TraceSafe - A post-COVID play with limitless applications
TraceSafe is an emerging leader in the growing market for health and safety wearables. The COVID crisis has accelerated the adoption of wearables technologies across industries, offering an effective solution for contact tracing and significant applications beyond. Our initiation report (29 Sep 2020) provided a broad overview of the company’s capabilities and financial outlook. We provide an update of recent developments below and a summary of the product range on page 2.
In the last three months, TraceSafe has continued to significantly expand its market presence. It gained its first customer in the education sector and won prominent contracts with the TD Gardens Arena in Boston, the Junior World Hockey Championship, and the Boustead engineering group in Singapore. The Boustead contract led to TraceSafe winning the Singapore National Innovation Challenge. This market is particularly noteworthy because Singapore has been a world leader in rolling out back-to-work technology solutions, which we expect other countries to replicate.
In addition to signing new customer contracts, in the last three months, TraceSafe has added further new technology partnerships, including agreements with the UKG (Ultimate Kronos Group) Dimensions Technology Partner Network, the TELUS IoT Market Place, and a partnership with Tritan Software giving TraceSafe exposure to 95% of all cruise ship operators. These agreements extend TraceSafe’s route to market, and we expect further partnerships to be announced during the first half of 2021.
Overall, we argue that TraceSafe has now completed its strategic aim of validating the technology in service across multiple safety-critical operating environments. For 2021 we believe the focus will be on continuing to grow revenues within existing market spaces, adding new verticals, and continuing to grow the software element of the revenue base.
Strong progress during Q4 2020 and Q1 2021
We expect the next four quarters to see continuous sequential growth in revenues. For FY (full-year) 2021 we are forecasting US$18.0mln of revenues and a transition to positive operating margins.
An additional upside catalyst for the shares could arise in the coming months from the proposed market listing of a company called Airbeam, in which TraceSafe holds a 16% equity stake. This could provide a route for TraceSafe to crystallise the value of its holding in Airbeam.
The current market cap represents a multiple of 1.1x revenues based on our 2021e forecast, even allowing zero for the value of TraceSafe’s holding in Airbeam. We argue that this leaves substantial headroom for the shares to rerate during 2021e if TraceSafe continues to deliver on its growth strategy.
Outlook and stock price
Year end Dec 31 · Current · 2021 · 2022 · 2023
Revenue (US$M) · 3.5 · 18.0 · 44.5 · 49.0
EBITDA (US$M) · (1.2) · 1.6 · 6.9 · 7.5
TraceSafe offers a comprehensive suite of hardware and software solutions providing safety wearables and contact-tracing technology for businesses and venues across all sectors. These technologies offer a proven solution for post-COVID back-to-work applications, but also provide an invaluable tool for the overall management of employee safety, engagement, and productivity.
TraceSafe’s product offering covers three categories:
Wearables
TraceSafe wearables are lightweight devices that provide location data. They can offer other features such as temperature sensors or buzz/vibrate warnings for social distancing or other markers. TraceSafe devices are available as wristbands, lanyards or clip-ons, with other formats in development.
Gateway hardware
TraceSafe also provides the gateway device — the hub that receives a signal from the wearables. Gateways operate using BLE and LTE/M/IoT or Wifi, providing seamless connectivity with the cloud management system and offering strong privacy protection for the user.
Software
TraceSafe’s proprietary software supports the deployment of the wearables and will allow integration via an application programming interface (API) with human resources (HR) software platforms. The ability to use TraceSafe software as a plug-in for the major HR software platforms in the market is an important utility for the customer base.
The following image illustrates some of the products.
TraceSafe products
The products
Source: Proactive Research