AI is all the buzz on the ASX; here are three ASX-listed companies getting on the front foot with world-leading offerings in their respective fields.
- Straker (STG, 48.5 cents)
Market capitalisation: $31 million
12-month total return: –29.7%
3-year total return: –37.6% a year
Forecast FY25 dividend yield: no dividend expected
Analysts’ consensus price target: 89.2 (Stock Doctor/Refinitiv, one analyst)
AI-powered translation company Straker is riding the wave of generative AI, moving beyond its original base of translation services and into AI-driven content verification and compliance. To recognise this, in the FY24 financial year (ending 31 March) – which the company describes as a “transformative” year – Straker rebranded from “Straker” Translations to simply Straker.
Straker first listed on the ASX in 2018, as a dual listing, coming from its native New Zealand. Back then, Straker was on the way to becoming a global leader in translation services, with its Ray translation platform that used machine translation, a proprietary cloud-based platform and a cloud-based pool of freelance translators.
Straker’s model involves automating big volumes of translations while still using what it calls a “human overlay” – for example, a complex or specialist topic such as an aeronautical engineering manual will require an expert human to refine the translation. That’s where the human “crowd” comes in. The machine has the first go at the translation, and then the humans came in, with cloud-based ‘refinement,’ followed by a quality review. There was also real-time machine learning happening all the time, ‘training’ the translation platform.
Straker has built up a global business enabling the translation of documents, technical manuals, websites and e-commerce platforms for both large and small businesses across a range of industries. The Straker Ray platform has continued to develop, as its data set of translated word pairs has increased, its machine translation capability has become faster and more accurate, meaning the platform became more efficient, and was able to scale-up.
The platform now supports translation between 250 languages. It was integrated within the enterprise-grade Language Cloud platform, Version 2.0 of which has been rebranded as ‘AI Cloud,’ which serves as the strategic cornerstone for expanding software-as-a-service (SaaS) revenue streams within the existing client base.
More recently, Straker has moved to meet the ballooning demand for AI-driven content verification, introducing in FY24 its AI-driven tool, Verify. Verify discerns content suitable for direct use from machine translation and content requiring human review, providing substantial cost savings for clients. Verify has a ‘verification’ component, that gives customers the ability to scrutinise content for factual accuracy, and a ‘compliance’ feature that is tailored to streamline processes for customers’ audit and compliance teams, reducing both internal and external costs. The product goes into workplace apps, and handles translation processes inside a customer’s business, embedded in the tools employees use every day.
FY24 also saw the establishment of the Managed Services (MS) division, which mainly serves key enterprise customer IBM, with which Straker has had a strategic translation services partnership since January 2021, with the original agreement due to end in January 2023; in November 2022 the companies renewed the contract for three years and extended it from the 55 languages envisaged in the original partnership, to “any language combination that IBM might request.”
Straker also has partnerships with Microsoft, Salesforce and Slack.
In the year to March, Straker record revenue, of NZ$50 million; earnings before interest, tax, depreciation and amortisation (EBITDA) surged to NZ$4.5 million, a threefold increase from NZ$1.4 million in the previous corresponding period; and free cash flow (FCF) improved by NZ$3.2 million, to get into the positive at NZ$2.3 million. The gross margin, at 63.8%, exceeded the company’s guidance, and has risen 6.8 percentage points over the past two years, a highly credible performance. The balance sheet is healthy, with no debt and cash reserves of NZ$12.2 million. While net profitability is several years away, Straker is poised to leverage its growing suite of AI-powered applications to boost its SaaS revenue and convert a larger proportion of its revenue from ‘Repeat’ to ‘Recurring’ – particularly through Verify. That is the key for Straker, and it’s what makes it an exciting prospect. Straker says its global market is a US$73 billion market that is growing but remains “open for disruption” – it forecasts that the global translation services market will exceed US$95 billion by 2028.
The industry is experiencing a significant shift from traditional processes to AI-based solutions. Straker is well-positioned to capitalise on this shift, ploughing more than 70% of research and development (R&D) spending into AI initiatives.
- Beamtree (BMT, 22 cents)
Market capitalisation: $63 million
12-month total return: –10.2%
3-year total return: –18.1% a year
Forecast FY25 dividend yield: no dividend expected
Analysts’ consensus price target: 59 cents (Stock Doctor/Refinitiv, two analysts)
Beamtree is a global healthcare technology provider that provides hospitals, clinics and pathology labs with software tools to help professionals make better decisions and improve patient outcomes. It has more than 1,000 implementations, with 180 customers, in 25 countries, and earns revenue from licence, subscription and usage fees. In FY23 the company earned $22.8 million in reported revenue – up 38% on FY22, and more than five times what it brought in just three years earlier – and all of that revenue was classified as annual recurring revenue (ARR). International revenue surged by 78%, to $7.3 million (32% of revenue). Beamtree has given guidance of $60 million in ARR by FY25.
The product suite is designed to help healthcare providers gather data, and generate from it “deep insights and action,” in four key areas: Diagnostic Technology, Clinical Decision Support, Coding Assistance and Data Quality, Analytics and Knowledge Networks.
Beamtree delineates the mission of these four areas as such:
- Diagnostic Technology: Enabling the effective delivery of diagnostic services as they underpin the future of health and personalized medicine.
- Clinical Decision Support: Combining human and artificial expertise with machine learning to enhance decisions that improve care, value, cand experience.
- Coding Assistance and Data Quality: Digitising and automating workflows with data, classification, coding and technical expertise to improve information standardisation, quality, and timeliness.
- Analytics and Knowledge Networks:
Combining data analytics solutions with peer-to-peer alliances that accelerate innovation and knowledge diffusion.
