written by reader In a Land Filled with Goliaths, You Want to be Long a David

By hot rod, November 11, 2019

Hello Fellow Stock GumShoe Readers,
It’s an honor to be able to share with you an investment idea that I strongly believe in and hopefully it’ll accomplish two things: Give you a chance to participate in a huge opportunity and help me win an annual subscription too.

To start with I would describe my idea as “unknown, undiscovered, and undervalued”. That sets the stage for what I believe is “unlimited” potential. So you’re hearing about this company in the early phase of its growth. But make no mistake about my conviction, now is the time to be buying or building a position in this company.
David’s Story
Our David is a uniquely positioned SaaS company in the Internet of Things (IoT) sector leveraging patented technology related to the management and optimization of energy assets, such as HVAC units, wind turbines and oil & gas assets. Our David is well aligned with global energy trends that are driving businesses to adopt technology to lower electricity costs, extend the life of energy equipment, maximize energy production and increase the intelligence of legacy energy systems. With competitive data and analytics edge, coupled with management’s energy experience, should help it add clients to an already impressive base, with pricing power and new asset connections leading to outsized revenue growth versus other SaaS peers.
David’s Strengths
Strong Competitive Position / Proven Technology: Our David has a solution called “AssetCare”. Leveraging data from low-cost IoT sensors, AssetCare is used by the likes of Bank America, Starbucks, and McDonald’s to help curb energy usage, targeting millions of smaller and older buildings where cost of implementing complex automation systems isn’t feasible. The company also leverages AI/3D imaging technology that is so precise it has been used by Lockheed Martin to assess damage in F-35 jets. Now it’s being used to correlate wind turbine blade damage to energy production. There are multiple opportunities for growth in a global context as the demand for energy increases, electricity rates rise, and more businesses and countries embrace renewable
energy sources.
Strong SaaS Model / High Growth with High Margins: Our David is a rapidly growing company, with organic SaaS revenue of just under $1 million in 2018 forecast to reach $5 million in 2019 and $11.5 million in 2020, with recent acquisition that brings in $35 million in consulting revenue in oil & gas sector. All in, total revenues go from $1.8 million in 2018 to $31.8 million in 2019
and $61.1 million in 2020. That should produce EBITDA of $2.4 million and $9.8 million in 2019 and 2020, respectively. (These are conservative estimates and in Canadian dollars).
As our David grows it’s AssetCare revenues, please keep in mind these have margins in the 65% – 70% range. And the market will recognize this and give our David a much higher valuation, similar to other SaaS software companies trading at 8X – 10X revenues.
Strong Management Team / Outstanding Track Record : Our David is blessed with an outstanding management team that has consistently under promised and over delivered. They delivered by ending 2018 with 28,000 connected assets. Their goal for 2019 was 40,000 connected assets, but recently had to update their progress that they will exceed that goal. The CEO spent 10 years at Honeywell where he led the internet and software businesses and was founding partner of Energy Knowledge Inc., which was acquired by Yokagawa Electric Corp., where he led deals with IE and KBS. He is joined by a co-founder who brings leadership roles at Yokagawa, Honeywell and ExxonMobil.</