The Next Money Tree on the ASX, Nuheara Limited (ASX:NUH) - Hearing Aids with a Difference

The Next Money Tree on the ASX, Nuheara Limited (ASX:NUH) - Hearing Aids with a Difference

Looking for the next money tree on the ASX, have a good look at Nuheara Limited (ASX: NUH).  Nutheara Limited makes Hearing Aids with a difference.  The company, Nuheara Limited (ASX: NUH) recently announced that they had been selected by the United Kingdom’s (UK) National Health Service (NHIS) to provide hearing solutions to adults and children with mild to moderate hearing loss.

Now prescribed alongside traditional hearing aids means that they are real participants in a billion dollar industry.  Nuheara Limited has also partnered with Specsavers which is a fantastic distribution partner.  However, in my view, the main game is the health industry.  The health industry has limitless customers.  As we all know, the two sectors that never run out of customers are childcare and aged care.  The critical aspect is that a loss in hearing in an ageing population is more than a common coincidence.  Nuheara making hearing aids with a difference is a sure way to get noticed in an industry that have billions to share.

My Involvement

My involvement with Nuheara Limited started in 2015 by way of an investment in a small company called Wild Acre Metals Limited.  They took on this new technology called “Wearable Hearing Aids”.  I thought that Bluetooth earbuds are not exactly new and what is the whole excitement.  As my position was not significant at all, I just let the entire scenario play out but I was not impressed.

In fact, for a long time, I did not think much of the technology.  I guess it was nearly18 months later that I looked into the technology and was impressed.  This lack of interest was because I had minimal exposure to the stock.  But I did make up to 5 times my investment, so that made up for it :-).

Corporate Information

Nuheara Limited was born out of a Reverse Takeover (RTO) of Wild Acre Metals Limited and formally incorporated in early 2016.  However, the announcement of the transaction started in 2015.

  • Market Capitalisation: 66M (12/2018)
  • Shares Outstanding 891.5M (06/2018)
  • Top 20 %: 38.6%  (Two directors, Justin Miller and David Cannington own 7.1% each)
What is the Technical Aspect of the Story

In a very simplistic way, the Nuheara earbuds allow the user to change the frequency of sound based on the environment you are present.  If you are at a construction site or a restaurant or in an aeroplane, it works to allow the user to change the ambient noise and improve the sound of what you want to hear.  As I understand, if you are talking to someone in a construction site, you can cut out the ambient noise and allow you to listen to that person’s voice.  Similarly, in a crowded area, you can use it to cut out the surrounding talking and concentrate on the person you are talking to directly.

 

Nuheara Limited product range. (source: Nuheara Limited)

 

I remember when I first bothered to look into the Nuheara Limited’s product, I was surprised that it is not just a Bluetooth earbud, but it does all these functions.  I was amazed at what the fuss was all about at that time.  I seem to have an issue with looking into details 🙂  The products range looked very stylish and wearing that would not look like your traditional hearing aids which spells Old Man

So What’s the Big Deal?

Now that we are all at the twilight of our lives (I am anyway…) when things such as an improvement to our health are so apparent.  As a gadget freak, I own three rather expensive wireless earbuds, and god knows how many noise cancelling headphones.  Now researching this product, I am tempted to buy the buds myself.  Imagine that we have an app on our phone (a gadget we seem to cannot live without and cannot stop touching every 5 seconds.)  that allows us to manipulate the sounds we hear.  We can cut out the surrounding noise and only listen to what we want to hear, and I am not talking about music.

I love the idea that we can cut the sound of the machines and isolate the voice of the person we want to talk to directly. Having spoken to several people who are wearing hearing aids, their biggest complaint is that sounds are all pouring into the head.  They cannot isolate.  The ability to do this is a big deal.  I recently paid $200+ for a Jabra earbud.  It is great to use, but it has some of the functionalities while you are playing music but not as a hearing aid.  Now I believe that the Nuheara Limited iQbuds are both.

The other factor is the use of these buds in industrial applications.  As a geologist, we are always working close to noisy drilling rigs, and we wear earplugs.  These earplugs protect our eardrums from the constant loud noise.  Imagine wearing these buds to do that, but it is connected to all the technology to play music….etc

So What’s The Business?

