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Nice 5 year deal from Acusensus with an additional 3 year option to extend in yearly increments.
Disc Hold IRL & SM
Today the co released that the MSC (Mobile Seatbelt Contract) contract for NSW has been renewed after it was retendered. The term is longer at 5+1+1yrs under the main framework agreement.
The initial project orders (PO) are $8.94m (ex-GST) and operate under a 2+1+1yr term. Tbh, I’m not sure why this would be contracted differently but from the prior option pick up under the prior contract, its seems to be a way business is done.
LfL the initial orders would be the equiv of ~$49m over 5 years versus the prior contract being ~$42m over 5 years noting the main difference is that the $42m did not include switching on seatbelt as that was done 5mths before the end of the prior contract. ACE did not specify a value in the release but I think on a latter call it was determined that it would be ~10-20% revenue uplift on an annualised basis. Multifunction has higher GM so it was a backsolve in extra revenue to take GMs form 40s into 50s so from the perspective of adding on a function later, ACE flicks a "switch" to turn it on so the GM on the incremental revenue is effectively 100%.
As such, this implies under the prior deal, the annualised revenue rate was potentially ~$8.5-8.6m (ex-GST) thus implying the new PO of $8.94m (ex-GST) is largely a rollover + minor scope changes/inflation. The image below shows some working out of this.
The release today ;eft many Qs open and the contract hasn't been published yet. It could take a day or two or weeks so this is an exercise in thinking and testing numbers until confirmation can be sought.
Given the term of the new framework agreement is longer than the initial project orders, I suspect NSW is working on broadening deployment and maybe use ACE for things like average speed (note ACE will do this with the same trailers in WA). Below is from the roadmap 2026 doc and a recent ministerial release which I think I linked in my update on the speed contract.
This doesn't change my valuation as I had a figure for this included. 1H25 also hasn't changed much either.
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.
Aw Nuuu Bro, I have to update the model.
ACE announced it won a nationwide tender for mobile speed in NZ and alongside that it is raising up to $12m at $0.90 (tight). Not so good is a $3m sell down by the chair and MD.
The contract is estimated to be worth NZD92m (AUD83m) over 5yrs of which NZD5.2m (AUD4.7m) is recognised in FY25 with full deployment to be achieved in FY26 which is revenue of NZD17.2m (AUD15.6m). Margins unclear but noting their speed contract in NSW, it is typically lower at low 40s or high 30s.
Good win overall and dries a big step change in revenue and profit growth. I note ACE was the tech used to pilot mobile phone and given that is a big issue over the ditch, this is likely the first for further contracts for ACE in country. It will help as for ACE, it is a as easy as flicking a switch on the software to implement thus they have the advantage of lower cost and time to add on services.
See the valuation section for the impact of this contract on my valuation.
Finally around to updating post FY24 results and getting a chat in with the co. Key points:
- US and UK to grow at least 100% each. Both back by contracts which commenced around the end of FY24 so largely bankable. US is Georgina and Arkansas whilst UK is Devon & Cromwell.
- Oz to growth ~10% without any major new contract wins. Comprises of QLD speed variation going live early FY25, Full yr uplift from additional mobile/seatbelt trailers that went live Dec 23, + BAM stuff on tailgating. Full year of SA + extra installs. NSW seatbelt switch on July 24 that could lift revs by 10-20%p.a. (Say ~$1.5m).
- Immediate major contract awards ahead is WA. Expected award this month. Initial 6 Trailers (see my straw on that preso) which based on ACE average of $380k/yr/unit ($49m rev on ~130units)(likely higher given multi-function) equates to a contract value of $2m+.
- Other incremental is ACT and SA flagging desire to switch on seatbelts too. US trials have led to funding request is upside to bolt on more deployments. QLD has more speed to outsource as well.
- Revenue growth is higher margin deployments so expect GMs to tick up however this is offset but additional cost-in which would increase as they win more major work. Full run-rate of FY24 cost in would add ~$2m to run-rate cost base. Hence why Rev and GP better tools for progress and valuation.
- Whilst UK traction is accelerating, unclear when it leads to Oz style deployments and tenders. US will be smaller piecemeal contracts without changes to automated enforcement.
Putting thing all together in updated numbers as per below:
