Emerging Companies: TZ Limited (ASX: TZL)

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Published 15-JAN-2014 00:00 A.M.

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2 minute read

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Overview: TZ Limited ("TZL", the Company") is an Australian technology company focused on asset security. It has developed devices and software which enable the management, control, and monitoring of business assets, including aircraft, buildings, data centres, and parcel delivery systems. TZL’s core technology enables remote operation of mechanical devices such as fasteners and locks. It was founded in 1998 and listed on the ASX via a reverse merger in 2004.

Catalysts: Renewed balance sheet health and greater concentration on technology sales are expected to drive growth for TZL. Loss-making engineering services unit, PDT, was disposed of in 2013, and convertible note holder, QVT Funds has agreed to a $24m ordinary equity exchange. The transactions are expected to drive a significantly improved financial performance in FY14 with the Company targeting ~2x revenue growth to $8m and operating cost savings up to 25 percent.

Hurdles: Despite cumulative investment exceeding $100m, TZL remains reliant on external capital to finance operations. Confidence in the Company has been impaired by high levels of historic executive turnover and an unsuccessful tender for Australia Post in 2012. Convertible note exchange is subject to shareholder approval in February.

Investment View: TZL is a speculative turnaround play with leverage to data center growth and a trend towards the ‘internet of things’. Restructuring undertaken during 2013 has the potential to deliver significant operating and financial improvements. Whilst further capital may be required to reach a self-sustaining trajectory, current prices of ~0.5x historic investment offer value as commercial applications for TZL’s Intellectual Property portfolio expand. We expect recent successful tenders with Poste Italiane and Singapore Post to boosted near-term confidence, and initiate coverage with a ‘speculative buy’ recommendation.



General Information Only

S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.

Conflicts of Interest Notice

S3 and its associated entities may hold investments in companies featured in its articles, including through being paid in the securities of the companies we provide commentary on. We disclose the securities held in relation to a particular company that we provide commentary on. Refer to our Disclosure Policy for information on our self-imposed trading blackouts, hold conditions and de-risking (sell conditions) which seek to mitigate against any potential conflicts of interest.

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The information contained in this article is current as at the publication date. At the time of publishing, the information contained in this article is based on sources which are available in the public domain that we consider to be reliable, and our own analysis of those sources. The views of the author may not reflect the views of the AFSL holder. Any decision by you to purchase securities in the companies featured in this article should be done so after you have sought your own independent professional advice regarding this information and made your own inquiries as to the validity of any information in this article.

Any forward-looking statements contained in this article are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results or performance of companies featured to differ materially from those expressed in the statements contained in this article. S3 cannot and does not give any assurance that the results or performance expressed or implied by any forward-looking statements contained in this article will actually occur and readers are cautioned not to put undue reliance on forward-looking statements.

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