Tern invests in UK start-ups in the multibillion IoT and Healthcare spaces, and nurtures and grows them for sale primarily in US markets at US valuations.
With a current Market Cap of £20 million, £2.1m in cash, and exposure to huge international markets it is not unreasonable to foresee significant returns for Tern. The question is not if, but when? However, investors being a somewhat impatient bunch, just knowing the value of the company’s portfolio is not apparently enough. But at least on this basis we are looking at a stock where the message is weakness provides opportunity.
That said, Tern shares have been in favour relatively recently. Since the arrival of Covid-19, tech stocks, along with pharma and more recently mining, have been among the few sectors to really flourish. What is interesting regarding Tern’s shares, isthat while there was a four-fold rise for the stock March to May, since then gains have been eroded.
Nevertheless, because of the ongoing grumpy attitude the market seems to have towards Tern, this will mean that it is likely that this state of affairs will only change significantly when we witness the first sale of one of its investee companies. Only then is it likely that we shall see the market recognise the true value of Tern’s business model.
Few would argue the heavy discount of the assets the company is holding, even if only on the basis that discounting is almost universal in equivalent investment companies, whatever the sentiment in the market actually is.
Tern has 4 primary investments at the moment.
50% stake in IoT Systems Integrator InVMA
57% stake in IoT Cybersecurity company Device Authority
27% stake in Surgical VR company Fundamental VR
100% stake in IoT communications company Wyld Networks
InVMA provides the skill sets to drive digital transformation at the companies they work with. Partnered with big names such as PTC, Dell, ARM and Microsoft installing their technologies in client offices and manufacturing facilities. Although a lot of their clients retain anonymity some such as Centrax, Howden and GCE Healthcare have gone public. Their development of an Asset Management platform for SME’s and their rapidly growing experience in building IoT deployments should make them an increasingly attractive target for the larger systems Integrators such as Deloitte, Accenture, Wipro etc.
IoT security is significantly more complex than traditional IT security because of the number of devices to be secured and their distributed locations. Device Authorities KeyscalerTM has been built to deal with this complexity and to scale to the millions of devices that are being installed by the world’s largest enterprises. They have integrated their product into Microsoft’s IoT platform Azure and Microsoft have been giving them significant exposure and freely sharing hugely positive commentary on the technical ability of the platform. This is a huge market worth $5 billion per annum and growing fast. Device Authority is partnered with the likes of Dell, AT&T, Microsoft, and Symantec It is difficult to know if the ultimate purchaser will be Microsoft, one of the Systems Integrators such as Wipro or Cognizant, or perhaps one of the traditional cyber companies looking to gain a foothold in IoT.
This is a surgical training platform combining virtual reality and haptics (sense of touch). Fundamental VR is partnered with leading US, German and UK hospitals and health services. They have been recruiting significantly in the last 18 months and have received VC series A backing to fund their growth. It is the winners of multiple awards and sponsored by leading healthcare institutions it is very probable that this company will attract a very significant price upon its eventual sale. There are significant cost benefits for hospitals to utilise this system versus the cost of using cadavers, and its ability to provide scoring to surgeons and trainees will be attractive to insurance companies. FVR has truly been one of the beneficiaries of the COVID 19 crisis as remote learning is becoming the new normal.
Wyld have developed innovative communications networks aimed at Agritech, Industrial, Environmental, Retail, Stadiums, Transport and Smart Buildings. They have partnered with a leading global satellite company to develop satellite to ground IOT communications systems. They have installed the first of their mesh networking systems in a range of locations such as stadiums, rail stations, retail etc which is extremely encouraging but their mesh technology is also perfectly suited to providing social distancing technology to health and other businesses. One of the most interesting deployments is a prototype installed in a number of care homes in NHS Scotland. If successful, then it can be expected that swift roll out of the platform will follow across the NHS and possibly globally. Although the immediate driver is Covid-19 it can deal with issues associated with annual flu outbreaks in care homes.
While it is certainly early days for Wyld Networks, one can imagine it will already be attracting the attention of some of the bigger players in the market. Wylds has many assets across a number of verticals and looks to be the diamond of the pack. A re-rate within Tern by the City, or a sale of Wyld, look to be the main triggers for a possible new rally for Tern, despite the contingencies of Covid-19.