Unlocking the Competitive Edge: Proprietary tech empowers these ASX stocks to surge ahead
In the fast-changing world of technology, how do investors pick one tech company from another to invest? From PE ratios, to management teams and cost of growth, experienced tech investor Salter Brothers director of equities and portfolio manager Gregg Taylor recently told us his 5 tips for finding a tech winner.
At the top of his list of tips was unique intellectual property, and how unique is the company’s tech.
Taylor told Stockhead exclusive technological advancements or innovations owned by companies or individuals and protected through legal means, such as patents, trademarks, or copyrights, are referred to as proprietary technology.
“Proprietary technology plays a critical role in a company’s success as it helps differentiate their offerings, provides a competitive edge, establishes their industry leadership and increases profitability,” he said.
“Having proprietary technology enables pricing power for a company and this is particularly important in the current high inflationary environment.
“It means customers are more willing to accept price increases due to the lack of alternatives.”
Companies often invest in research and development to create proprietary technology and protect it from unauthorised copying or use by others. The technology is exclusively owned and accessible only to the company in question.
That’s Taylor’s reasoning for why he says that proprietary tech represents valuable intellectual property that fuels innovation, enhances competitiveness, and drives the success of companies in various industries.
On the ASX there are several companies with that proprietary tech Taylor’s so keen on. Here’s some we’ve noticed:
In a age where cybersecurity is paramount for organisations Netlinz patented technology revolves around algorithms which make it almost impossible for hackers to tap into an IP address.
A NET spokesman said it has developed an “invisible” network to reduce the surface area of a potential attack on an organisation.
The network has a control unit which gives the organisation choices about scaling up or down the internal communication network.
“If one layer of communication of an organisation is infiltrated it means that the cyber attack may be contained,” he said.
“It’s a constant battle to stop the criminals so essentially its locking down different compartments of an organisation’s data.
“We are setting a barrier to essentially protect files and data wherever they’re located.”
The company is selling its software service to telco companies in Southeast Asia to enable organisations to establish security across their own organisation and supply lines.
Furthermore, one of the world’s largest consumer goods companies uses the NET technology to secure its supply lines and financial dealings.
NET’s patented technology has won various awards including the US Department of Defence Cybersecurity Challenge.
QHL’s proprietary technology is solving a well-known problem in the manufacture of high volume carbon fibre composite parts with a particular focus on aerospace applications.
QHL CEO and managing director Mark Burgess told Stockhead their technology removes a complex, high-cost and slow step in the manufacturing process resulting in a steep reduction in production costs.
“When you make carbon fibre parts, you use a mould,” he said.
“QHL’s technology pre-heats the mould and cures the part using a pre-heated specialist liquid and a silicon membrane to produce high complexity, high-quality, low cost parts.
“It allows automation throughout the process which reduces labour content massively and that drives the cost savings.”
QHL’s technology is now being used in series production of complex commercial drones for Swoop Aero and Carbonix. It is also being used across rail transportation and medical devices.
Founded in Australia in 2003, SIX is an engineering and manufacturing company specialising in clean air compressor technology.
Their focus lies in research, product development, and manufacturing of electric and mechanically driven compressors with the company aiming to establish itself as a global leader in the supercharger industry.
Using their patented technology, SIX is delivering highly efficient superchargers that offer power, efficiency and economy at a competitive price point.
As the world increasingly shifts towards renewable energy sources, the significance of effective energy storage systems, including grid storage batteries, is experiencing rapid growth.
Altech’s proprietary groundbreaking sodium-chloride solid-state CERENERGY® batteries aim to revolutionise energy storage and exhibit a minimum 50% lower greenhouse gas (GHG) emission than that of lithium-ion batteries.
CERENERGY® batteries do not rely on critical metals such as lithium, cobalt, copper, graphite, and manganese, which are associated with high emissions from mining and extraction.
Instead, CERENERGY® batteries employ sodium-chloride (common table salt) and nickel.
