Pinned straw:
In ACE’s qtr report they noted the option for the NSW speed deal was picked up, extending the contract to June 2026. This link is to the page on Tender NSW for the contract which provides key headline info including the value of the contract.
I noticed the same with the WA contract as the value was higher than what ACE put in its own release (and latter mentioned in ACE’s qtr report). For this I note ACE’s release said it was ~$3.13m p.a. with the tender page implying it can be up to $4.16m p.a.
Back to NSW Speed. The original contract was for a period of 3 years with a total value of ~$77.1m (incl GST) or ~$23.3m p.a. (ex-GST). Post the option pick up, the page details a period of 5 years with a total value of ~$149.8m (incl-GST) or ~$26.7m p.a. Subtracting the initial 3yrs from the 5yr total, gives a total value of ~$72.8m (incl GST) for the extra 2 years for ~$31.5m p.a. (ex-GST). This suggests revenue from this contract will increase by ~$8.1m p.a. I note that speed contracts sit in the low to mid 30% GM range.
The other group doing mobile speed in NSW is Redflex (formerly listed on the ASX) and their contract has gone up as well with their option pick up. I note that the proportion towards ACE has increased under the option pick up thus I guess one can infer it has “won market share”.
The images below show the breakdowns for both ACE and Redflex for NSW speed and the back solving of contract value after the option pick up.
I will note that I haven’t been able to clarify with the company as there is likely some nuance to understand. In a release from the gov in January, they indicate that they will materially increase the number of sites where mobile speed cameras can be located (predominately expanding in country regions), however, there wouldn’t be an increase in total enforcement hours. This suggest that existing (and/or additional) cameras will be moved around more regularly and wider across NSW which may explain the uplift in contract values i.e. being paid more to manage a higher turnover deployment schedule.
The impact is that growth in Oz is likely to increase further and adding this to my model would see FY25 and FY26 valuations increase to $1.38/sh and $1.75/sh from $1.29/sh and $1.66/sh respectively. I will reserve formerly updating my valuation until I can verify.
I finally got clarity and there was nuance but not what I expected. It is a good lesson in how to considered info like this at face value and thinking about the issues/risks in it and the need to clarify. It also makes me look a little silly although I did warn "subject to clarification".
The variation amount of $149.8m includes revenue from the signage variation from 2023 and inflation from the initial 3 years which total to of ~$8m.
Adjusting for this, the years 4+5 have a value of ~$62.7m instead of $72.8m for an average of $27.1m. Re-cutting the calc from an inflation accrual basis and FY25 and FY26 annualised revenue more likely lands between $27-29m.
As such, the uplift is more modest, inline with Redflex which was ~11% and has a lesser impact on my valuations. My model has been adjusted to now better reflect inflation and through this I noticed an error (silly again!) that used a flat growth rate in FY26 rather than the new contract/variation aggregation I track.
Asu such 2.0, below are the re-cut valuations which still incrementally lift on the prior prior update. I note the FY26 figure has barely changed but if I fix the calculation error and leave in my bad take on the NSW contract, it would be $1.85/sh so it a downgrade on like for like basis.
