Trac Group Holdings targets listing on the Australian Securities Exchange in early March and seeks to raise up to $6.5 million in an Initial Public Offer to commercialise its innovative solar and thermal roofing solutions.
The construction industry has been one of the most significant drivers of the Australian economy in the past decades. The Australian Bureau of Statistics states that during the June 2015 quarter all construction work completed totalled nearly $50 billion with the majority generated in civil engineering. Residential construction totalled roughly $14.6 billion.
As part of this enormous industry, more than 180,000 new dwellings are being built in Australia annually. The average roof area for a small house is approximately 100 - 150 square metres and even though there is a trend to build more sustainable and energy efficient roofs, overall the industry has witnessed limited innovation to-date. Modern roofs can absorb or reflect heat and an increasing number of Australians try to use this space efficiently by installing solar panels.
Trac Group Holdings aims to tap into this macro-trend and supply an innovative product to an industry that has lacked development to date. Trac Group designs, supplies and distributes innovative and sustainable roofing solutions. The roof tiles are integrated with solar photovoltaic and thermal capacity and the company’s technology is protected by an intellectual property portfolio.
With research and development largely completed and patents secured, Trac Group is now focusing on monetisation of its technology, establishing sales and channel marketing partnerships. To date the company has not made any meaningful sales, but plans to use some of the funds to increase sales growth and build brand value in the Australian market. Even though the company has not yet established a footprint in the domestic market, management targets an international roll-out of its products as there are limited cities in Australia with a population of more than one million people.
However, the Company remains reliant on external capital to fund its operations and there is no guarantee that ongoing funding can be secured, nor that sufficient interest for its product exists. Trac Group has a limited operating history and despite management’s ambition to monetise its innovative product, it is yet to be determined if there is a market for this product. A significant degree of unallocated free float may impair trade in the Company’s shares.
The technology could potentially substitute for existing traditional roofing materials and management seems to be targeting the right areas which are high socio economic suburbs with high value houses. However, IPO participants should be aware of principal risks surrounding funding requirements, a lack of successful precedents and a large free float. Conclusively, the offer could be attractive for anyone seeking speculative exposure to the demand for sustainable building product, but overall the IPO is lacking catalysts.
Feb 18, 2016
Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian. Simon worked for Wise-owl from 2013 until January 2020.