Beamtree’s AI tools include its revolutionary Ainsoff Deterioration Index (ADI) product, an application that tracks the wellness of patients in hospital in real time, using AI and advanced machine learning technology to track changes in key health indicators such as blood pressure, heart rate, respiratory rate, oxygen saturation, temperature, and renal function, and detecting subtle changes in a patient’s condition, predicting the likelihood of unexpected and sudden deterioration – effectively acting as an ‘early warning’ system to give clinicians the chance to intervene quicker, alerting them through a mobile device.
Another globally successful tool developed by Beamtree is RippleDown, its core diagnostic AI product. RippleDown is a piece of clinical decision support (CDS) software that automates more routine pathology and frees-up the time of the expert clinician to focus on more difficult cases. RippleDown can interrogate patient data across time and ‘reason’ with it at scale to generate insights based on individual patient’s unique circumstances and prepare the different medical scenarios that could apply to their situation, giving clinicians support and ultimately, improving patient outcomes. Global healthcare company Abbott Laboratories is in the second year of a three-year deal to be global distributor of RippleDown, with an option to extend for two more years.
Beamtree’s suite of products have an expanding global presence and plenty of prospects for growth; it is really at the crest of the wave of the application of advanced technology to transform the healthcare profession and give it the ability to not only handle the increasing volume of data that it generates, but to use this data much more effectively.
Last month, Beamtree released a trading update that said that company continues to perform in line with previously disclosed FY24 outlook guidance, including revenue growth of more than 20% and a positive operating profit for FY24. To support this, it reported that it had achieved operating profit of $100,000 in the third (March 2024) quarter, compared to a $500,000 operating loss in the equivalent quarter a year ago. At the end of the March quarter, the cash balance stood at $4.3 million.
Beamtree is not well followed by analysts or fund managers, and you have to do your own research. It is a lot cheaper than its peak of 65 cents in September 2021, but it looks a lot stronger business, with better growth prospects, now than it was then.
- DUG Technology (DUG, $2.63)
Market capitalisation: $311 million
12-month total return: 124.8%
3-year total return: 28.1% a year
Forecast FY25 dividend yield: no dividend expected
Analysts’ consensus price target: $3.45 (Stock Doctor/Refinitiv, five analysts)
High-performance computing firm DUG Technology arrived on the ASX in August 2020 at a share price of $1.50, a premium of 11.1% to its offer price of $1.35 per share. The IPO price implied a $134 million market capitalisation upon listing, which DUG Technology has more than doubled.
DUG develops software and high-performance computing (HPC) for real-world applications, built around innovative processing, algorithm development and storage solutions to leverage big data.
The company has developed a specialisation in the resources industry, in which it has operated for more than two decades: oil and gas is the primary driver of revenue and earnings. DUG says it delivers a “comprehensive geoscience offering” and that it “maximises the value of seismic data.” Its new proprietary multi-parameter full waveform inversion (MP-FWI) imaging technology has revolutionised seismic data processing, giving resources companies – mostly in the oil and gas industry – better results, and much more quickly than the technologies they have used in the past. DUG says its MP-FWI technology can produce higher-resolution images and reduce data processing from nine months to four weeks – removing the need for a conventional processing workflow – and stands to replace the incumbent methods for processing and imaging of seismic data, as the new global standard. Last month, DUG began the roll-out of this new technology.
The Services segment, the bulk of the business, provides clients with two types of services: data loading, quality control and management; and seismic data processing and imaging. The Software segment has one main product, DUG Insight, which is an intuitive and interactive software package for scientific data visualisation and interpretation, and processing of data sets of all sizes (including the extremely large) on a range of tools, from workstations through to very large HPC installations.
Apart from software and services, DUG offers high-performance computing-as-a-service (HPCaaS) from its own network of what it describes as “some of the largest and greenest supercomputers on Earth.” (The company’s patented, award- winning, immersion-cooling technology ‘DUG Cool’ reduces power consumption by more than 50% compared to a typical air-cooled data centre and is used in all of its data centres.) Clients connect to DUG’s supercomputers, located in three global locations, and can use the substantial compute and storage capabilities. DUG also provides software and algorithm support and development to enable a client to successfully operate on its HPC network.
There is also DUG HPC Cloud, a collaborative cloud platform that enables clients to mix and match the three product offerings with their own codes and expertise, to suit their needs and desired outcomes.
At the FY23 result, services generated 75.6% of revenue, with software 16.5% and HPCaaS 7.9%.
While DUG is rightly considered a resources specialist, its client base also features customers in radioastronomy, biomedicine and meteorology, from the government and education sectors, as well as growing commercial use. Demand for HPC services is likely to take off on the back of processing of big data: according to Global Industry Research, HPC is already a US$35 billion market and is expected to grow to US$57 billion by 2028.
In February, DUG got pounded after the release of its half-year result (to 31 December 2023), plunging as much as 29%, despite revenue rising by 23%, to US$30 million, and EBITDA by 4.4%, to US$7.1 million. The revenue boost was powered by a strong performance from the key services business, which delivered a 28% lift in revenue to US$25.3 million, but the market did not appear to like the fact that the EBITDA margin weakened significantly, down from 28% a year earlier (and from 31% in the second half of FY23) to just 24% for the March 2024 half-year. Net profit slid 31.6%, to US$1.3 million, compared to US$1.9 million a year earlier (and US$3.1 million in the preceding six months). DUG did not issue earnings guidance for FY24, but net profit will be down substantially.
But the analysts that follow DUG Technology are looking for a profit rebound in FY25, as MP-FWI is rolled-out and the company’s client base diversifies further from the cyclical oil and gas industry.
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