With share markets under pressure, it is more important than ever to know the ‘story’ behind stocks; to grasp where their revenues and cash flows will come from in the future. It greatly helps to look for companies that ply their trade in industries where both regulation and the search for economic efficiency is pushing participants toward the solutions they offer. Here are two such situations from the world of road transportation: both are micro-cap situations, followed by only a handful of analysts, and not greatly liquid – but situations where patience could be well-rewarded in the long run.
- Acusensus Limited (ACE, $1.015)
Market capitalisation: $141 million
12-month total return: 48.9%
3-year total return: n/a (listed January 2023)
Estimated FY26 dividend yield: no dividend expected
Estimated FY26 price/earnings (P/E) ratio: n/a (loss-maker)
Analysts’ consensus valuation: $1.365 (Stock Doctor/Refinitiv, two analysts)
I looked at road safety technology company Acusensus a year ago https://switzerreport.com.au/two-2023-floats-going-cheap/ , but it’s worth taking a fresh look. Acusensus is a very interesting company in both the technological sense and the social sense. It designs and delivers AI-enabled road safety solutions to governments and businesses. The company’s technology detects – and provides prosecutable evidence of – violations of the road rules, in areas such as using a mobile phone while driving, seatbelt compliance, and speeding.
Acusensus has created a solution that tries to address the “fatal five” most common causes of road deaths: speeding, impaired driving, failure to wear a seatbelt, driver fatigue and driver distraction. Collectively, these lead to the deaths of 1.19 million people each year around the world.
For more than 40 years, of the fatal five road safety issues, only speed was being addressed by technological enforcement. Acusensus is revolutionising road safety with solutions that have been deployed for three of the critical behaviours – speeding, drivers not wearing a seatbelt and drivers being distracted behind the wheel – and is developing solutions to the other two.
- Speeding: Acusensus supplies speed enforcement technology and services in most of the Australian states (Queensland, NSW, the ACT. South Australia and Western Australia). Speed enforcement can be supplied standalone, or in conjunction with phone and seatbelt enforcement. ACE receives a fixed monthly fee, under long-term government contracts.
- Mobile phone distraction: Acusensus supplies the majority of Australian states and territories with distracted driving enforcement camera technology and associated services. It was the first company in the world to supply this technology.
- Not wearing a seatbelt: Acusensus supplies seatbelt enforcement camera technology to half of the Australian states. It was first in world to supply this technology.
- Impaired driving: Acusensus is developing technology to identify whether drivers are under the influence of drugs and alcohol, to provide real-time notification to police officers of suspected offenders. Acusensus deployed a world first pilot of this technology in the UK.
- Fatigue driving: Acusensus heavy vehicle detection technology and licence plate recognition technology could be used to assist in the prevention of fatigue driving.
The company has also expanded its capabilities into licence-plate recognition and railway-crossing monitoring.
Acusensus’ platform can capture high-resolution, prosecutable evidence of illegal driving behaviour 24 hours a day, seven days a week, in all weather conditions. This can be done no matter the level of sunlight or glare, with very high clarity and without blur, up to vehicle speeds of 300 kilometres an hour.
In November 2024, Acusensus opened up a new diversification, securing a contract with construction and utilities contractor Fulton Hogan to provide its safety technology for roadworker crews in Australia and New Zealand. The AI-driven technology has been developed to help protect workers through real-time monitoring, alerting and tracking within worksites, to gain critical data on vehicle proximity to workers with the ultimate goal of enhancing safety and providing operational insights.
While 93% of revenues currently come from Australia, the company is starting to expand internationally. In December 2024, won a NZ$92 million five-year contract from the New Zealand Transport Authority for a new nationwide mobile speed enforcement program. In the United Kingdom, Acusensus is working through the first real-world deployment of impaired driving enforcement prototype with Devon & Cornwall Police. In the US, where Acusensus opened a Nevada headquarters in 2023, it has three state-level enforcement (speed, distracted driving and seatbelt compliance) projects, in North Carolina, Arkansas and Georgia). Offshore revenue rose by 46% in the December 2024 half-year.
In the first half of the current financial year, Acusensus lifted revenue by 16%, to $28.8 million; increased total contract value (TCV, the known value of contracts signed with customers) by 36%, to $278 million; boosted earnings before interest, tax, depreciation and amortisation (EBITDA) by 8%, to $3.4 million; increased gross profit by 18.2%, to $13.6 million; and generated free cash flow – that is, net cash flow from operating and investing activities, minus the capital spending the company does, and paying its bills – of $1.29 million. Revenue has now grown by a compound annual growth rate (CAGR) of 21% for the past five years; gross profit at a CAGR of 27%; and EBITDA by 30%.
