$0.110
Opened: 31-Mar-2025
Shares Held at Open: 657,500
What does ROC do?
ROC has developed “Vision Artificial Intelligence” technology for giant companies to analyse and respond to in-store customer behaviours.
ROC’s main customers today are retail supermarkets and commercial banks to help optimise workforce management and alleviate loss prevention.
What is the macro theme?
In-store shopping behaviours are moving to “autonomous”.
With self-checkout and self-ordering systems stores are putting the control back into the customers’ hands.
The challenge is that this has led to an increased amount of loss and theft for the retailers, and requires highly advanced monitoring software to sustain.
Why did we invest in ROC?
ROC already has long term, paying enterprise customers including Bunnings and Suncorp.
Both Bunning (large DIY goods retailer owned by Wesfarmers) and Suncorp (community bank owned by ANZ) are paying customers of ROC.
They have been customers since before ROC’s December 2021 IPO and continue to renew and expand their licence contracts 7+ years later.
This is strong evidence that ROC can sell its product to enterprise customers, and that those customers find long term value out of the service.
Over ~$35M in potential annual recurring sales from “advanced stage deal pipeline”
According to ROC’s most recent quarterly report, ROC had 10 customers in its “Advanced Pipeline”.
These customers represent over 10,000 sites in total.
At $3,500 per site per year, by our rough, basic calcs this represents over $35M in potential annual recurring revenue if ROC is able to convert into sales.
(using a basic $3,500 per site per year times number of sites calc, ignoring bulk discounts and setup fees)
Even if just 10% of that “advanced stage” pipeline is converted, it would be 3.5x ROC’s current revenues.
One large deal could multiply ROC’s current revenue
If ROC is able to sell to a large multinational contract it could have its product in thousands of stores through just one deal.
At a price point of $3,500 per store one deal could be in the millions of dollars in recurring free cash flow.
These deals take a very long time to secure (as do most enterprise software deals).
ROC has shown that its enterprise customers tend to be incredibly “sticky” (stay on for a long time)
Partnership with Europe’s largest Point of Sale company: Gebit Solutions
Gebit Solutions sells self checkouts to supermarkets and retailers.
Gebit is the point of sale system for some of the largest supermarket retailers in Europe and Gebit will now support an “out of the box integration” with ROC’s software.
High-synergy partners like Gebit help improve ROC’s reputation to enter the conversation with big retailers, despite ROC being a smaller player in the space.
Original founding team still in place, with a new experienced tech chairman at the helm
The original team that developed ROC’s technology in the early 2010s are still running the company (including the CEO and CTO).
This is a positive sign for tech startups when a long term founding team has been working on the product for 10+ years.
Now however, ROC has a new chairman with experience in both private equity and tech enterprise sales.
ROC’s new chairman Roy McKelvie is also the chairman of an education technology company called Pathify that he helped to scale and raise US$25M at a A$180M valuation.
Roy invested $200,000 personally into ROC last year at 8.5 cents and a further $90,000 in the current placement.
Genuine AI and deep knowledge of how to apply AI to a specific problem
ROC’s AI and machine learning technology has been developed since 2010.
(well before AI became big Investment theme)
Companies developing genuine AI with over a decade of development efforts AND internal knowledge on how to apply AI to solve a specific and real world problem are rare on the ASX…
And in our view are the best positioned to leverage and apply the rapid recent advances in AI technology and tools to their specific sector of expertise.
Vision capture technology valued in the US$250M-$500M range
In late 2022 a company called Trigo raised US$100M off the back of its grocery vision software.
In 2023 one of the largest companies in this space Everseen raised US$70M to advance a very similar technology.
Those large raises are evidence of the size of the opportunity in this space that investors are seeing.
If ROC is able to deliver more sales and capture market share, it could grow to the size of these larger competitors in the space.
ROC has a good capital structure with strong ownership represented in board and management
Following today’s capital raise news and its completion, ROC will have 154 million shares on issue.
The major shareholders are the original vendors of the technology and have proven to be sticky since the IPO.
The board and senior management represent ~44% of the shares on issue prior to this recent capital raise, which means they are very aligned to shareholders interests.
What do we expect ROC to deliver?
Objective #1: New Sales: Retail/Supermarket
Milestones
New customer 1
New customer 2
New customer 3
Objective #2: New Sales: Consumer Banks
Milestones
New customer 1
New customer 2
New customer 3
Objective #3: Existing customer resigns or expands:
Milestones
Contract re-sign with Bunnings
Contract re-sign with Suncorp
What could go wrong?
Sales and Delay Risk
ROC could lose key clients or not seal as many deals, hurting their revenue and share price.
Large organisations like the one’s ROC works with don’t tend to adopt new technology very often and the sales cycle can be long. This feature of ROC’s customer base can cause delays in sales that drag out over a long time,
Marco factors in the market including a recession can cause a reduction in spending on new technology, affecting ROC’s ability to make sales.
Technology / Competition Risk
Technology is a competitive market. If ROC’s technology is deemed to be less valuable than other competitors, then it may fail to win sales.
Market risk
Tech stocks could fall in value again. Even if ROC does everything right from an operational standpoint, the market could always sell off or favour different sectors.
Funding Risk
Although ROC just raised $3M, it is still a small cap stock that it is burning more money that it is making.
Based on its existing cash burn this $3M will give the company about 3 - 4 quarters of runway before it will need to raise again.
If the company has not been able to secure a major deal in that time then it may be doing the next raise at a lower valuation.
What is our investment plan?
We plan to hold a position in ROC for the next 3 to 5 years (and beyond) as it scales up its technology business.
We eventually may look to take some profits by selling up to ~20% of our holding (in line with our holding policy and escrow conditions) if the share price materially re-rates on the company successfully delivering on the key objectives listed above.
Disclosure: Disclosure: S3 Consortium Pty Ltd (the Company) and Associated Entities own 6,575,000 ROC shares and the Company’s staff own 125,000 ROC shares at the time of publishing this Investment Memo. Some shares are subject to approval in an upcoming EGM. The Company has been engaged by ROC to share our commentary on the progress of our Investment in ROC over time.
