In a world where rising fuel bills are swallowing a growing slice of household incomes, energy efficiency suddenly matters all the more.
Smart meters are one of the weapons power suppliers have at their disposal. These pieces of hi-tech kit link your home to gas and electricity companies, so you can see, in real time, how much energy you’re using — and adjust your use.
The government wants to see 53m smart meters fitted in all homes and small businesses by the end of 2020. That £11bn roll-out may be ambitious, but the tide is unstoppable.
Step up Smart Metering Systems. The AIM company is one of four in the UK that installs and owns smart meters. The other three companies are owned by private equity and infrastructure funds.
Smart has contracts with eight energy suppliers, including First Utility and Good Energy, to supply 2.5m homes with meters.
Smart installs the meters, finances them with cheap debt and collects a recurring annual fee from each one. That provides an attractive flow of cash — £41.3m last year — that is inflation linked and will only grow as more are fitted.
Shares in the company rose strongly last year and stand at 567.5p, with a valuation of £513.8m, as the chart shows. That puts it on a pretty racy 26 times last year’s profits.
With only about 10% of the government’s target for meters fitted so far, there should be much more to come. Analysts at Panmure Gordon think it is chasing a market of about 22m homes.Water meters are next on its list as new entrants break into the household supply market.
There are potential pitfalls — such as the government pushing back its 2020 deadline. The industry has also been hit by a rash of concerns recently about meters’ potential vulnerability to hacking and households being hit with erroneous £33,000 readings.
Even if the roll-out slows, smart meters are here to stay. The company’s rivals have been targeted by yield-hungry predators, such as infrastructure fund Alinda’s swoop last year on Energy Assets. As Smart Metering Systems’ book of contracts grows, so will its appeal.
Buy.
