V shape Recover en-route, page-12

Fundamentals. 101 for techfacts

1. Buddy started as a cloud based business in IoT. The Thor industries partnership is a glowing success and will continue to grow. The OHM business developed from a need to provide a start to finish solution to energy management in smart buildings and cities. To date, the OHM sales have been slower than hoped. There could be numerous reasons for this, but the main one ,IMHO, is its inability to control the energy consumption either automatically or remotely. I expect OHM 2.1 will address this issue. Management have told us the March launch has been delayed until June in order to bed down the LIFX deal. I suspect that if this LIFX deal was available 12-18 months ago, that OHM would not exist in its current form !!
2. Having said that, BUD ohm sales are happening slowly. The process takes much longer than most expected. For example, a council agrees they need to monitor their buildings in UK. They contact Buddy. In the first week of meetings they outline their requirements and what buddy provides. Week 2-4, Buddy visits the multiple sites with building managers and the like and scopes out the required work for each individual building. They return to the office and prepare a scope of work with a quotation. Week 4-8, the quotation is compared to others and assessed at multiple council meetings. Week 10 a decision is made that Buddy wins. Week 12-16, the ohm begin the be installed, with co ordination of building managers, trades people and buddy staff. After a 3 month paid trial, the product is approved for use. A contract is prepared and sent back for the council to sign. It sits on their desk for another 6-8 weeks. There is next to zero urgency. We are now 8 months into this deal!!!! This does NOT mean OHM is a failure at doing what it said it would!! Eventually, a deal is signed like the one in Doncaster. They start with 5-6 buildings and slowly build it up. IT TAKES TIME.
3. What fundamentals have changed in last 12 months for Bud sales MOVING FORWARD--- The level of urgency has significantly increased via a) British legislation to provide a carbon footprint for businesses or pay a higher tax rate as of 1 April. (b ) European requirements to comply with the Paris Summit have begun to kick in. (c) Resellers have finally been trained and have launched the product to customers. ( remember they receive 1/3 of everything they sell )
Having acquired LIFX means they can bundle sales and the lifx sensors can be controlled automatically or remotely. ( lighting is more than 60% of energy consumption in a building )
4. Bud will be cash flow neutral by the end of this year. This can be achieved by a combination of cost cutting and increased sales. LIFX will be able to access substantial working capital and expand its sales exponentially and globally. The revenues are expected to be $70m- $100m with a positive $5-$10m NPAT. Compare those number to other asx companies that have that profile!!!! What is their market cap?
5. With regards to the debt for the lifx deal: Leverage IS NOT a dirty word. Most people have made money on their property using huge debt. As long as the leverage is used to expand and grow the profitability of the business then the interest payments will be easily covered. This is a far better solution than the dilution of a equity raising at these levels. In a few years time the debt may be paid off with a CR at $1.00.

IMHO, the coy fundamentals are now in place to deliver significant result over the next 12 months. Like most long term investor, I wish I was buying here at 6c rather than 16c. But I am not bitter about it. I look at what the coy is now and assess it on those fundamentals. I expect a v shape technical recovery to new highs in the not to distant future. But DYOR.