In Search of the Next Appen Limited
By Bob Kohut | 18.09.2017
Aussie investors have eagerly embraced Initial Public Offerings (IPO’s) in the past few years, especially in companies operating in “hot” sectors like technology. Unfortunately, many of these stocks see significant drops in share price following a hot start. One stock breaking that trend dramatically is
Appen Limited (ASX), debuting on the ASX on 7 January of 2015. The share price has been on a steady climb since and is now up over 800% from its first day of trading.
The Appen website describes the company as a
global leader in the development of high-quality, human-annotated datasets for machine learning and artificial intelligence.
While “human-annotated datasets” may be a bit of a mystery to some retail investors, the kind of language recognition software in contemporary “chat boxes” found in consumer electronic devices from smartphones to navigation systems is familiar. The technology behind those devices and behind the Appen’s language translation software is artificial intelligence.
The first definition of Artificial Intelligence came from a Dartmouth University professor in the US – John McCarthy -- who coined the term back in 1956.
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every aspect of learning or any other feature of intelligence can in principle be so precisely described that a machine can be made to simulate it
An early glimpse of the potential of an AI infused computer program came in 1997 when the IBM Deep Blue chess program defeated the world’s reigning chess champion, Russian Gary Kasparov. In 2011 another IBM creation –
Watson – beat two champions of the game show Jeopardy.
Both are examples of what the experts call “weak” artificial intelligence, in that the systems focus on a single task, as in the virtual assistants currently in use in most smartphones. While they are programmed to simulate human intelligence, the program is confined to a narrow range of tasks. Strong artificial intelligence is still on the horizon but it will usher in programs with intelligence akin to that of the human mind. A major problem facing developers of strong AI is the lack of certainty as to what constitutes full human intellectual capability. In short, if you can’t precisely describe it, how can you program a machine to simulate it?
Even without such agreement, researchers know the human brain is capable of performing a broad range of tasks, while today’s AI is limited to narrow tasks where computers mind-bending speed and calculating capability provide an edge.
Right now, AI is making major impacts in data collection and analysis that in many cases result in recommended actions for humans to take. There are currently at least four ASX stocks in addition to Appen that can make a claim to be involved in some form of weak artificial intelligence.
However, the gap between Appen’s performance and the rest of the pack is vast. Appen was generating revenue and making a profit prior to listing. In its first Full Year Financial Reporting in 2015 the company grew revenue by 62% and profit by 414% over its 2014 performance. For FY 2016 revenues climbed 34% and profit rose 26%. Half Year 2017 results continued the trend, with revenues increasing 39% and profit 50%. Growth forecasts are positive as well. Appen reported $0.105
earnings per share, forecasted to rise to $0.198 by FY 2018, a 37% increase. The company is already paying dividends, with the current payment of $0.05 per share forecasted to expand to $0.08 per share by FY 2018, a 26.5% increase. The company has about $20 million cash on hand with only $5k in debt and features a client list of most of the top tech companies around the world, including Microsoft and Facebook. The company also provides a range of data analytic services to automakers and government agencies as well as tech companies.
The following table lists the four stocks that could conceivably morph into the next Appen. Like APX, all five are recent ASX entries.
Southern California in the US is home to a growing list of entrepreneurial tech start-ups, among them
Brainchip Holdings (BRN) which listed on the ASX in late September of 2015. The first day closing price of $0.23 jumped to $0.39 in a matter of weeks and has been on a roller coaster ride since. The company affords an exotic appeal to investors eager for advances in AI, with its self-description as a “leader in neuromorphic computing.” Brainchip has developed a “spiking neural network” (SNN) technology that mimics neural patterns in the human brain. Unlike most AI in use today, SNN technology does not need to be pre-programmed and actually learns pattern recognition from repeated usage, in essence learning from experience.
The company has developed SNN into a neuromorphic chip, called Spiking Neuron Adaptive Processor, or SNAP and is ready for use in civil surveillance with its BrainChip Studio and BrainChip Accelerator, to recognize objects or faces from video surveillance footage. The company’s first commercial foray came in September of 2016 with SNAP testing for use in gaming casinos in the US.
The company’s Half Year 2017 Financial results showed an impressive revenue increase from US$71,447 to US$368,956, a 414% increase. However, increased R&D costs resulted in a loss ballooning from US$1.5 million to US$5.8 million.
Bigtincan Holdings Limited (BTH) listed on the ASX on 24 March of this year. The company offers a sales enablement platform – Bigtincan HUB – powered by AI for use on iPhone operating system (iOS), Android, Windows, and Blackberry, as well as Windows desktop, Mac desktop and Apple Watch OS. The company also offers Bigtincan Forms to digitally capture data and eliminate manual forms.
The company has offices in the US, the UK, Europe, Singapore, and here in Australia. In business since 2011, Bigtincan has been generating software subscription revenue from about 300 customers world-wide, including notable companies like AT&T and Merck.
OpenDNA Limited (OPN) listed on the ASX in November of 2016, reaching a high of $0.20 in March of 2017 before falling back. The company is incorporating machine learning via artificial intelligence into its data analytics platform for use by both consumers and corporations.
The OpenDNA platform is meant to bring together the dizzying array of increasingly connected digital devices and platforms. As a result of virtually any digital search, consumers are besieged with contacts, assuming genuine interest on the part of the consumer in the original search. OpenDNA allows consumers, at no charge, to customise unique user profiles, ensuring they are exposed to the kinds of contact they truly desire.
Companies are equally inundated with mountains of data regarding consumer behavior, much of which may be irrelevant. The platform has the ability to learn consumer interests, based on search behavior from both mobile and fixed devices. Corporate subscribers to the OpenDNA platform have embedded software codes in mobile devices, smartphone apps, and relevant corporate websites, enabling the platform to learn information relevant to the company. While very early in its development, the specificity of user profiles when compared to consumer data analytics available with Google or Facebook could give OpenDNA a substantial competitive advantage.
Xped Limited (XPE) listed on the ASX on 5 April of 2016 with a first day closing price of $0.04, climbing to an all-time high of $0.13 on 1 June before it began a slow and steady decline. The company has made key acquisitions since listing and recently completed a capital raise.
Xped’s core business began with the development of a solution to the challenges of an Internet of Things environment where each device manufacturer creates its own ecosystem, steering consumers into their products but making connection with rivals time-consuming at best. Xped has developed an Auto Discovery Remote Control (ADRC) technology that enables individual smart devices to be controlled from a central smartphone app once the phone is paired with the device. In effect, the ADRC device acts like a web browser, allowing access regardless of standards.
The company has added two acquisitions -- JCT Healthcare Pty Ltd and Jemsoft Pty Ltd. JCT provides software and hardware solutions in the healthcare market, offering Xped immediate revenue as well as potential for expanding its technology applications. On 7 September Xped issued a market update raising its revenue guidance from $1.2 million to $2.5 million, due to the JCT business and Xped’s partnership arrangement with Shenzhen Lenze Technology for use of the ADRC as well as other applications under consideration.
Jemsoft is an AI company and partial owner of a Media Intelligence company. Xped plans to incorporate AI into its existing technology.
Xped has the cash for development but close scrutiny of the company’s efforts reveal somewhat of a shotgun approach to growth, focusing on multiple fronts.
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