Growth from new contracts means that Acusensus expects full-year FY25 revenue of between $58 million–$61 million, compared to $49.6 million in FY24, and EBITDA of between $4.3 million–$5.5 million. The financial position is strong, with cash of $30.3 million as at December 2024, and no external debt.
Despite significant progress, road transport continues to kill people on a scale that is comparable to cancers, cardio-vascular disease and respiratory diseases. Up to 94% of US fatalities involve the “fatal five” – and result from preventable and typically illegal behaviour. It’s very rare to have a company with such a clear social good flowing from its growth – and Acusensus is also well on track to be a profit-maker. This stock still appears to be good buying.
- EROAD (ERD, 76 cents)
Market capitalisation: $142 million
12-month total return: –3.8%
3-year total return: –32.2 a year
FY26 estimated dividend yield: no dividend expected
FY26 estimated price/earnings (P/E) ratio: 20.6 times earnings
Analysts’ consensus price target: $1.394 (Stock Doctor/Refinitiv, one analyst), $1.40 (FN Arena, one analyst)
I looked at New Zealand-based transport and logistics industry technology company EROAD in March 2024, and while it has barely changed in price, I think its’s tracking fairly well. There’s a pun intended there: EROAD works in the field of telematics, targeting commercial-vehicle fleet operators who need a straightforward solution to track and manage their vehicles efficiently, as well as to save time, reduce costs, and simplify fleet management. Ensure driver safety, stay compliant with road user charges (RUC) and support transport decarbonisation.
EROAD was the first company in the world to implement a GNSS (global navigation satellite system)/cellular-based road-charging solution across an entire country (New Zealand). It designs and manufactures in-vehicle hardware, operates secure payment and merchant gateways and offers web-based value-added services. EROAD modernises road charging and compliance for road transport by replacing paper-based systems with easy-to-use electronic systems. It is the largest provider of RUC compliance in New Zealand, and a leading provider of health and safety compliance and fleet management solutions.
The platform is used by commercial and government operators across New Zealand, Australia and North America to manage vehicles, assets and drivers with greater visibility and control. EROAD provides both hardware and subscription-as-a-service (SaaS) software; SaaS revenue is currently more than 93% of the total).
Globally, EROAD has now hit the 250,000 units installed milestone, which is driving operating scale. Operating costs as a percentage of revenue has come down from 82% in 2023 to 69% at the first half (September 2024).
At present, the home market of New Zealand generates 51.9% of revenue, with the US contributing 41.3% and Australia 6.8%. But the latter two are growing strongly, and the US will soon be the company’s biggest market. Broker Shaw and Partners believes the US strategy is progressing well, with the business pipeline in the US now twice the average level of the past five years.
EROAD achieved positive free cash flow – that is, net cash flow from operating and investing activities, minus the capital spending the company does, and paying its bills – of NZ$1.3 million in FY24, compared to negative free cash flow of NZ$29.9 million in FY23. This improvement was the result of growth in units, price increases and cost control.
When the full-year FY25 (to 31 March 2025) result is announced on May 26, EROAD will be compared by the market to its FY25 revenue guidance of NZ$190 million to NZ$195 million (compared to NZ$182 million in FY24), and earnings before interest and tax (EBIT) guidance of NZ$5 million to $NZ10 million (compared to NZ$4.4 million in FY24), normalised for the costs of company’s one-off 4G hardware upgrade program, which will conclude in FY26. EROAD expects to be free cash flow-positive in FY25.
The 3G shutdown and President Trump’s tariffs will show up in the result, although EROAD is in the fortunate position of having a financial year that ends on March 31 – meaning that it ruled-off its books before “Liberation Day.” The company makes 40% of revenue from the US, of which almost 90% is not subject to tariffs. However, EROAD produces its hardware in Indonesia, the Philippines and Vietnam, and the company has said it is examining options to reduce the impact, such as shifting to other countries and refurbishing existing US-based hardware.
That said, EROAD has a proven product that helps fleet managers improve safety, streamline their business operations and improve the unit profitability of their vehicles, and that puts it in front of strong tailwinds in the large North American market, and in time, in other markets. The global telematics market is growing at an annual rate of around 12%–16%, but EROAD believes that less than half of commercial vehicle fleets currently use telematics.
ERD also looks like value at present, with the caveat that it can’t afford any bad surprises in its result in a couple of weeks’ time.
