Max Pacella
Investment Analyst
Equities
10 Nov, 2021

Australia is often overlooked when it comes to innovation.

The culture we export to the rest of the world doesn’t often focus on our academic history or inventive merits, no thanks to Paul Hogan and Lara Bingle implying we eat “shrimp” to the world.

Compared to the likes of the steam engine, the printing press or the radio, it’s difficult to stand up and proudly announce that we invented the clothesline.

It’s often forgotten that we have had a history of inventions which have made impacts on the world; the electronic pacemaker, ultrasound technology the black box flight recorder and significant contribution to the development of Wi-fi, to name but a few.

Today, we will do our best to put the spotlight on some of our ASX-listed (or soon to be) companies which are operating on the very frontier of technology and inventiveness in their respective fields, to bring better repute to the innovation of Australian business.

Listed Frontier Companies

The list of companies in this note is not exhaustive, and that’s a good thing.

Particularly within innovative & smaller companies, we have an inefficient market – I know companies you don’t, you know companies I don’t, the market is exciting and full of opportunity.

The following are two companies which both coincidentally use lasers.

Silex Systems (SLX:ASX)

Silex is a technology company pioneering laser enrichment technology.

SLX is best known for their work in uranium production and enrichment, an endeavour in which they hold a joint venture with Cameco (CCJ:NYSE) to develop a commercial enrichment facility in Kentucky, USA which will have a capacity of over 5 million pounds of uranium per year. Silex will use their technology to enrich produce to natural grade uranium (for global sale), and to further enrich produce into nuclear-grade fuel to help power the shift towards clean energy.

The company also have commercial applications for enriching silicon to be used in next generation processors (one of our largest hurdles to conquering quantum computing), as well as separation of isotopes in stable elements for medical and imaging applications.

The company has managed to find next-generation applications across several industries through its enthusiasm for lasers – I’m reminded of the Dr Evil quote about sharks from Austin Powers, which probably can’t be repeated in this forum.

Source: Bloomberg

Electro Optic Systems (EOS:ASX)

Electro Optic Systems may be as frontier as it can get, being focussed on space, “the final frontier”.

EOS develop and produce a variety of market-leading products across Defence, Space and Communications sectors.

Their applications to the aerospace are satellite management and the identification/removal of space debris – to give an idea of the scale of debris we are facing currently, there is over 9,600 tonnes and 29,610 regularly tracked debris objects in Earth’s orbit (source: European Space Agency). For over three decades, EOS has been a global leader in tracking and identifying objects in space to be used by worldwide space agencies, as well as being involved in space-based defence systems.

Their technology is also crucial to remote-controlled weapon systems and next-generation sensors for use in defence equipment (given the nature of this work, their primary commercial partners are government agencies and leading weapons manufacturers), as well as in satellite communications systems.  

Since 2005, EOS has been in a strategic partnership with Northrop Grumman (NOC:NYSE) for co-development of military and space technology.

Given their very real potential of building a giant space laser, potentially this is the company I should have made the Dr Evil joke about. Worth a second dip at least.

Source: Bloomberg

Soon-to-be-listed Frontier Companies

This year we have seen several innovative companies tap the public market in pre-IPO rounds, as they prepare to list on a public exchange.

Again, this is not an exhaustive list, but the two companies below both demonstrate innovation within two very different market sectors.

EBR Systems

EBR Systems recently held an IPO roadshow with investors, highlighting their leading medical technology and equipment, in preparation for an ASX-listing towards the end of 2021.

As participants in their capital raise, we got insight into the company and the medical innovation it presents.

EBR look to address cases of heart failure, where a traditional wired pacemaker technology would normally be employed to prevent deterioration. EBR have pioneered the only wireless, endocardial pacing system in clinical use – essentially, they have produced a tiny pacemaker which can sit inside the heart to provide a safer, more effective treatment.

The market for heart failure treatment is around 200,000 patients per year, representing a $2.1 billion USD (source: EBR Systems) market today and expected to continued growing rapidly.

As a company in their final stage of clinical trials and FDA approval expected in 2023, EBR have proven themselves to be an innovator and operating on the frontier of medical equipment technology.

Iris Energy

Iris Energy made headlines back in September, being a clean-energy Bitcoin miner looking to list on the NASDAQ (after first indicating an ASX listing).

Iris operate a simple business model of taking an environmentally-friendly approach to mining cryptocurrency.

The company develops, constructs and manages its own data centres and electrical infrastructure, vertically integrating their process to help sure-up their offering of sustainably mined Bitcoins.

Given their high-performance data centres are wholly owned assets, this offers the company further opportunities to leverage out their robust platform into other sectors including artificial intelligence, healthcare, communications and weather forecasting.

Furthermore, their vertically integrated approach and adoption of renewables means their mining operations (and cost of maintaining their centres) is low and will continue to gain efficiencies in the long run as renewable energy becomes most cost-effective.

Living on the Edge

Emerging companies, looking to address markets and issues which are not yet “solved”, are some of the most interesting parts of the equity market to explore.

Though our domestic market may not boast the robust technology landscape of the U.S or Asia, we still do hold innovative companies and entrepreneurs who are pioneering the technology of tomorrow.

Of course, not all innovations succeed and not all technologies of tomorrow will realise their potential, at least in a reasonable timeframe. But it pays for investors to remain abreast of emerging trends and what companies close to home may be in a position to ride the wave of invention through the next few decades.

The views expressed in this article are the views of the stated author as at the date published and are subject to change based on markets and other conditions. Past performance is not a reliable indicator of future performance. Mason Stevens is only providing general advice in providing this information. You should consider this information, along with all your other investments and strategies when assessing the appropriateness of the information to your individual circumstances. Mason Stevens and its associates and their respective directors and other staff each declare that they may hold interests in securities and/or earn fees or other benefits from transactions arising as a result of information contained in this article.