Now, this is an excellent question?  There are a heap of brands out there in the market.  Let’s not kid ourselves.  We are a species of the animal kingdom that loves brands. Brands make us feel the quality.  Even the perceived quality comes from the name and the perceived quality of the name. We are such simpletons. But you need to understand the message Nuheara is trying to sell.  They are not headphones, and I feel that many people out in the general public will miss this message.

When you look at the diagram below, Nuheara had placed the IQBuds in a sector that is different from headphones.  How is it different?  The best analogy that between fossil fuel cars and Electric cars, the general public can understand the clear distinction.  However, when you ask people about dementia, they think of memory loss issue, but when you talk to carers, it is the character change that drives them nuts (see my post on dementia).  I fear that Nuheara is in this confusing category.  The market will lump them into the headphone industry.

There is a danger that customers cannot differentiate between a hearing aid and a hearing aid with a difference.

 

The market perception for Nuheara Limited is fundamental. (source; Nuheara Limited)

The diagram above represents where Nuheara Limited is in the market.  The traditional hearing aid industry is an $8B market but is only selling 13M devices p.a. as opposed to the conventional headphone industry of the same market value, but it sells 300+M devices p.a.

When you look at those numbers, it’s an important reason to be in the industry.  There are several videos on the website that explains the IQ buds. The videos are great as it makes it clear why they are not just another Bluetooth device.

 

Nuheara Limited has a product that will allow users to have more control.
Share Price Movement

In Figure below,  you can see that the share price journey has been volatile, but if you smooth the curve out, it has not been too exciting.  Listing at a low of 2.5c in early 2016 and now being 7c is not what I would call impressive. Fortunately for me, my exit was well timed, but that was because I had a small shareholding and the capital gain warranted a departure.  If I had a more substantial holding, my modus operandi has always been to exit when the story changes.  In this case, that would have meant that I would be still a shareholder.

Technically, the 5-year chart does show that it is trending upwards and trying to break the resistance level at 15c would appear to be approaching.  I am never one to make bold predictions on individual stocks solely on technical analysis but when you couple the recent announcements and the chart, I do feel very comfortable in predicting that the share price will test 15c again.

 

Nuheara Limited 5 year share price chart (source: www.commsec.com.au)

 

Technically, when I look at the 3-year chart, there is more clarity on my thoughts on breaking that 15c level — lots of bullish sentiments and setting new higher lows.  As I am an advocate of horizontal support, I see several support levels.  It seems like the bulls are busy creating new highs, but the bears come in to set the lows before the bulls are back in there setting new highs again.

 

Nuheara Limited 3 year share price chart (source: www.commsec.com.au)

 

My Thoughts

I have to admit that I am now more intrigued about Nuheara Limited than before I started writing this blog.  The more I have learned about its potential, the more I feel its a reality.  So what does all this mean?  In my opinion, the Hearing Aid industry is only going to get bigger. My parents paid thousands for their hearing aid, and they tell me that it is too annoying to wear them which is also consistent with other people wearing hearing aids.  If the IQbuds can deliver what they are marketing, they will conquer the market.

In regards to a view of its share price, I feel that the currently released announcements are good signs of a good foundation and the market accepting the company strategy.  Surely the oversubscribed placement in December 2018 is a testament to the direction of the company.  For me, that placement at 7.5c is now below the current share price, and this is representing good value.

 

Conclusions

Remember that once you go past the age of 35,  everything in our body is deteriorating including our hearing.  I once read that once we reach 21 years old, everything is going downhill.

If there are still people, who think that the hearing aid industry is a small market you need to have a look at a company called Amplifon .  It retails and fits hearing aids and supplies correlated services aimed at the solution of problems related to the loss of hearing.  The Group operates in Italy, France, Spain, Portugal, Switzerland, Austria, Holland, the United States, Hungary, and Egypt. Amplifon operates through a network of distribution centres and licensee network affiliates.  In Q3 of 2018, they had a revenue of 303.2M Euro and a nett income of 10.6M Euro (Bloomberg)  In August 2018,  Bloomberg reported that its IPO had returned almost 1000% since IPO.

