• The commercial use case for robotics and AI has expanded rapidly post-Covid
  • ASX stocks in the space are eyeing off global markets for their technology
  • Robotics technology has also been indexed to provide investors with broader exposure

Robotics, AI (artificial intelligence) and VR (virtual reality) – three buzzwords that have often been difficult for investors to wrap their heads around.

But like other sectors, the COVID-19 pandemic has been an accelerant for change in the use of robotics and machine learning.

A cohort of robotics and AI stocks are looking to capitalise with a partnership approach to established industries such as ecommerce and healthcare where demand has surged.

A good recent example of that is Vection Technologies (ASX:VR1), the only VR-focused company among ASX small caps.

The stock chalked up a 10x return this year amid a positive run of news flow through early October.

And speaking with Stockhead, chief operating officer Gianmarco Orgnoni said its key near-term focus is on deploying VR tech to assist hospitals in Europe combat the pandemic.

“In terms of key drivers, we see healthcare as a very strong opportunity,” Orgnoni said.

“Especially with the Covid-19 situation in Europe. Hospitals and health departments are looking for solutions that enable them to continue to operate, while avoiding contact as much as possible between patients and doctors.”

The company has commenced its first trial at Moscati hospital in southern Italy, for a wearable AR (augmented reality) device that allows surgeons to incorporate data from endoscopic equipment into their field of view.

“Our strategic goal is to become the first accredited solution for the introduction of augmented reality,” Orgnoni said.

“In our view that’s a very strong opportunity. We’re currently in talks with multiple parties in the healthcare sector, and that will be one of our key drivers over the next six months.”

Advance Australia (tech)

Closer to home, Stockhead also took the opportunity to catch up with James Hemmings, Vice President of Perth-based advanced robotics company Stealth Technologies.

A subsidiary of listed research company Strategic Elements (ASX:SOR), Stealth has caught the market’s attention with the development of its patented Autonomous Security Vehicle (ASV), in partnership with NYSE-listed engineering conglomerate Honeywell.

Earlier this month, the two companies successfully passed User Acceptance Testing (UAT) with the WA Department of Justice for the deployment of the ASV at Eastern Goldfields correctional facility.

Hemmings explained that the technology has been initially developed for two perimeter security use cases – autonomous patrol and surveillance of a property perimeter, and automated testing of perimeter intrusion detection systems, performed by the ASV’s onboard robotics.

“If you look at how that work is traditionally done, patrol and surveillance is largely done manually via human labour,” Hemmings said.

“First that labour cost can be quite expensive. And second, you can find yourself with surveillance blind spots if the level of accuracy isn’t where it should be, because of the mundane and highly repetitive nature of this work.”

“So that use case really lent itself to a robotics and automation solution in form of the ASV. For starters it has onboard technology capabilities which are far superior to that of a human security guard, in terms of video surveillance and sensor monitoring.

“Additionally we’ve built the ASV from the ground up to operate, day and night in outdoor environments that are often subjected to variable and harsh weather conditions.  And with its start of the art battery systems the ASV can operate continuously for hours at a time.”

Benchmarking innovation

For sectors such as robotics and AI, the level of advanced innovation involved means identifying the next multi-bagger investment is a particularly tricky excercise.

And in that context, Stockhead got some interesting insights from Richard Lightbound, the London-based CEO of EMEA and Asia for ROBO Global.

Established in 2013, ROBO Global built the first global benchmark index series to track robotics & AI companies.

The indices are now used as a platform for exchange traded funds, such as the NYSE-listed Robo Global Robotics and Automation ETF.

“We like the world of indexing for disruptive innovation because it brings a lot of structure,” Lightbound said.

“We can see robotics and automation is a multi-decade growth and return opportunity. But in the short term it can be difficult to pick winners. So we’ve created a platform that gives investors a broadly diversified basket of exposure.”

ROBO Global’s advisory panel includes industry luminaries such as Daniella Rus, director of the Computer Science and Artificial Intelligence Laboratory at MIT (“the home of AI”, Lightbound said.)

The company’s robotics index is comprised of over 80 stocks across 12 sub-sectors in 14 countries.

“We evaluate companies based on metrics such as revenue maturity, market leadership, and quality of the management team,” Lightbound said.

“We also factor in our ESG policy and a liquidity filter. That process gives us a score, and highest scoring companies go into the strategy.”

Over a five year period, Lightbound said the index had posted an average return of 16.9 per cent.

“So it’s been doing exactly what it was designed to do, which is outperform the global market and give investors something new.”

Billion-dollar markets

Turning back to the ASX, both of the companies we spoke to also highlighted the commercial application of their technology across multiple sectors.

For Stealth, the broader strategic focus is to make inroads in the critical infrastructure market sectors where perimeter security is of particular importance.

“What we’re seeing is very much an emerging theme from governments globally — certainly in Australia and the US – around proactive steps to strengthen and protect critical infrastructure,” he said.

Amid that backdrop, Stealth has also flagged opportunities across utilities, transport, energy, communications and defence.

“Our market research suggests all these sectors have some common attributes around maintaining high levels of perimeter security. So they’re all sectors we’re looking to test the ASV and validate market sector fit,” Hemmings said.

In a recent report, industry research group Data Intelo said the global perimeter security market is projected to grow at a compound annual rate of 12 per cent over the next six years, reaching $US282.6bn in size by 2026.

“That’s encompassing patrol and surveillance, and testing of perimeter intrusion detection systems,” Hemmings said.

“So through robotics and automation, we’re looking to really disrupt that and offer a higher quality solution, that generates a strong positive ROI for customers.”

Hemmings said Stealth’s initial strategy is to deploy the technology with Honeywell across the Government correctional facility sector in Australia and then build upon this with entry into the US. But the broader market fit goes well beyond this.

For Orgnoni at VR1, the goal is to execute Vection’s operational strategy in an environment where the take-up of VR and AR has accelerated.

“I think every investor is understanding that VR and AR are technologies that are becoming a must-have, not a nice-to-have for companies,” he said.

He added that 5G will play a “massive role” in the rollout of VR solutions, by allowing for the “effective deployment of heavy data across multiple devices”.

“From the investor standpoint – particularly in the second half of this year — we’ve received a lot of interest because people are understanding this tech isn’t just a gimmick,” Orgnoni said.

“That’s why I firmly believe 2021 will really be the year this kind of technology will be deployed on a larger scale.”