The internet age is sparking a new wave of innovation and technological change. Australian companies were largely spectators to the last tech wave in the 1990s but, partly helped by a range of government initiatives and incentives, seem set to be larger beneficiaries this time around. In this note, we explore four technology themes that have the potential to change our lives and outline some Australian companies which stand to benefit.
The Internet of Things
The Internet of Things (IoT) is the next big advance to follow the mobile revolution. Everyday items such as home appliances and vehicles are increasingly being connected to the internet through mobile networks. From a convenience level, you will be able to have your house turn on the lights as you arrive or have your fridge automatically reorder your groceries. From a safety level, your car will know to slow at blackspots or when there is trouble ahead to prevent accidents. Your insurance might be cheaper if you are a good driver because the insurance company will be able to monitor how often and how safely you drive.
The growth of wearable technology including smart watches, glasses or fitness trackers has been an interesting subtheme. The growth and success of products such as FitBit and the Apple Watch highlight the potential of this theme. Indeed, the Chart 1 shows that the ‘wearables’ market is expected to grow rapidly in future years.
Source: Generator Research
One Australian company which is taking advantage of IoT is Smart Parking (ASX:SPZ). Councils place sensors on roadside parking spots and then collect payments through mobile payments. Drivers can identify parking vacancies using an app. Smart Parking is a global leader with the technology being trialled in the UK and Australia.
Another is Catapult (ASX:CAT) which makes chips and wearables for athletes. Sensors sit in padding on players’ backs and monitor work intensity and heart rates allowing for earlier detection of distress, injury and fatigue. They supply a range of teams, including AC Milan and Newcastle United in soccer, the New York Giants in the NFL and Brisbane and Melbourne in the NRL.
Businesses are migrating from holding software and data on their premises to storing it online – on the Cloud. This allows companies to save on storage costs and opens up new opportunities including Software as a Service (SaaS) – subscription to a software package rather than upfront purchase.
A simple example of the Cloud in action in everyday households is accessing your email on your phone at work or at home due to the email server being stored on the Cloud. Some Australian companies focused on this area are Xero (ASX: XRO) and MYOB (ASX:MYO).
Big data – where firms make use of the data they collect to generate new insights or assist customers with recommendations – is a theme more focused at the business level rather than individual. An example of this is Amazon making book suggestions based on purchases of similar buyers.
There are two companies in Australia that are engaged with Big Data. TechnologyOne (ASX:TNE) is Australia’s largest enterprise software company, helping clients to harness the power of big data with it’s Business Intelligence solution. The second company is NextDC (ASX: NDC), a data centre company that allows companies to outsource their data storage and connect directly to cloud platforms and networks. NextDC is an indirect beneficiary, as the increased collection and usage of data will increase demand for Data Centres. Chart 2 shows that growth in data usage per month is nearly exponential, and businesses will want to capture and store this ever increasing stockpile of data.
Biotechnology is another interesting theme that has emerged recently. It focuses on using technology to create products that help improve quality of life and treat disease. This can be through creating new drugs, modifying viruses to treat cancer or creating products that help strengthen your own immune system to fight a particular disease.
An example of an Australian biotechnology company is Viralytics (ASX:VLA), which focuses on harnessing the power of certain viruses to treat cancer. Their most promising product is CAVATAK, a modified form of the common cold that is being trialled to treat tumour cells.
And plenty of others
These are just a handful of interesting themes in technology that allow investors access to attractive growth opportunities and really, it’s only just the beginning. Other growth areas in technology include automation, mobile payments, 3D printing and batteries just to name a few. We will explore these in future notes.
For more information on these technology themes and your investments, please speak to BT Financial Group.
This information is current as at 18/02/2016.
This document has been created by Westpac Financial Services Limited (ABN 20 000 241 127, AFSL 233716). It provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such. This information has been prepared without taking account of your objectives, financial situation or needs. Because of this, you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. Projections given above are predicative in character. Whilst every effort has been taken to ensure that the assumptions on which the projections are based are reasonable, the projections may be based on incorrect assumptions or may not take into account known or unknown risks and uncertainties. The results ultimately achieved may differ materially from these projections. Information in this document that has been provided by third parties has not been independently verified and Westpac Financial Services Limited is not in any way responsible for such information.
© Westpac Financial Services Limited 2016.