Hearing Aids market Size Projected To Reach $6.5 Billion By 2024 (www.grandviewresearch.com)

The global hearing aids market was valued at USD 4.5 billion in 2015 and is expected to reach a value of USD 6.5 billion by 2024, according to a new report by Grand View Research, Inc. Key factors driving the market expansion include the dramatic increase in ageing population of 65 years & above and the associated loss of hearing and growing demand for new-generation instruments that are technologically enhanced and enriched equipment with better aesthetics.

As per the data published by the WHO (2013), the prevalence of the same disease in adults over age of 65 years is expected to be five times more than that for the individuals below 65 years of age. It also estimates that in the developing nations around 20% of the people with hearing loss require hearing aids and less than 3% of them are expected to be using it.

 

Disclaimer:

The information contained herein is the writer’s personal opinion and is provided to you for information only and is not intended to or nor will it create/induce the creation of any binding legal relations. The information or opinions provided herein do not constitute investment advice, an offer or solicitation to subscribe for, purchase or sell the investment product(s) mentioned herein. It does not take into consideration, nor have any regard to your specific investment objectives, financial situation, risk profile, tax position and particular, or unique needs and constraints.

Accordingly, no warranty whatsoever is given, and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of this information. Investments are subject to investment risks including possible loss of the principal amount invested. The value of the product and the income from them may fall as well as rise. You may wish to seek advice from an independent financial adviser before committing to purchase or invest in the investment product(s) mentioned herein.

If you choose not to do so, you should consider whether the investment product(s) mentioned herein are suitable for you. The writer will not, in any event, be liable to you for any direct/indirect or any other damages of any kind arising from or in connection with your reliance on any information in and/or materials appended herein. The information and/or materials are provided “as is” without warranty of any kind, either express or implied. In particular, no warranty regarding accuracy or fitness for a purpose is given in connection with such information and materials.

15 Comments
  1. Disclaimer:The information contained herein is the writer’s personal opinion and is provided to you for information only and is not intended to or nor will it create/induce the creation of any binding legal relations. The information or opinions provided herein do not constitute investment advice, an offer or solicitation to subscribe for, purchase or sell the investment product(s) mentioned herein. It does not take into consideration, nor have any regard to your specific investment objectives, financial situation, risk profile, tax position and particular, or unique needs and constraints.Accordingly, no warranty whatsoever is given, and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of this information. Investments are subject to investment risks including possible loss of the principal amount invested. The value of the product and the income from them may fall as well as rise. You may wish to seek advice from an independent financial adviser before committing to purchase or invest in the investment product(s) mentioned herein.If you choose not to do so, you should consider whether the investment product(s) mentioned herein are suitable for you. The writer will not, in any event, be liable to you for any direct/indirect or any other damages of any kind arising from or in connection with your reliance on any information in and/or materials appended herein. The information and/or materials are provided “as is” without warranty of any kind, either express or implied. In particular, no warranty regarding accuracy or fitness for a purpose is given in connection with such information and materials.
  2. good review neil but i worry about nuh, they have some serious payment [mainly executives that in my opinion have not made much difference to nuh in the last year -still highly paid] as well bringing on more products [liveIQ has been ongoing for last 8months still not out!] -how are they paying for all this -more c redit raises. Problem theyre not selling the damn thangs as good as they are!

    1. Hi, And this is the unknown that will make NUH unstuck. I am very interested in teh aged are sector and I see this product almost as essential. However, I don’t know of the performance, the support and the distribution. Hopefully, the introduction of Specsavers could help with the distribution.

    2. The Amazon reviews are extremely critical of the ear buds. They get only 2.5 stars.

  3. Great article that I see as true potential from an Aussie company. From the comments above I cant see how exec salaries is going to impact highly on a potential growth market, and with multi products available to suit differing market segments, it seems like a target stock for the long term? Signing a deal with anyone as large as Specsavers means volume flow surely as they are HUGE in the UK .

    1. To me, Specsavers is a game changer. Now its all about the proof of this thought. We all know that the foundations can be strong, but if the execution is not on song too, then we will have a problem.

