By Tim Boreham
From thwarting terrorist attacks to helping divorcees snare an alimony payment, small-cap Veriluma has it covered. In the meantime, internet-of-things champion, CCP, will ensure the milk in the fridge doesn’t go off.
VERILUMA (VRI) 2.6c
Just as we got used to the notion of big data analysis, along comes a tool that doesn’t even need hard numbers to analyse and predict a particular situation.
Sadly, Veriluma – a leader in the emerging art of prescriptive analytics – isn’t offering up this weekend’s winning Lotto numbers.
But its black box IP may be able to predict when and where the next terrorist attack is likely to happen, or the likelihood of North Korea firing off a ballistic missile that actually works.
In essence, says Veriluma chief Elizabeth Whitelock, prescriptive analytics combines number crunching with gut feeling based on ‘softer’ inputs.
Or, in a more Donald Rumsfeld-esque vein, “it takes known factors and associated unknown factors and applies an algorithmic framework to reach conclusions about a stated hypothesis.’
Veriluma, which listed last September via the shell of Parmelia Resources, is doing hard-core but secret squirrel work for local and US defence and national security agencies.
That’s not surprising, because the IP evolved out of the old Commonwealth Research Centre and has been refined by the Department of Defence Intelligence Organisation for war games and scenario modelling.
Veriluma’s most likely revenue source is from a Department of Defence intelligence project involving up to 1000 staff.
We can’t say too much.
Come to think of it, we don’t know too much.
In the US, Veriluma has anti-money laundering and counter-terrorism and has forged a link with ex-gumshoe John Cassara, an expert in both these fields.
In business circles, Veriluma has been used to assess the chance of an acquisition based not just on financial but ‘soft’ aspects, such as culture and reputation.
Peer-to-peer lender Marketlend uses Veriluma’s analytics to assess credit risk not just on the usual measures such as the borrower’s age and income, but inputs such as the Reserve Bank’s economic commentary.
New Criterion is most intrigued by Veriluma’s pending launch of Legal Logix, an app-based tool for divorcing couples to assess the quantum and likely success of a settlement.
“It creates a brief around your situation you can take into a courtroom or to your lawyer,’’ she says.
Whitelock says 37% of aspiring divorcees represent themselves. With 50,000 divorces annually, that makes about 18,000 people who have a fool for their client.
In theory, Legal Logix has the potential to replace lawyers and their fat hourly fees, but in reality, the robotic tool is likely to compliment their offerings or allow them to take on more cases.
Veriluma has also attracted the attention of Gilbert + Tobin, which is trialling the software as a way to provide complex corporate advice earlier. The company expects to know this quarter whether the trial will lead to ongoing revenue.
“The goal of the trial is to take one scenario and distil it into something they can use again and again,’’ Whitelock says.
“Some lawyers will find it difficult to concede their hourly rate will be diminished but the reality is the world is moving this way.”
With the divorce app costing up to $250 for the user, it’s not going to move the revenue dial in the short term.
Management envisages that government bodies or large companies will pay subscription fees to a cloud-based platform, perhaps with an annual licence fee.
Veriluma’s shares March quarter statement recorded nil revenue, operating outflows of $585,000 and cash of $810,000.
While the company will bank $500,000 by selling a residual mining tenement, we don’t need prescriptive analytics to know the company will need to raise capital at some stage.
CCP Technologies (CT1) 2c
When Terry the cook from Fawlty Towers said “what the eye don’t see the chef gets away with”, he was oblivious to the enormous business risks posed by food contamination.
For any catering establishment other than Basil’s, regulating and monitoring fridge and freezer temperatures should be taken very seriously indeed.
Enter CCP, as in ‘critical control points’, which has launched an online monitoring system for the food industry. Subscribers are alerted via their phones about temperature variances – in time to avoid a mass outbreak of giardia.
CCP’s IP was devised by Anthony Rowley, a former Telstra internet heavy hitter and was first tested on export tuna.
Rowley says a fridge might record three degrees at closing time and three degrees in the morning. “But if the fridge goes off overnight they will never know and it is in breach of safety rules.”
Food safety is one aspect and efficiency is another: Rowley says cafes average three to four fridges, with cooling accounting for 15% of global electricity usage.
In effect, CCP is another player in the Internet of Things (IoT) sphere: the interconnectivity of devices with equipment for monitoring and business optimisation purposes.
CCP can also improve business efficiency and predict the failure of key equipment.
In the case of Meals on Wheels, this meant avoiding the breakdown of a compressor and several dozen queasy senior citizens.
Recently, CCP cracked it lucky in Las Vegas by winning a monitoring deal with the Stratosphere Casino, home of the Top of the World restaurant.
This establishment won the 2016 Best of Las Vegas Gold Award for fine dining – and one doesn’t get such a gong for serving dodgy prawns.
In all there are 2400 restaurants and one million potential monitoring points in the buffet-loving town, which has led CCP to create a permanent sales presence there.
In its biggest deal to date, CCP snared a $US180,000 ($240,000) deal with a US food consulting firm.
CCP chalked up a mere $70,000 of revenue in the March quarter. Cash outflows were $500,000 and cash on hand stood at $1.07m, with expected current-quarter burn of $620,000.
Sensing its financials were getting tight, CCP this month raised $518,000 in an institutional placement and is tapping a further $850,000 in a rights offer at 1.7c apiece.
CCP doesn’t charge an upfront fee, but levies clients $15 per month per monitoring point, over a two-year contract.
On our back-of-the-serviette sums, CCP needs about 20,000 monitoring points to break even - it currently has only 800. But, as CCP did not start selling in earnest until January, the new customer run rate should improve dramatically.
Disclaimer: The companies covered in this article (unless disclosed) are not current clients of Independent Investment Research (IIR). Under no circumstance there have been any inducements or like made by the company mentioned to either IIR or the Author. The views here independent and has no nexus to IIR’s core research offering (www.independentresearch.com.au). The views here are not recommendations and should NOT be considered as general advice in terms of stock recommendations in the ordinary sense.
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