re: ..why it is going up... going up from today?
Aside from todays ann here's areprint of an interview held in late 2002...nothing uch has changed
INTERMOCO LIMITED 2002-11-18 ASX-SIGNAL-G
HOMEX - Melbourne +++++++++++++++++++++++++ The following Briefing interview was completed 7 October 2002. A Concept Equity analyst conducted the interview with Chief Executive Officer, Mr Allen Roberts.
Concept - your company changed direction in 2000 when it acquired Australon Enterprises and now operates in the technology sector by providing Automated Meter Reading solutions. Can you explain what an Automated Meter Reading solution is?
AMR is essentially aimed at, and used by electricity, gas, and water utilities. It can provide significant cost savings. It offers a variety of features such as remote connection and disconnection, theft detection, demand side management, improvement of supply quality, electronic billing interfacing, reductions in energy purchase and settlement risk, automated fault reporting and it can significantly reduce the cost of working capital. For instance, in the electricity industry utilities may need to carry as much as 90 days of working capital. By using AMR, billing cycles can be shortened to 3 days, reducing "work in progress" and providing substantial savings. I should add that Intermoco does not refer to its technology as AMR, but rather by is solution name "Utilitgy" - technology for the utilities industry and a name that more accurately reflects what we believe to be the first cost effective end-to end internet-enabled AMR solutions.
Concept - is AMR a recent development?
AMR is not a new idea. AMR devices have been around for about 10 years. Their main function is to capture relevant data. The key issue however, is to gather that data in a cost-effective manner. To maximize the benefit from an AMR solution a utility company must be capable of receiving information from its network in real time. A meter reading should be taken as frequently as every half hour to achieve real time reporting. Further, the information must be delivered to the utility in a manner and format that enables the utility to have a real understanding of issues relating to their network almost instantaneously. To take a reading every 30 minutes will results in a single meter being read in excess of 17,000 times per annum. Traditional methods of delivering that information have not been cost effective and, as a consequence, many so-called AMR solutions have not been commercially successful. Intermoco's solution uses the latest 2.5G wireless communications technology and the financial model that we create for the utility no only provides significant improvement in the provision of real time information but also provides substantial cost benefits that will translate to an improved bottom line for the utility.
Concept - for the uninformed how do your AMR devices work?
A Meter Interface Unit is installed in the end user's premises. The device interrogates the smart meter at the premises and transmits the data via the powerlines to a Meter Data Concentrator, which is located at a central point on say a power pole. The data is then transmitted across a communications network to a network operations centre. The data can be then provided in any format that the utility wishes and is accessed by the utility using a standard PC with internet access to the secure website that Intermoco develops specifically for each utility using its proprietary technology.
Concept - are your products proprietary and protected by patents?
Yes our products are proprietary and we continually seek patent protection. We also use software encryption to protect our designs. We strive to stay at the leading edge in the design and development of monitoring systems for application across a number of industries. We look at creating cost-effective solutions that enable utilities and other clients to better manage their assets.
Concept - do you have specific markets that your AMR targets?
We are initially aiming to secure market share in the electricity industries in South East Asia particularly Malaysia and the UK. We have recently visited the UK and demonstrated our technology to two major utilities in that country. As a consequence of that trip we believe that there are good opportunities to deploy our technology in networks over there. In Australia, we have unfortunately confronted regulatory obstacles and hindrances that we believe may potentially delay the wide-scale implementation of our solution in the short term, however, we do see a market for specialist smaller installations for new estate and building developments, retirement villages and shopping center complexes as examples. In due course with deregulation being embraced at all levels, particularly political and industrial, Australia will also be a major market for us.
Concept - what is the size of these markets?
There are over 1 billion meters worldwide of which approximately 300-400 million are in first world countries. There are roughly 7.7 million meters in Australian and in places such as Italy there are over 27 million while in China there are in excess of 100 million, to highlight the market size. The market we are initially pursuing is Malaysia where there are over 5.5 million meters on the Malaysian Peninsula, with another 0.5 million in East Malaysia. We aim to secure global market share of 13.5 million units within 5 years.
Concept - have you had any successes so far in installing your AMR devices?
Yes we have had very favorable responses to our technology. We have completed one trial in Victoria (which has since been converted into a commercial installation with a local utility), a second installation in NSW was handed over to Integral Energy several weeks ago. A third pilot in Malaysia has commenced installation with handover anticipated by the end of November and we have been approached by two other utilities to commence trials for them.
Concept - can you identify the locations where these trials have been conducted?
The Victorian trial took place at the "MAB Newquay" development located at Docklands, which is supplied by CitiPower. This development comprises three residential towers where we will be installing a total of approximately 76 meters. In NSW we have worked with Integral Energy and installed our technology at 5 different sites in other suburban Sydney. The other pilot installation is under way in Malaysia for Tanaga Nasional, which is the national power utility in peninsula Malaysia.
Concept - do you have any competitors and who are they?
Around the world there are a number of companies that claim to operate in the area of AMR. During our own internal analysis of our competitors, we uncovered a number of companies that have some elements of an AMR solution on offer and there are a number of ways in which these so called "solutions" are put together. After undertaking our investigations we came to the conclusion that few if any offer the total solution that we offer that incorporates the meters, the technology, the data carriage, storage and presentation as well as financing and management. For that reason, as well as our innovative use of new technologies and the cost effective manner in which the solution can be presented, we feel that we have few, if any, direct competitors offering the same features and benefits as ours.
