Catching a megatrend: Why ASX-listed EPX could be one to watch in rapidly growing green tech space
Green technology has emerged as a megatrend that’s gaining momentum across the globe.
The term itself is broad and encompasses a wide range of innovations across various sectors – including renewable energy, transportation, agriculture, and waste management.
But one area of adoption that’s quickly gaining traction is the energy-efficient building space, where green technology has emerged as a permanent feature in many newly constructed structures to reduce energy usage.
As far as value propositions go, they can’t get more compelling: energy usage in buildings accounts for approximately a third of all greenhouse gas emissions annually.
One Australian company that’s vying for a slice of this potentially big global market is ASX-listed, EP&T (ASX:EPX).
Listed in 2021 with a current market cap of around $10m, the company’s flagship product is EDGE – a platform that detects real-time energy inefficiencies in buildings.
EDGE has been installed in over 550 buildings across Australia, UK, US, and the Middle East.
EP&T’s CEO, John Balassis, explained to Stockhead that when the company’s founder set this business up many years ago, he had a single focus in mind.
“And that was to help property owners reduce energy consumption. So the DNA of the company hasn’t really changed a lot.”
Balassis explained that the company (which is short for Environment, Property & Technology) has progressed rapidly since, and is now near an inflection point.
He points to three thematics that could drive the business to new heights.
The first is the ongoing energy crisis triggered by recent geopolitical tensions.
“In the UK and in Europe for example, we’ve seen an increase in energy prices by 200% to 300%,” Balassis said.
The second tailwind, says Balassis, is the need for building owners to switch their energy usage quickly as hybrid working becomes more commonplace.
“Whether it’s retail, commercial or industrial property, tenants and landlords want to be able to quickly downsize and upsize property based on the need.”
And the third element that has become more prevalent is legislative changes, which are driving a lot of the net zero programs.
“But the common thematic in all of these three is accurate and consistent data,” Balassis said.
“EDGE’s fundamental value proposition is that it constantly gives our customers accurate and consistent data.”
EP&T collaborates with building managers to improve and optimise building plant operating systems, and deliver significant energy savings.
The EDGE platform monitors and collects BMS (building management system) information 24/7 – including electricity, gas, thermal and water usage data, to identify inefficiencies and provide auditable data to rectify faults and optimise building operations.
EP&T estimates that across its client portfolio, the average reduction in energy consumption from using EDGE is 21%.
Around 85% of its clients achieve 10% or more savings, 38% of sites achieve 20%, while 18% of sites achieve 30% or more savings.
Meanwhile, almost half of the installations are in commercial real estate, which are basically office buildings.
“Then about 30% are in hotels, and the remaining is shared between retail, industrial, and some very small high rise residential,” said Balassis.
In Europe and the UK, where around half of EP&T’s clients are based, the pace at which legislative changes is taking place is very encouraging for the business.
“To be frank, the driver of our business in the UK and Europe has been legislative change, and how quickly the European Union and the UK Parliament have adopted environmental net zero legislation into mainstream commercial real estate.
“So that’s prompted quite a lot of property owners there to move quick into capturing the E bit of the ESG data reporting requirement.
“And what you’re seeing in Europe, and fingers crossed in in Australia, is legislative changes which in effect will move ESG reporting to be mandatory reporting.
“That will be a big tailwind for us, at the same time when energy prices are being where they are right now,” said Balassis.
Revenue in FY23 was $10.6m, an increase of 50% from FY22.
Around 89% of that revenue is recurring, and on average, a paying client stays around for 4.1 years.
“They’re relatively sticky in the way that they engage with our business, and from our perspective, our technology continues to be able to deliver for them – be it in energy savings, or to win awards,” Balassis said.
Over the last 10 years, multiple EP&T clients have won the world’s most prestigious energy efficiency and sustainability awards, including the renowned NABERS and GRESB awards.
Meanwhile, EP&T has provided the market with a ACV (annual contract value) guidance of between $16million – $17 million for the full year of FY24.
While the company is yet to be profitable, the needle is moving in the right direction: Underlying EBITDA has improved from a loss of $6.5m in FY22, to $4.9m loss in FY23.
“We right sized the cost base in the company, by flattening the structure of the business which has improved our operating efficiency metrics.
“As a result, we’ve also been able to stabilise the business, and have now reached two quarters of cash flow breakeven.
“So one could take the view that as we improve our cash flow, that’s a metric for how we’re likely to improve our profitability moving forward,” said Balassis.
The company has also just successfully completed a $2.9 million placement and institutional entitlement offer at $0.02 per new shares – with funds to be used mainly toward revenue growth.
“Changes to the business over the last 12 months has positioned the business to focus on growth, as it is now at operating cash flow break-even.
“Our technology continues to be useful, and we continue to sell the technology in a global landscape – and that’s no small feat for a small little Australian business founded in Sydney.
“And we’ve done a lot of work in the business to transition away from loss making, to being positioned to become profitable,” said Balassis.
ClearVue’s flagship product is the integrated glazing unit or IGU, a novel technology that enables windows on buildings to not only generate, but also conserve electricity at the same time.
How it works is that the IGU technology is first inserted between two panes of glass in a building window.
Nanoparticles are then inserted in the glass that deflect the energy of the sun, the solar radiation, and disperse it to the edges of the glass where we embed solar cells that pick up the energy, and turn it into electricity.
This means that buildings equipped with Clearvue’s technology have reduced cooling load.
X2M is an Australian company working with the South Korean government to alleviate the problem of water management.
X2M owns a patented technology that can be connected with water and gas meters, enabling utilities to obtain live data from the one platform.
The company is retrofitting water meters in South Korean cities to make them “smart” and communicate with X2M’s IoT platform.
For the household, the technology can provides accurate real time data on usage, increasing the accuracy of billing.
For the local government, X2M’s technology can detect leaks and inform social welfare services when there are cases of non-usage.
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