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Is Xped Ready to Serve the ‘Internet of Things’ Market?

Is Xped Ready to Serve the ‘Internet of Things’ Market?
Industry estimates for connected devices to the internet range from 20 to 100 billion. Xped aims to capitalise on this explosive growth momentum.
Apr 19, 2016 By Simon Herrmann Tags: XPE, Internet of Things

 

Xped Limited (“Xped”, “the Company”) is an Australian technology company focused on Internet of Things technologies. Xped is principally focused on the development and commercialisation of intellectual property (“IP”) to support the “internet of things”. Xped’s most advanced asset is intellectual property surrounding the Auto Discovery Remote Control (“ADRC”) technology. Xped was founded in 2008.

Following the successful completion of a $8m prospectus raising, Xped listed on the Australian Securities Exchange on 5 April 2016 via a reverse takeover of Raya Group Limited.

Issued capital is estimated to stand at $12.1million, or 0.7c/share.

The ADRC Technology is Xped's Primary Asset 

Xped has developed a portfolio of Intellectual Property (“IP”) that focuses on enabling any electronic device to be easily added to a network such as Wi-Fi and controlled via one master app known as a Device Browser, or DeB for short.

Xped’s primary asset is its Auto Discovery Remote Control technology (“ADRC”, “the technology”), which allows a single control unit like a smart phone to remotely control and command any common industrial device or household item.

Xped's ADRC TechnologyDevelopment commenced seven years ago and the technology is currently undergoing commercial trials. IP associated with the technology is protected by a granted patent in the US, and further patent applications in 13 countries.

Subject to outcomes of current user trials, Xped intends to commercialise the technology via licensing agreements with third parties.

The Internet of Things (“IoT”) is a colloquial expression for technology that enables physical objects or ‘things’ to collect and exchange data with cloud platforms, other things and humans via connectivity with the Internet.

Industry estimates for connected devices to the internet range from 20 to 100 billion with a median average of around 50 billion devices that could be connected to the Internet by 20201 . Other estimates suggest that IoT producers and service suppliers will generate revenue exceeding US$300 billion by 20202.

The "Internet fo Things" is Expected to Grow Exponentially Through 2020

As IoT technology will enable communication amongst objects generally not considered computers, collaboration from a broad range of stakeholders  is necessary.

Participants converging to facilitate IoT technology include object manufacturers, parts suppliers, software developers, and communications providers. This movement was characterised by the founding of the Industrial Internet Consortium by AT&T, Cisco, General Electric, IBM, and Intel in March 2014.

To date, a lack of historical interface between stakeholder groups has created a dynamic characterised by a lack of standards, or conversely too many competing standards.

Presently there is no adopted IoT solution that provides for the various needs of both consumer and manufacturer.
Xped is offering a technology solution which is agnostic to the competing interests of existing stakeholders. Its ADRC technology intends to markedly simplify the IoT on-boarding process and the provision of a single application or browser to control “things”.
Xped has invested more than $6m to date to develop the technology, and secure granted patents in the US, and further patent applications in 13 countries.

Xped has spent the past seven years developing and patenting its ADRC technology at a cost of ~$6million. The technology is presently at the validation stage which typically involves commercial trials and independent testing.
With the ADRC software supporting prototype demonstrations, Xped is now engaging prospective industrial customers.
To date, Xped has utilised a combination of direct and channel marketing strategies. Xped’s direct marketing initiatives have thus far seen various industrial manufacturers commit to commercial trials of the technology.

Xped is Engaging Prospective Industrial Customers

The Company has established MOUs with a US listed tech giant, and a NASDAQ listed chip set manufacturer. Additional MOU’s have been established with a number of privately held entities including South Australian based – Tytronics.

After satisfying requirements of the validation phase, Xped aims to commercialise the technology via a licensing approach. Xped aims to provide its intellectual property via reference designs, standard hardware modules, a pre-programmed chip and firmware for direct integration with a customer's own hardware.

Xped secured its first licensing agreement in March with privately held, LEAPIN Digital Keys LLC (“LEAPIN”). The LEAPIN agreement covers use of the ADRC technology within door locking systems, with Xped to receive USD$5 per unit sold worldwide.

Licensing agreements involving Xped’s other MOU partners are contingent on the outcome of further commercial trials and integration of the ADRC technology into chip sets. 

Economics: Xped Aims to Generate Revenue by Licensing ADRC Technology

Xped aims to generate revenue primarily by licensing its ADRC technology to third parties such as semiconductor vendors, device manufacturers and software manufacturers. Additional revenue streams are possible via the sale of device apps, usage data and services revenue generated from Xped’s platform.

The core business is to license Xped’s ADRC technology which will be based on a subscription model with volume based unit pricing. A single licensing charge may apply for software embedded into each chipset unit. Whilst the LEAPIN agreement provides a licensing fee of USD $5 per unit, expectations for licensing charges around higher volume markets is expected be in the order of USD $1.50 per unit sold.

 

The Company aims to generate revenue in the second half of 2016 following successful trials of products it has designed for a number of customers.

Another potential revenue stream can be generated by Xped charging a fee-for-service when assisting device manufacturers design-in ADRC to their products. The Company has created a range of reference designs for home automation products (IP camera, smart plugs, infrared blaster) that can be manufactured by consumer product manufacturers and sold.

Xped also aims to generate service revenue through Xped’s platform. The platform enables device manufactures to directly communicate with their end customers thus transforming them from "box movers" to service providers. Xped targets monetisation of services through cloud services or ecommerce.

Strong Demand for Xped's $8m Propsectus Raising

Xped does not presently generate revenue and is reliant on external capital to fund technology development.

To date Xped has financed operations via equity. Its most recent raising was a $8 million prospectus raising completed in March 2016. Xped issued 320 million new shares at $0.025 to raise $8m. In addition 150 million performance shares and 30 million Options were issued expiring 24 months from allotment and exercisable at between 7 and 13 cents. 

Issued capital after the prospectus raising is estimated to stand at $12.1million, or 0.7c/share. Following the prospectus raising Xped is estimated to hold approximately $9.7m in cash.

Investment View

Xped offers speculative exposure to demand....

 

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Simon Herrmann Author: Simon Herrmann Apr 19, 2016

Simon is a financial analyst at independent research firm Wise-owl who wants to change the world by disrupting the cliché approach to investment decision making with convergent thinking. Wise-owl’s goal is plain and simple: Find the best opportunities for our members by following a proven methodology and to create long-term value through high-quality advice, innovation, technology and education. We combine industry experience and the agile mentality of a start-up. Wise-owl is the future of stock market investing.

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