  4. 1. There is no contract with the NHS. It is simply an opportunity to tender to supply devices. There is no guarantee that any devices will be sold.

    2. There is no partnership with Specsavers. It is a one store trial.

    3. EVERY reverse listed tech company in the history of the ASX has eventually failed.

    1. I can disagree with your comments but there has been a lot of success as well. As for Point 1, its like having the chance to tender to Rio Tinto. I rather have the opportunity than not have that ability to compete at all. Point 2, I don’t know. Thank you for commenting.

    2. No contract?

      What bit of the following do you not understand?

      “In a world first, IQbuds BOOST™ was selected as a smart hearing bud (Hearable) to be prescribed
      alongside traditional hearing aids. Commencing in April 2019, the contract will be for an initial twoyear
      period with provision for a further two-year extension. The anticipated value for purchases made
      by NHS for hearing device solutions to support this mild to moderate hearing category is circa £34.5m
      in the first 12 months and £138m for the full term of 48 months (if extended). The total contract
      value of devices to support all forms of hearing loss is circa £270m.
      Commenting on the significance of the contract Nuheara CEO, Justin Miller said, “This tender and
      CONTRACT through one of the world’s leading government health care provider’s is a defining moment
      for IQBuds BOOST™. In a world first for any government body, IQbuds BOOST™ can be prescribed to
      suffers of mild to moderate hearing loss.

  5. Build up has been slow and steady Noel with a pivot in 2018 to focus more on the hearing industry than consumer electronics. This is the right move. The NHS contract verifies the stand out quality of the Nuheara products and provides a significant income stream in Q2 2019, on top of all other sales. Contracts with Acuitis, Vision, Hidden Hearing, Puretone and Specsavers means other groups are not selling the products via consultative sales. The next hearing product. IQbudsMAX is to be launched on Jan 8th St the CES.

      1. Nuheara has a lot of products?

        At present here are only two:
        Base level IQbuds for augmented hearing (not such much hearing loss)
        IQbuds BOOST for hearing assistance for mild to moderate hearing loss.

        Soon there will be IQbudsMAX for Audiologists to suggest to those who want a very advanced product.

        The LiveIQ are for a complete different market.

        Each has its own price range – I cant see how the market will be confused.

  6. I was at a conference in 2017 when the IQbuds were 1st released and some one from the Co was demonstrating them and offered me a try out. I was more interested in them as a good set of music ear phones and they were excellent. I tried a few of my favourite tracks (rock, jazz & guitar solo)and was really impressed. But what got me really interested was when at this noisy conference he was able to cut out all the background noise and we had a normal conversation. It was then I realised the potentiall of this technology. It was very impressive. They are like a cross over between a hearing device and a really good quality headphone. I think they were just talking of the IQboost product then and I xould see with the potential to take some of the hearing AID market (because the boost product was able to analyse a persons hearing) that this eventually could be a winner. What they really want is TGA approval as a mild hearing aid ….because they are cheap in comparison to a set of hearing aids. (my mum paid over $5000 and she is not that deaf) I’m not a share holder yet but have been watching the share price drop as the tech sector got sold off. It will find a bottom somewhere and head up when they receive TGA and sales figures confirm the same. The product has the ability to severely disrupt the hearing aid market which in my observation is rorted. (My basis for saying this is Im nearly 60, I get pestered by local hearing aid Co’s at least 2 times a year hoping to sell me hearing aids after a free hearing test. My father in law has had the similar experience, except he is 77 and they sold him some Govt subsidised ones which are ugly, uncomfortable to wear and at the low/cheap end and don’t perform and so he does not use them. This product would be perfect for him, minor hearing loss. But he probably would not pay for it when he can have a govt subsidised pair. The IQboost needs to be on the govt approved list …then we’ll see fireworks in the share price. The other advantage I see is that they have a Bluetooth TV sender (extra $$) which if somehow included in the price could also boost sales while making a big difference to the elderly when watching TV, because they were actually comfortable to wear unlike some headphones..)

    1. I am really interested in buying a pair but what am I going to do with the other 3…. 🙂 Thank you for your comments. Cheers

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