Energy Action EAX

[mark100]

Energy Action is a recent listing on the ASX. Issue price was $1 and they raised $3.8m. No vendor shares were sold. At the current price of $1.23 the Market Cap is $31m.

From the prospectus:

“Energy Action has developed Australia’s only online exchange for conducting reverse auctions for energy. Using a web based technology platform developed in-house and refined over the last decade, since 2005 the Company has conducted more than
5,000 reverse auctions with a Delivered Electricity Price value in excess of $3 billion, yielding savings for its customers of more than 7%. An upgrade to this system is planned to be released in Q2 FY12, and the system is designed to be highly scalable in terms of volumes handled and to be able to handle other utility service contracts such as gas and water.
In addition to the auction platform, Energy Action has developed a package of energy efficiency and support services branded as “Activ8”. The Activ8 service has been evolving since 2002 and it is the core of Energy Action’s energy monitoring and contract management services. This product stream is built around a largely automated customer centric monitoring and reporting system developed and refined in-house by Energy Action. This enables the Company to send to customers, for example monthly, (or even daily) reports on their energy consumption, alerts on excess demand, an overlay of the day’s temperature and other details. This aspect of the business is also highly scalable.
More recently, services have been expanded into “Activ8+” which is a range of energy efficiency and sustainability services provided by a team of technical and engineering specialists.
The Active8 services have grown strongly and contribute more than 60% of the revenue, with the balance of income from Auctions and fee for service consultancy work.”


The business has been in operation for 11 years and future revenue is transparent through forward sold contracts. They have $54m of revenue already locked in over the next 5 years (forecast FY12 revenue is $17m)

The prospectus was one of the better ones I have seen for some time. Nice and transparent with previous years NPAT, not quoting EBITDA to make the multiple look lower or using proforma number to hide mistakes.

Prior years NPAT are:
FY09 $1.56m
FY10 $2.37m (52% growth)
FY11 $2.94m (24% growth)
FY12 forecast $3.83m (31% growth)

Based on the forecast FY12 result the forward PE is current 8.1x and return on equity over 50%.

They also intend to pay out 50% of earnings as FF dividends with an interim payment to be made early next year.

EAX could benefit from rising electricity prices in a post carbon tax world.

I have bought a few post listing.

[drillfix]

Mark, sounds very interesting there mate, good post.


Cheers Mark ! :)

[drillfix]

Just looked at the Investor ranges page.


Seems there are only a total of 447 shareholders shown in Oct 2011

Here is a breakdown of holders.
100K + there are 24 holders
10 - 100K there are 53 holders
5000 - 10K there are 83 holders
1- 1000 there are 287 holders


This does not mean the number of holdrs wont change, but interesting all the same. Very illiquid stock to trade though, as there only seems to be approx 48 Million shares on issue.

Also, the only names in the top 20 I recognise are Zeus and HBSC.

What was the post listing price Mark?

[mark100]

drillfix, The issue price was $1 and they traded between $1.30 and $1.23 on listing day.

The purpose of the listing was not so much that they needed capital (they are debt free) but they wanted to lift their profile. No vendor shares were sold. So most of the company is owned by the founders and senior management at this stage (85%). Bill Moss (ex Macquarie in the boom days) is a non exec on the board and he holds 2.5%.

This stock is not for day trading!

[drillfix]

This stock is not for day trading!

Can only agree with you 100% on that one Mark :)

Thanks for the info though, I am sure it will be of interest to many~!

[percy]

Yes thank you mark100.Have put on my watch list.

[mamos]

What are the risks to Energy Action's business?

[mark100]

Solid result for EAX.

H1 NPAT of $1.75m, up around 15% but if you add back the one-off listing costs NPAT is up almost 40% to $2.1m with an annualised ROE of over 40%.

Prospectus forecast is for FY12 NPAT of $3.8m. On a normalised basis (adjusted for listing costs) they look like easily coming in at over $4m, maybe $4.3-$4.4m id the second half keeps growing. So despite been up 70% on its listing price the FY12 PE is probably only around 10 or a bit less.

Cash flow and balance sheet both look good as well and I will keep holding. The Boat Fund might have a few talking about EAX now but I have to say I was on to EAX a bit before him (but thanks for the publicity TBF)

[drillfix]

EAX sure have made some gains since last posting Mark, but now the EMA structure is starting to show up in charts.

Nice run over the 6 weeks or early Jan, but perhaps time to take a breather by the looks of a couple indicators.


Saying that, anything could happen as look at MAD, cant get any more MAD than trying to work out the indicators of MAD which then started to make me MAD so I choose now not to chart MAD yet just watch it like a work of Art in motion painting its own story on the chart as deemed fit by broker houses or investors a like.

