Australia | Jul 21 2006
By Chris Shaw
Innovative technology companies in Australia don’t often attract a lot of support, so more often than not they are forced to sell the technology to richer companies from larger markets, particularly in North America.
One company attempting to develop its product internally is DataDot Technology (DDT), which specialises in developing anti-theft and anti-counterfeiting microdot technology.
Intersuisse rates the stock as a Speculative Buy, suggesting there is growth potential in the company’s key market, which is anti-theft technology for the automotive sector. Datadots are currently applied to all Holden HSVs, along with high performance BMWs and Subaru’s imported into Australia, as well as an increasing number of cars in the after sales market. Total vehicle numbers using the technology currently stands at about 75,000 annually.
The broker suggests the upside comes if the company can move into the motor vehicle manufacturing process, which would provide a significantly larger market for its product. With this in mind management has been working to develop a robotic device for applying the dots, having achieved some success by developing one that can complete a single vehicle in about 45 seconds.
Industry bodies such as the National Motor Vehicle Theft Reduction Council are believed to approve of the technology, the broker suggesting there is also upside potential as insurance companies are likely to put additional pressure on the industry to introduce some mandatory form of marking as a way to lower the costs of stolen cars. The broker estimates such thefts cost about $500m annually in Australia.
The New Zealand market also looks promising in this regard, the broker noting mandatory marking of cars is expected to be introduced in that market in coming years, while the company also has a joint venture in place in China that provides exposure to a growing market.
Performance by the company has been solid, the broker noting revenue for the year to December 2005 was $4.46m, up 49% from the previous year. Funding the development of its new technology should also be no problem in the broker’s view, as the company recently raised $8m via a placement of shares at $0.42.
Given the company is only capitalised at about $35m it receives little coverage in the broader market, as no brokers in the FN Arena database officially research the stock. Thomson One Analytics shows there is a median price target on the shares of $0.60, which compares to a trading range over the past 12 months of $0.225-$0.565 and a last closing price of $0.45.