Treasure Chest | Aug 06 2019
FNArena's Treasure Chest reports on money making ideas from stockbrokers and other experts. Canaccord Genuity assesses a clear opportunity for BidEnergy to build a profitable operation.
-Enables easy monitoring of real-time energy use for enterprises
-Channels such as energy broking and facilities management identified
-Break-even expected across FY21-22
By Eva Brocklehurst
Energy software developer BidEnergy ((BID)) is pursuing contracts in a number of channels and geographies to gain beneficial scale, rolling out its "land and expand" strategy. While this makes it hard to predict revenue in the near term, Canaccord Genuity believes there is a clear opportunity to build a profitable operation.
The broker has initiated coverage with a Buy rating and $1.50 target, noting annualised revenues are low but growing quickly. BidEnergy reported annual subscription revenue of $4.6m as of June 30, 2019 from 92 clients across Australasia, the UK and US. Meters under management from active contracts almost doubled over the financial year, to more than 85,000.
The software-as-a-service platform enables the easy monitoring of real-time energy use for enterprises. The platform outsources workflow relating to energy expenditure from bill collection through to payment and uses automation technology that becomes more efficient as it builds scale.Yet businesses have the choice of using the software to automate specific bottlenecks initially, rather than outsource the entire process straight away.
The company has won contracts with large Australian organisations that have high energy expenditure and/or multi-site operations. These include BP, Toll Holdings, Cotton On, SingTel and Flight Centre. Additional market channels have been identified, such as energy broking and facilities management, which offer lower initial revenues on a per-meter basis but provide significant scale immediately.
For example, in December 2018 an agreement to serve the Australian customer base of facilities manager Cushman & Wakefield meant the company secured more than 10,000 meters under management in one contract.
Expansion Opportunities
BidEnergy intends to expand where opportunities present. Early success in Australia is being exported to the US and UK via existing relationships in Australia such as with BP in the latter.? Canaccord Genuity finds the UK particularly interesting, as the company is establishing partnerships in a large and complex energy market amid legacy processes that appear ripe for automation.
Many of the businesses in the UK have legacy processes which involve considerable manual/data entry requirements. Energy brokers, common in the UK, often provide administrative services such as bill validations and reminders, and can use the software to advise on energy consumption levels.
The broker considers the US a longer-term opportunity for BidEnergy. At present, not all US states have deregulated electricity markets, bills are issued less frequently and most are paid by cheque. BidEnergy acquired RealWinWin in November 2016 to build a foothold in the US market. This company helps small businesses secure rebates from utilities where applicable under state-based energy efficiency programs.
Another feature means the company can sell its software to other parties that may provide adjacent or overlapping services to energy users. Energy retailers may use the software to provide detailed dashboards to large clients or to validate accuracy of data before a bill is sent to a customer.
BidEnergy is also engaged in paid pilot programs with energy retailers to explore the potential of a self-service solution for enterprise customers in Australia. This may offer considerable upside which Canaccord Genuity does not include in forecasts. The broker assesses an addressable market of nearly 5m energy meters and expects break-even across FY21-22.
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