As always, though, everything at one point or another needs to take a breather or simply put, nothing goes up forever :P

Nice move up from $1.25 though.

IMO, if the stock is to take a breather then it should line up with some fib prices being:

76.4% = $1.605
61.8% = $1.51
50.0% = $1.44
38.2% = $1.365

Most stocks will test the higher % numbers at some stage by nature, however there is a saying in the Fibonacci retrace from rises that a fall back below 50% shows weakness and higher probability of more decline.

The higher the bounce off the higher the FIB % can be interpreted as higher or stronger the bounce from it giving the stock strength.

Anyway, that's just some technical babble for those who can relate other technical speculative thinking.

Good luck to holders :)

[mark100]

Pie Funds latest newsletter says they have taken a position in EAX. I am a big fan of Pie and they have a great track record. Nice to see they agree with me on EAX.

Also an interview with the EAX CEO on Sky Business http://www.skynews.com.au/video/?vId=3427408&cId=Programs&play=true

[mark100]

Finally getting a bit more media coverage

http://www.leadingcompany.com.au/strategy/energy-action-the-value-of-liquidity-as-a-growth-strategy/201207311945

[Lizard]

Result looks on track, but I was a little confused by the forward sold contracts data.

The headline data said they'd increased to $65m from $47m at 30 June 2012, while the detailed written statement and presentation said they'd risen by $11m from $54m since 30 June 2011. So I'm not quite certain whether there was a typo or two in the headline, or whether forward sold contracts are quite volatile?

[mark100]

Hi Liz, yes results were good although I was hoping for a little better ($4.2m normalised NPAT). But outlook is good an the recent acquisition will help next years numbers as well.

Looking at their presentation total forward contracts have risen 20% from $54m to $65m over the 12 month Jun 2011 to Jun 2012 period. I was a bit confused by the $47m number as well. My understanding is that rfrward contracts are not a volatile number. Once you have the contract you have it until it ends so you only lose old contracts dropping off and hopefully they are replaced by the same customer renewing plus new customers.

My estimate for FY13 EPS is around 21.5cps. This assumes 20% EPS growth from the EAX business (16cps up to 19.2cps). And assuming the Ward acquisition has no growth it should add EPS of 2.5cps. So a total FY13 EPS of 21.7cps. Considering forward contracts are up 20% this could possibly translate into higher profit growth than 20% plus you would hope the Ward acqusition has a bit of growth as well.

Considering a fair bit of this profit is recurring it is feasible that the market may start to re-rate the PE as it become more well known in the market.

[steve fleming]

Market is being very unforgiving in the current reporting season, particularly in relation to those priced for growth.

EAX down 15% before closing down 10%

Little genuine EPS growth from what i can see, but earnings skewed to 2H. Plus a cash flow hit with commissions moving upfront, plus concerns over CEO departing.

[mark100]

Yes it was priced for perfection and the growth was not up to expectation. Plenty of revenue growth there but expense growth was too high. I had sold out at $3.10 a while back and was doing the odd short term trade on it. It now has more to fall in my view. Even accounting for the $0.5m of acquisition expenses, they will struggle to do normalised EPS of 19c for FY13.
I think it could see $2.50 or less before finding a bottom

[steve fleming]

http://stocknessmonster.com/news-item?S=EAX&E=ASX&N=725961

Nice work Fat Prophets....can't get more amateurish....they both start with "A" at least

"it is clear that Fat Prophets have mixed up ACCC action being taken against Energy Australia with Energy Action"

[mark100]

Yes it was priced for perfection and the growth was not up to expectation. Plenty of revenue growth there but expense growth was too high. I had sold out at $3.10 a while back and was doing the odd short term trade on it. It now has more to fall in my view. Even accounting for the $0.5m of acquisition expenses, they will struggle to do normalised EPS of 19c for FY13.
I think it could see $2.50 or less before finding a bottom

Nice result here. Even after a sub-standard interim result the FY result was excellent. I ended up buying a few in the days leading up to the result given analyst bullishness on the result and the buy side depth.

Underlying EPS up 22% from 15.9cps to 19.4cps, growth in forward revenue contracts up 17%, ROE is near 40%, net cash $6m etc

Guidance for FY14 of 10-15% NPAT growth is solid but a little disappointing given revenue growth is forecast to be 20% plus but in theory this extra investment should set them up for a strong FY15.

So FY14F PE is now around 15x which is not cheap but probably fair for a business that has a lot of annuity style revenue in what should be a growth industry. With a bit more of a track record it's the kind of stock that could trade at 18-20x in the future