buddy team and energy consultant expert, Jimmy Jia, to learn how to use data to benchmark, baseline, and motivate others within the building.
18 July: Webinar: Data-Driven Energy Strategies for K-12 and Higher Education - Buddy team and Jimmy Jia will outline data-driven energy strategies you can take in the K-12 and Higher Education industry.
GLTAH! 2018/2019 are going to be truly transformational for BUD. This is a very exciting time to be a shareholder of BUD
All my posts are IMO and do not constitute investment advice. Always do your own research!
BUD Price at posting:
12.5¢ Sentiment: Buy Disclosure: Held
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