FYI | Jun 12 2019
By Pitt Street Research
Sensera Limited ((SE1)) is an ASX-listed technology company with two distinct revenue pillars; Micro Devices (Micro Electro Mechanical Systems or MEMS) and location-aware wireless networked sensors and systems that comprise solutions for the Internet of Things (IoT).
Clients’ product roll out is driving growth of MEMS
Rapidly advancing MEMS technology facilitates usage of MEMS devices across Industrial and Medical industries, in products such as pressure sensors, organ-on-a-chip (OoC) and electro-optic devices.
The global microfluidics market alone is predicted to grow at an 8-year CAGR of 18.7% to US$23.4bn in 2025. As OEM customers ramp up production, SE1 should be able to grow on the back of their commercial success.
Increasing recurring revenues to drive Nanotron’s growth
SE1’s is shifting towards becoming a systems provider rather than just a component supplier. This is changing its revenue model and customers will be charged a recurring monthly fee rather than a one-time licencing fee and product sales.
The share of recurring revenue is expected to be in the range of 5% to 10% by the end of FY2020 and is anticipated to reach >50% over the next 3–5 years.
We believe a higher share of recurring revenue should lead to better predictability of revenues, and hence a higher valuation of the shares.
Valuation range of $0.50–0.58 per share
We believe that as the company scales up operations and production, cuts back on R&D expenses and moves towards a recurring revenue stream, margins should expand significantly.
Our DCF-based valuation projects an intrinsic value of $0.50–0.58 per share.
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