The Missing Piece to Amazon’s Australia Puzzle
For a small nation, in terms of population, Australia tends to punch well above its weight.
Take the red meat industry, for example. In 2016, Australia was the largest beef exporter in the world.
According to the Red Meat Advisory Council’s State of the Industry 2017 report, Australia is also the world’s second largest exporter of sheep meat, and third largest livestock exporter.
As Food & Beverage reports:
‘Not only does Australia lead the world in selling meat, Australians are some of the highest consumers of red meat in the world, eating four times the average amount of beef and six times the amount of sheep meat compared to the global average…
‘The report shows the value of Australian red meat and livestock exports increased by almost $6b over the past five years from $9.2b in 2011-12 to $15.1b in 2015-16.
‘It also showed that a once niche industry in goat meat has experienced a significant boom with Australia now a leading supplier of global goat meat, enjoying a recent price increase of 177 per cent and exporting over 27,000 tonnes of goat in 2016 alone.’
That’s a lot of meat. And the $15.1 billion quoted in the State of the Industry report doesn’t even include domestic consumption.
This — logically — got me thinking about Gustavus Swift and Philip Armour. And, of course, Aristotle…and Amazon.
Hold the salt…
Gustavus Swift and Philip Armour may not be as familiar to you as Thomas Edison. Yet without their innovation, Australia’s meatpacking industry would be a shadow of its current self.
In the mid-1800s the red meat industry was hobbled by its inability to get fresh meat to neighbouring markets. Lacking reliable refrigeration, beef was instead salted and packed in wooden barrels. Hence the term ‘meatpacking’. A word still in use today.
But over in the US, Swift and Armour changed all that.
The men introduced refrigeration to the meatpacking industry. Both in warehouses and refrigerated rail cars. By the 1880s, their innovation had provided an efficient way to safely ship fresh meat across the US.
It delivered thousands of new jobs, and changed the eating habits of Americans across the land. And it didn’t take long for other nations to follow suit.
The interesting thing here is that there were no other dramatic changes to the red meat industry at that time. Armour and Swift simply filled in the missing piece of the puzzle. And in doing so, they made the whole greater than the sum of its parts.
History lesson aside, I bring this up to you for a reason.
That’s because there’s a key piece still missing in Amazon’s Australian expansion plans. One that could be as important to its logistics operations as refrigeration technology is to the meatpacking business.
Without this missing piece, Sam Volkering — editor of Australian Small-Cap Investigator — is convinced Amazon will struggle to gain the dominance it’s come to expect in other markets.
Dominance that’s seen the company’s share price soar 49.78% so far this calendar year. With no immediate sign of easing off.
On Tuesday the stock closed up 0.22%, for yet another record high. That brings Amazon’s market cap to US$541.22 billion (AU$707.11 billion). Which, incidentally, is up US$5.57 billion since Monday.
Source: Google Finance
The company’s price to earnings (PE) ratio has gone up accordingly. The share price now stands at 283.50 times earnings, telling you investors are still pricing in massive growth potential.
Keep your eye on 16 November
Amazon remains coy about the exact date that Amazon Australia will open for business.
The first official Aussie shipping centre in Melbourne is already operational. And the rumour mill has it that we should expect a launch before the end of the month. Likely in time to make the most of the Black Friday and Cyber Monday retail booms.
That’s not much time for Amazon to get everything right.
And that’s where a small Aussie company Sam has identified comes into the picture. A company that neatly fills the missing piece of Amazon’s Australia puzzle.
This small-cap company has the technology — developed and proven in Oz — to help Amazon hit the ground running. Whether that’s the paved streets of Sydney, or the red dirt tracks of Coober Pedy.
As Sam explains:
‘If you can’t solve the basic challenge of getting a box from Point A to Point B, you’re dead meat in retail. But solve that challenge and you’re almost guaranteed success. That’s what this new Australian technology does.
‘Nearly half the country is outside an urban centre.
‘So what works for deliveries in downtown Sydney isn’t going to help you when you’ve got to wrangle something out to Wagga Wagga. Different terrain, different challenges.
‘And yet, a small team of brilliant locals has figured out how to make the road out to Kiwirrkurra as clear as the back of your hand…
‘In action, this native Australian technology obliterates the global competition.’
It’s been a while since I’ve seen Sam so excited about an Aussie tech company. And as you may know, Sam lives and breathes technology stocks.
Part of his excitement stems from an upcoming announcement the company has scheduled for 16 November.
Now, he can’t be certain the announcement correlates with Amazon’s imminent launch Down Under. But if it does, he expects this small-cap stock could rocket 750% or more.
You can find out exactly why here.
Contributing Editor, Money Morning
Editor’s note: The above article is an edited extract from Port Phillip Insider.