The future looks bright for Security Matters as analysts lift its valuation
Special Report: It’s been less than a month since Security Matters joined the ASX but a new report suggests the stock is already on the fast-track to success.
Researchers at TMT Analytics have put a $1.13-a-share price on the head of the brand protection, supply chain integrity and blockchain technology company, highlighting the opportunity presented by similar companies that are using blockchain to solve global supply chain concerns.
That’s 57 per cent higher than the price at closing Wednesday.
Security Matters’ (ASX:SMX) technology is known as “The Intelligence on Things” and allows any solid, liquid or gas to be invisibly and irrevocably ‘marked’ using a chemical-based barcode, and ‘read’ using a unique proprietary reader.
It is focused on providing a safe, effective and unique way to track items from raw materials through to manufacturing and sale in a world fraught with fakes.
The report suggests that the high target is due in part to the fact that each ‘reading’ is recorded on a tamper-proof distributed ledger, enabling products and materials to be accurately tracked across the entire supply chain.
The price was based around the valuation of a venture capital-funded peer and recent M&A deal involving companies that have successfully integrated blockchain into supply chain solutions.
Brands trying to keep pace with globalisation and growing international trade are struggling with supply chain management – a market is set to be worth US$19 billion by 2021.
Counterfeiting is another pressing concern.
OECD says around 2.5 per cent of global imports were fake in 2013, totalling more than US$ 461 billion in value and brands are increasingly investing in anti-counterfeiting measures to protect their IP and ensure product quality.
The report says however, these global problems can be ‘thwarted’ with SMX’s technology.
Potential across a variety of sectors
Security Matters’ markers are tailor-made for each application and can be used to trace almost anything – solid, liquid or gas.
The versatility of the technology – which was initially developed and proven by the Israeli Government – is another key advantage, according to the report.
“This enables SMX to provide an almost infinite amount of marker combinations (codes) it can add to the various layers to be marked. Furthermore, the markers are very durable and have a shelf life as long as the shelf life of the marked products themselves.”
This custom approach enables Security Matters to develop end-to-end solutions across a range of different sectors including food, pharma, electronics, precious metals and more.
“We believe SMX’s ability to link the physical world to the digital world by irrefutably logging product movements through the supply chain on a Blockchain is of very high value to customers and prospects companies in many sectors.”
“Counterfeiting of their products will become a thing of the past.”
Multiple revenue sources
While it’s still in the early stages of commercialisation, Security Matters already has a number of ways to generate revenue from its technology.
In addition to customer set up, customisation and licensing fees, SMX also aims to generate revenues from the sale of consumables, i.e. markers, either on a unit basis or per kilogram.
It will also take a clip every time a product is scanned and logged on a blockchain, generating value ‘per read’.
“A customer will typically pay a set-up fee, a price per kilogram of markers (consumables) and pay a cost per scan each time SMX’s readers scan and log a code on the customer’s product as it moves through the supply chain.”
“We believe this revenue model will provide a diverse and stable revenue base with each customer, while being highly scalable at the same time.”
Early adoption by market leaders
Security Matters says its plan is to target market leaders with trials as a way to encourage broader adoption of its technology across various verticals – and the approach seems to be working so far.
It has already secured a number of Memorandums of Understanding (MoU) and proof of concept trials, despite being in the early stages of commercialisation.
Experts say this momentum shows the need for SMX’s technology and the willingness of B2B players to pay for it, saying they expect “substantial future demand” for SMX’s products.
The company has reeled in formal and informal partnerships with the likes of BASF, Crossworks Manufacturing, Kafrit Industries and The Perth Mint but the report predicts large logistics companies, such as UPS and FedEx, could also be hooked.
“These companies are at the forefront of supply chain management. As such, we believe they can potentially play a crucial role in maintaining the integrity of entire supply chains through the adoption of novel technologies, such as SMX’s.”
Security Matters has also caught the eye of Intel, which offered it one of 12 spots in the prestigious Ingenuity Partner Program.
Security Matters is a Stockhead advertiser.