Company Interview / Advanced Braking Tech accelerates

Key points:

Australian homegrown engineering OEM, Advanced Braking Technology (ABT), enjoys robust margins due to disciplined cost management and supply chain executionAdvanced Braking Technology's brakes act as superior safety solutions, particularly essential in mining operationsDespite market penetration currently standing at about 20%, Andrew Booth is optimistic about his company's expansive growth potential over the forthcoming years

Australian homegrown engineering OEM, Advanced Braking Technology (ABT), headquartered by Andrew Booth, reflects a robust quarterly report. The blue-chip company enjoys a net profit that falls just short of AUD 2 million. Andrew appreciates the results, attributing the robust margins to disciplined supply chain and cost management. He discusses ABT's focus on producing failsafe braking technology for road vehicles used in mining applications which surpass standard braking systems in safety.

Welcoming the increased focus on safety in the mining sector, Andrew presents ABT's brakes as a potent solution. He points out that ABT's shares have surged, though he still considers the company to be undervalued in the market. He expresses optimism about ABT's growth, noting the abundant opportunities in the global market for failsafe breaks in mining. Andrew also names technology and mining safety as key areas this upward trajectory.

Despite market penetration currently being about 20% for ABT, Andrew firmly believes in its growth potential over the next few years. The company enjoys a strong cash position, with no debt on the balance sheet, allowing for extensive working capital to fuel further growth and scale. Andrew notes that ABT’s investment in safety technology and mining aligns well with the industry’s sweeping trend towards such advancements. Lastly, he mentions the company's strong fundamentals that allow them to thrive despite any potential macroeconomic challenges.

Full unedited transcript below:

0:00

An emergency brakes distributor, Advanced Braking Technology shares tracking higher on the back of its trading update, the company posting fourth quarter revenue of more than $4 million net profit after tax, coming in just shy of $2 million.

0:14

For more on those results, Advanced Braking Technology CEO Andrew Buth joins me now. Andrew, just to run us through how you got here.

0:23

Hi there. Um, yeah. Look, we're, uh, we're really pleased and delighted with that, with the results that we've we've delivered, uh, both in this final quarter and for full year. Um, we've done this through really, I guess, uh, focused execution on our blue chip customer base, both here in Australia as well as key international markets being Africa, Asia and North America. Um, Abt has delivered, uh, really strong, sustained gross margins through really, um, I guess focused and disciplined cost management and supply chain management as we strongly foundation these business to, to scale.

1:03

Uh, let's just take a step back, Andrew, and talk a little bit more about the technology, the vehicle braking solutions that you are actually achieving here.

1:12

Yeah, sure. So, um, we're we're an Australian homegrown engineering OEM. Uh, we specialize in, uh, in failsafe braking technology. So essentially we're providing failsafe, uh, solutions for road vehicles used in mine applications, uh, braking systems, which are spring actuated, hydraulically applied uh failsafe systems with both primary and secondary activation um Um, uh solutions. And uh, and this is just part of an increasingly, uh, focused mining sector on safety. Uh, our brakes, uh, basically provide, uh,

1:58

uh, solution safety solutions, which are, um, which are superior to, to the standard braking system found on a vehicle. Now, your shares haven't put the brakes on. They've in fact accelerated. Excuse the pun. Andrew. Sorry, it was a bit too obvious, but, um, you must be happy to see that. What do you see, though, as I guess, fair value for your company.

2:19

Liquids allotted with the performance of the, uh, of the share price. But we still see ourselves as being, uh, comparatively undervalued, uh, in the market. Uh, look, I think, uh, abt is is a is a homegrown, uh, asx, uh, success story, uh, with, with plenty more, uh, growth, organic growth, uh, to achieve, we believe we've got only about 20% market penetration globally of failsafe breaks in mining. And so that gives us plenty of, uh, of growth horizon, uh, over the next 3 to 4 years. What do you see as, I guess your, your main competitors or companies that you would be looking at to potentially merge with down the track or gain sort of collaboration with.

3:06

Yeah. Look, uh, our biggest competitor is actually, uh, you know, operators doing nothing. So, uh, so Abt is in a relatively strong niche position in the market, uh, in this space. Uh, look, in terms of, uh, investments. Uh, and, and, and growth, we see technology, safety, technology and mining as being a really key area. Uh, and and this is, uh, I guess looking at, uh, aspects like automation, vehicle automation and collision avoidance technology, which goes sort of hand in glove with, uh, with fail safe braking. When you talk about that mine safety technology, how much are you relying or using AI as well at Abt?

3:54

Yeah. Look, uh, technology internally is a really big focus, uh, for the business, uh, where we're we're certainly, uh, looking very sharply at, uh, at technology development for our brake systems. Uh, but we're also using technology to streamline our processes, our workflow systems, and make investments in our in our, uh, ERP platforms, uh, and, and our partnerships to really foundation this business, uh, more strongly to, for future scale. So your cash position up about 18% on the prior period. So you're in a good position there. You talk there about potential further development. What would you be looking to do in terms of potentially deploying some of that cash?

4:41

You look, uh, we're in a strong cash position. We've got no debt on the balance sheet. Uh, look, we're look, I think I think we're we're we're in a good position. Uh, uh, that provides us with plenty of buffer for working capital, uh, to fund scale and growth. And I think, I think that is one of the unique stories for Abt being a micro-cap that's, uh, that's got really fundamental, uh, fundamentally valuable intellectual property. We've got an amazing blue chip, uh, institutional customer base of the world's leading mining companies. Uh, and we and we're actually making money. So, uh, so I think that that positions us pretty strongly versus, uh, versus some other microcap. Here's what takes you from a micro cap to a small cap to potentially a mid cap. Andrew, particularly given you are in a number of international markets. Yeah, sure. So I'll take you back to

5:40

that. Um, that estimated, uh, market share of, uh, what we believe is about 20% market penetration, giving us plenty of organic growth, uh, to scale on. But look abt uh, is is a is a bright specialist. Uh, we we need to continue to invest in that technology space so that we can keep up with, uh, the enormous investment that's been made in technology, uh, in, in safety, technology and mining globally. And just as I talked about the international markets. Can you give us a little bit of an update on on where you're seeing potentially differentials? I mean, you're in South Africa, Asia, North America, they're all developing, I believe.

6:23

Yeah. Look, I think I think where we see really strong growth is in, um, these emerging markets of, of Africa, both South Africa, uh, and West Africa. Uh, we're currently exporting about 40% of our volume, uh, uh, to these, to these markets. But we see plenty of growth opportunities as mining operators are more and more focused on deploying the same levels of safety, uh, and technology into these emerging markets as what they are in mature markets such as Australia and North America. And when you are operating in so many different markets, Andrew, how does the overall macroeconomic picture affect you at Abt, particularly in this higher for longer interest rate environment?

7:14

Yeah. Look, I guess I guess we benefit from having a really valuable, uh, blue chip customer base. Uh, we we we look, we we are in that position where we've got plenty of market penetration to really drive organic growth. Um, within, within the market. Uh, and look, we, we've got, we're endowed, I guess, with with a balance sheet that is, uh, is pretty healthy. Uh, we've got no debt. So, look, I think, I think for Abt and its external environment, uh, the fundamentals are pretty strong.