Sierra Monitor Corporation (SMRC) designs and develops hazardous gas monitoring devices for the protection of personnel and facilities in industrial workplaces. Through its subsidiary FieldServer Technologies, the firm has branched into protocol translation technology, which enables machine to machine (M2M) communication in energy and building automation applications.
This high-growth business should complement the gas detection business, while not sacrificing market or margins. FieldServer should see a tailwind as a result of the push toward zero net energy building designs.
Research and spending over the next several years will focus on “zero net energy” building designs. The WBCSD (World Business Council for Sustainable Development) identified buildings as one of the five main users of energy where “mega trends” are needed to transform energy efficiency. They account for 40% of primary energy in most countries covered by this project and consumption is rising.
The International Energy Agency (IEA) estimates that current trends in energy demand for buildings will stimulate about half of energy supply investments to 2030.
We see value in the shares of SRMC and initiate coverage with an Outperform rating.
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