Short-term loss ahead but heavyweights sure
Company: ikeGPS Ltd Sector: Technology Overview: ikeGPS is the latest in a wave of technology companies to list on the NZX.
Its two products, GE MapSight and Spike, enable the user to take photographs, overlay measurements on to those photographs, model the data, and share them with other stakeholders.
The technology comprises measurement software and hardware that integrates laser, camera, compass and global-positioning system components, and is designed to increase efficiency and safety in the electric utility market (GE MapSight) and construction, architecture, insurance, asset management and defence industries (Spike). Pros: ike has some heavyweight backing. In December 2013, United States utility giant General Electric invested in ike and signed an agreement to sell ike’s solution for the electric utility market.
ike has development contracts with In-Q-Tel, a US organisation tasked with accelerating innovation for the US intelligence community. In-Q-Tel has an equity stake in ike.
New Zealand-based venture capitalist No 8 Ventures is also a cornerstone shareholder.
All are retaining their stake in the company, showing confidence and meaning that the bulk of the funds raised will go to growth initiatives.
ike notes that the potential market for its GE Mapsight solution is US$700 million (NZ$800m). Its share of that market is small but it already boasts some of the largest US utilities as customers. The $25m being raised from investors will be used to fund ike’s growth plans, including increasing the sales force and continuing to develop its solutions.
These expansion plans come with the proviso that they will result in sizeable losses for the foreseeable future. This is not unusual in the tech sector, where many companies are happy to book short-term losses in the chase for long-term gains.
Other major risks to consider include the potential for product obsolescence, ineffective intellectual property protection, and the company’s reliance on key partners. Section 6 of the prospectus outlines the risks. Price performance: Shares are being issued at $1.10 each, with trading expected to start on the NZX on July 23. Investment outlook: Much will depend on the overall momentum of the technology sector in the short-term. The company will also need to make sure it hits its prospectus targets.
A Broker’s View is written by Grant Davies, an authorised financial adviser at Hamilton Hindin Greene, which may hold an interest in the security. This article does not constitute investment advice. Disclosure documents are available by request and free of charge through www.hhg.co.nz.