BidEnergy has a strong RPA product offering which is getting the attention of large energy companies (Credit: BID)

 

BidEnergy (ASX: BID) sold off 41% yesterday after signing a distribution agreement with Origin Energy. BID is an energy technology company that has a Robotic Process Automation platform that can monitor and track energy usage from industrial customers. The deal follows the successful completion of a pilot project with Origin and adds credence to arguments supporting the merits of the technology. Origin Energy will lead the market in adoption of an RPA-enabled customer focussed platform, which BID argues will cut costs and drive long term value creation. The reason why the market reacted so strongly was that the contract is the first to be signed with a major energy retailer. The deal will significantly increase the company’s revenue stream, but it is the prospect of further deals with clients of this size that excited bulls the most.

The company has been successfully expanding over the past year, growing revenue 30% to $5.3m. Subscription fee revenue was driving this increase, which gives rise to higher overall revenue quality, since subscription revenue is recurring and thus more sustainable. The company’s rebate revenue, which is more dependent on government policy in the US, grew by a more modest 12%.

BidEnergy has struggled with monetisation of their products and declared a $6.6m loss last financial year. This is a significant loss for a company that is worth $79.1m and has a volatile share price. In case of a 50% share price decline and stagnant profit growth, shareholders would be diluted by around 20% a year to keep the company afloat, highlighting the imperative for the company to monetise it’s offering quickly. Further adding to negative sentiment is the former chairman suing the company for unfair dismissal, accusing members of the board of conspiring against him. Investors will need to balance several factors that could lead to outsized share price moves when forming an investment thesis on BID.

 

Disclaimer:

This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)

(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).

This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.

ASR has no position in any of the stocks mentioned.

August 30, 2019