Concept - you mentioned strategic alliances and partnerships, could you tell us a little more about these?
We have entered into a collaborative agreement with Macquarie Bank. The agreement grants Macquarie Bank the exclusive rights to market the Intermoco range of production in the US, Canada, UK and Europe. Because Macquarie is active in the infrastructure sector, they understand the benefits of our technology. As part of the arrangement we have also granted them 75 million options exercisable at $0.15 cents, subject to them securing orders for up to 2 million devices. Macquarie may also provide financing to end-users so that the purchase of our devices will be made easier for them.
In addition to the agreement signed with Macquarie, Intermoco has also entered into a collaborative agreement with Email Metering. We are particularly excited by this agreement, as it not only gives Intermoco access to Email's extensive marketing network (as it is currently represented in some 35 countries around the world) but the agreement envisages the two organisations will jointly undertake co-development work that will result in Email's smart meters being fully integrated with Intermoco's meter interface technology. As a consequence of this work we envisage that the manufacturing cost of the combined devices will be significantly reduced, installation will be cheaper and more efficient and that the solution will be considerably more cost effective for the utility industry in general.
Concept - have you developed any other products?
We have also developed monitoring devised for sewerage systems and LPG tanks. In addition, we have developed a portal called iEnable, which allows devices such as air conditioners, spas and other home appliances to be remotely controlled via the internet. This technology will form the core of the smart home of the future. Other automation devices have been manufactured and commercialized such as the Synapse 211 (Physical Layer Repeater) and the Real Time Scheduler. Both products are used in building automation systems.
Concept - how does one earn income by being a participant in the AMR market?
We generate revenue from two different streams. The first is through the sale of our Meter Interface Units and the second is through the ongoing provision of metering data and presentation, which we supply to the utility at a fixed annual cost. The cost of the units to the end-user is a transaction revenue stream. The other revenue source is a recurring income stream, which we receive through the collection, storage and presentation of data. This service, which is provided to a utility, developer, building or facility owner or manager in a format that they determine) will be a major recurring income stream for us in the future. Our charges range from $25 per annum per meter depending on the type of AMR device being deployed and its location. Importantly once we have achieved the deployment of a significant number of meters, the ongoing revenues from this source will be substantial and will continue irrespective of the number of additional meters, which the company is able to monitor in the future.
Concept - given the size of the potential market and the numbers you have just mentioned the returns to Intermoco could be substantial?
I agree. In fact, I am loath to provide forecasts, as they could be viewed by some as being overly bullish. I can however confirm that Intermoco is budgeting to rollout a total of 13.5 million devices over the next five years with only a relatively modest increase in overheads. We are capable of keeping our overheads at a low level due to the fact that we will not be undertaking any installation work (that will be done by the utility companies or their authorized agents under supervision by Intermoco). Our focus will remain on designing the engineered solution for the utility client and providing technical support. In that way, we will maximise profits.
Concept - do you envisage having to go back to the market to raise further capital?
Not at this stage. Based on our forward budgets we do not envisage a need to approach the markets for funding to further develop or market our range of AMR solutions. However, if a strategic acquisition becomes available we may require additional funding in that circumstance.
Concept - you have recently had a major capital injection provided by Newpage. Can you tell us a little more about them and what their expectations are?
Newpage is an Australian private company with contacts in Malaysia that invested $9.5 million in Intermoco in February. The principal behind Newpage is an engineer who recognised the significant potential of our technology and in particular our AMR solution. He has joined our Board of Directors and brings with him outstanding introductions into the Malaysian markets as well as providing valuable R&D, and marketing contributions.
Concept - when do you expect to breakeven and generate profits?
We expect to be cash breakeven in the 2003 financial year and profitable by 2004 (ie before any abnormal write-offs). We had approximately $3 million in cash as at June 2002 with an operating cost of approximately $250,000 per month. That gives us enough cover for the next 12 months assuming that, in the unlikely scenario, we do not generate any income during that period from sales of our products or surplus assets such as our gold interests.
Concept - are you able to provide us with some numbers in respect to your forecasts?
I am always reluctant to provide forecasts because of their perceived bullish nature. We run the risk of losing credibility. To give you an idea of our forecasts take for example the Malaysian market where there are roughly 5.5 million meters. A contract for 1 million devices would give us a gross margin of $50-60 million from the sale of equipment and approximately $10 million per year in recurring net revenue. If the size of the contract was to double there would be only a small increase in the company's total overhead.
Concept - what about your people. Can you give us an insight into your team?
We have a total staff complement of 24 of which 15 are highly skilled, young and very bright engineers. The remainder of the team is engaged in marketing, finance and ancillary services.
Concept - finally, you shares have failed to move. Do you know the reasons for that?
The recent appetite for investments in companies, which have interests in "technology", has been generally poor. I feel that this situation has created skepticism that we can deliver our technology as promised and secure sizable contracts. We are very confident that the execution of such contracts is within our reach and we continue to work hard to achieve that results. I think that any investor that purchases Intermoco stock at current market levels will not be disappointed.
AHL Price at posting:
0.0¢ Sentiment: None Disclosure: Not Held