Google's acquisition puts spotlight on NetComm
Local investors wouldn’t be alone if they felt they are missing out on what could be the next big thing Google has jumped on.
The internet behemoth paid $US3.2 billion for home automation company, Nest Labs, as it bets on the explosive growth of the category.
Google’s move fired up listed North American home automation companies, with Control4 Corp surging 70% and Avente Logixx adding 15% in the last two days.
Even Chinese-listed Zhejiang IDC Fluid Control (the maker of plumbing equipment including intelligent control systems) appears to be basking in the afterglow with a 7.6% jump in the past few days.
However, there is a way for Australian-bound investors to gain exposure to this investment thematic – and that is through Uncapped 100 stock NetComm Wireless (NTC).
The trend for appliances (such as Nest’s smart smoke alarms and thermostats) to start communicating and networking with other devices is more commonly referred to by geeks as M2M, or machine-to-machine.
NetComm develops communication modules to the M2M space, although it is primarily focused on industrial applications at the moment. It has a contract to supply smart meters to SP AusNet (SPN) and has signed a global agreement with Vodaphone, which is recognised as a world leader in the M2M solutions space.
“Everything is automating. People want to connect anything and everything to central servers or devices,” says NetComm’s chief executive David Stewart. “That’s very good for us.”
How quickly and easily NetComm branches into the consumer M2M space really depends on the common protocol Google chooses to unify smart home appliances, but it probably wouldn’t take NetComm much to expand into this segment if it ever takes off.
This is not to say NetComm’s success hinges on home automation. The reality is that the company already has a lot on its plate with the opportunities in the industrial segment. Indeed, 2014 is a big year for NetComm as it has to prove to shareholders that the deals it has signed is translating into top and bottom line growth.
Investors will get early hints of this when NetComm hands in its half-year result next month, and Stewart says investors can expect a “pleasing result”. If that comes to pass, it could make NetComm’s full-year guidance look somewhat conservative.
Management said late last year that revenue is expected to come in between $58 million and $63 million, while earnings before interest, tax, depreciation and amortisation (EBITDA) is tipped to reach $4.6 million to $5.1 million for 2013-14. This compares with the $42.9 million and $803,000 respective figures posted last year.
NetComm has surged 76% over the last 12-months.