SP3 (ASX) Spectur IPO by Alto Capital

Originally posted by stardestr0yer ↑

I have a real interest in this so I did my own review below. A big thanks to @Inferno31 who as per usual took his time to dig his heels deep and do some exceptional investigative work on existing products in the market and their differences.
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Stock: Spectur (SP3)
Lead Brokers: Alto Capital (DEM, MCA, A3D)
Offer Dates: Open 27^th June, Closes 21^st July
Shares on offer: 22.5mil @ $0.2 ($4.5m) and 5.5m options @1c ($55k)
Total Shares: 41mil
Escrow: Both involuntary and voluntary of around 40% of existing stock.
Market Cap: $8.2mil undiluted and $12.4m fully diluted
Enterprise Value: 3.5mil undiluted
P/E: Not applicable.
Options: 14.3m @20c expiring 31^st Dec 2020.
Seed/Pre-IPO: 10c and 16c
Dividend: N/A

Business Overview:
Video Surveillance devices that require no physical connectivity to the telco or electric network. Ideal for locations where the installation of such infrastructure would be cost prohibitive or simply time consuming to undertake. In conjunction with the physical device they also offer Video Surveillance as a Service (VSaaS). That is the data is sent to the cloud to then be accessed by the customer. This is where the patent is relevant as it is how it uploads the data economically in order to reduce ongoing operational costs. I would say that this is fairly important as I reckon these devices would have to communicate with the Telstra network as most others are simply terrible in terms of coverage and speed but the trade off is they are the most expensive.

The aim is to target construction, mining, civil engineering, govt, agriculture and critical infrastructure environments.

Competition:
There are quite a few out there that are competing as highlighted in the prospectus and others. While I have not investigated them all, many seem to be able to have the same physical attributes so my initial feel is that the VSaaS offering is what is meant to be the primary differentiator. I also think being based in Australia will help them win business here unless the overseas competitors also have local offices. Many government organisations particularly will ONLY deal with Australian based businesses. In terms of look and feel I reckon Spectur by far look the best and most rugged.

Finances:
Consistent revenue growth of ~50% YoY from 2015-17. Expenses seem well controlled for a startup and losses for the last 3 years have been under $70k per year. That will obviously blow out for 2018 due to listing costs and growth initiatives. Doubt whether a capital raising would be required under a year unless sales got out of control and they had to stock up.

Management:
Very experienced management both within the business and at Board level so no concerns there.

Other matters of interest:
While the initial EV is low, you may as well increase it by $1.4 mil as I have no doubt the first 7mil performance shares will get awarded. YoY sales have been 50% yet to get the 1^st tranche of performance shares sales will only need to increase about 20%.

How will capital be used: Working Capital 46%, Production 16%, Offer 11%, Interstate Expansion 9%, R&D 9%, Bus Dev 6%,

Thoughts on the business:
Overall to me it looks like a well managed business but is competing in a competitive space. Anyone who offer 90% of what Spectur is offering today could easily catchup. I personally believe the patent would be superceded by other technology soon. I could also think of a few other markets for this product (eg. Sticking a speed camera in these things and putting them on country roads!). Would have also expected R&D budget to be higher (cater for changes in market like 5g technologies, newer batteries etc), but maybe they will just redirect working capital as required.

Regardless there are many aspects of this IPO that you cannot ignore:

Very reasonable EV even if diluted by first lot of performance shares;

Being led by Alto who have a 1^st class record in leading IPO’s recently;

Minimal loose stock below IPO price. Considering 40% is escrowed (some voluntary) and many of the shares are owned by large shareholders or management, very much doubt they would sell down;

Australian made (parts from overseas) and business is local. This to me is a massive factor in winning business locally and in govt.

Without a doubt throwing my hat in the ring with this one and will hopefully get allocated some stock. Given their revenue, I would also expect to see regular news flow of new sales with the new offices opening in NSW and Vic. Best of luck to those who already have a stake in this and for those that manage to get a stake as part of the IPO.

Expand

Very good review stardestr0yer.

One of the so called "competitors" is this company.

Moreton Bay Council's security cameras compromised - ABC News (Australian Broadcasting Corporation)

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(20min delay)
Last 1.7¢		Change 0.002(13.3%)		Mkt cap ! $5.082M

Spectur IPO by Alto Capital, page-11

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Spectur IPO by Alto Capital, page-11

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