my tip for 2005, page-13

re: my tip for 2005--- for meerkat Meerkat
You are correct in that RDF was once a struggling company similar to Transol trying to make it's way in the traffic enforcement business.

There is however one very significant difference. When RDF was starting out a few years ago their were no established compeditors. All the players in the market were start ups so it was essentially a level playing field. RDF has since emerged as the leader in the market.

This now presents tremendous problems for a new entrant such as Transol who are clearly undercapitalised for the task. If transol had another 20 to 30Million dollars in cash they may be able to make it, but they dont and I dont see how they will raise the funds.

Transol will need at least 150 installed camera's just to cover overheads. Once they get to this stage they will still have to borrow 100% of the capital required to install camera's. So i see funding as a huge obstacle for them. They are currently claiming that they can fund at least 100 installs from this rentworks lease funding. My view is this is just more hot air.

However before funding will become a isssue they have to win contracts and this is just not going to happen. RDF,ACS and Nestor are now established players and are not going to let transol get a foothold.

Transol did win a few contracts around the time they floated last year but have since won very little. I would also suspect that they knew they would win those contracts and timed the float to con-incide, so as to give the impression they were doing well.

You should also be aware that the contracts they won were in small cities where the other players probably did not bid. I will not be surprised if these initial contracts turn out to be un-profitable.

In more recent times Transol have been bidding at prices much lower(up to 50%) than RDF in attempt to win some contracts without success. Even if they were sucessful they would have very low profitibilty contracts.

When you also add in that their technology is inferrior to RDF and that they have no speed option it becomes more difficult to imagine how they will win enough business .

To simplify just put yourself in the position of the council selection commitee. You have RDF,ACS,nestor and transol. The first 3 have established businesses, the fourth transol have no proven track record, are financially weak and little experience.

Who would you pick

As to why there is no American market leader I think the reasons are
1. ACS was a market leader in wet film but through poor management (complacency) did not show any respect to the digital compeditors which were emerging a few year ago
2. Because there really was a limited market in the US the local companies did not recognise the potential
3. Australia being much more advanced than the US in traffic enforcement gave RDF to chance to develop a digitial solution here and susequently export it
4. RDF has prospered largely because american compeditors have shown little or no respect to RDF and consider themselves to be superior

Given that the US market is still in it's infancy it is still possible that a significant american player will emerge. I doubt that any of the existing companies will be the one.

If it comes it will have to be via a merger of 2 or more of the existing compeditors or the takeover of RDF by a american company. I doubt that anyone could start from scratch