“Our proprietary technology was developed by world-leading German Government research institute Fraunhofer over the last eight years having spent 35 million euro on the development,” Altech CFO Martin Stein told Stockhead.
“Now Altech and Fraunhofer are working together to commercialise the CERENERGY® battery via a 100MWh plant to be built on Altech’s land in Germany.”
SP3 is a manufacturer of both software and hardware, which managing director Gerard Dyson said is rare in the tech space because hardware is much more capital intensive.
SP3 provides solar and battery-powered platforms that connect wirelessly to the internet. The company’s proprietary tech solutions use visual artificial intelligence and IoT that allow organisations to sense, think and act, so they can protect people and property along with improve productivity, even in remote locations and harsh conditions.
“We design our own electronics, hardware, software and mechanical housing that us enables us to have much higher gross margins than people who are assembling other people’s equipment but also we can deliver technical outcomes that are unique” he said.
“Our main customers are resellers, government utilities and the construction sector who use it mainly for security, safety and deployment of smart city and environmental monitoring applications.”
Dyson said all of their hardware is solar powered and completely wireless which means they are using 4G and satellite, reducing cost of installation and their environmental footprint.
The company’s tagline is ‘Sense, Think, Act’.
“Our hardware is modular and includes the likes of cameras, speakers, lights and other sensors which is the sense part,” Dyson said.
“The think part is that our edge and cloud processors use decision rules and artificial intelligence to make autonomous decisions in a security instance it differentiates between a moving branch for example and a person so reduces false alarms.
“The action part is immediately the AI senses something it can turn on a light, speak to someone, open a gate remotely send an email alert, record the data, call for a security guard and so much more.”
SOR is registered under the Australian Federal Government ‘Pooled Development Fund Program’ with a mandate to back proprietary Australian innovation.
SOR managing director Charles Murphy told Stockhead it majority funds research and development, intellectual property protection collaboration and scale-up, whilst remaining open to a major strategic investor/partner that could escalate commercialisation.
The Federal Government provides investors in SOR with potential tax benefits in return for the company backing higher-risk Australian innovation under the ‘Pooled Development Fund Program’.
SOR is backing Advanced Materials Pty Ltd – its 100% owned venture – which is working with a team from the University of New South Wales to develop the Energy InkTM, a revolutionary new power source that generates electrical energy from moisture in the air.
“The Energy InkTM is still in development, and the fundamental upper limit of aspects such as maximum power output, duration and energy density remains unknown,” Murphy said.
“Significantly, the team are consistently identifying multiple avenues that increase performance.”
SOR is also backing Stealth Technologies – another 100% owned venture – which is working with researchers at The University of Western Australia to develop artificial intelligence and robotics technologies.
Stealth is collaborating with global software-industrial company Honeywell to progress the commercialisation of autonomous security.
RUL has proprietary software servicing the resources sector. Taylor said resources companies use the RUL software to schedule and monitor their mining activities.
He said the company is a great example of having proprietary tech which is unique, giving the company pricing power during times of inflation like now.
“They’ve upgraded their earnings for FY23 ahead of expectations and this is due to their ability to expand profit margins in the current inflationary environment through their proprietary tech,” Taylor said.
For FY23 Total Contracted Value (TCV) derived from software sales increased by $14.3 million or 25.4% over the previous year to $70.5 million.
Taylor said AIM have proprietary technology in voice captioning services with major media organisations and tech companies.
“So if you think about subtitles on live TV like the news or a corporate video presentation or zoom meeting AI Media have AI powered captioning,” Taylor said.
“Their technology hears someone speak and turns it into text in real time with 99% accuracy.”
Taylor said among AIM’s clients are Channel 7, major league baseball in the US along with the UK parliament and big tech companies like Google and Meta.
At Stockhead, we tell it like it is. While Netlinkz, Quickstep Holdings, Springtex, Altech Batteries, Spectur and Strategic Elements are Stockhead advertisers, they did not sponsor this article.