October 02, 2023 - 7:26pm EST by
2023 2024
Price: 1.55 EPS NA NA
Shares Out. (in M): 34 P/E 0 0
Market Cap (in $M): 53 P/FCF 0 0
Net Debt (in $M): 0 EBIT 0 0
TEV (in $M): 48 TEV/EBIT 0 0

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A2Z Smart Technologies is a cheap call option on the emerging trend toward smart carts in food retailing.  


A2Z (ticker "AZ") is an Israeli holding company that owns a few subsidiaries:


  1. Advanced Automotive Innovations Inc. is an early stage company that is developing a product for the automotive market..the FTICS or Fuel Tank Inertia Capsule System which activates automatically in the event of a vehicle collision


  1. Maintenance services utilizing the application of advanced engineering capabilities to the Israeli military/security markets and governmental agencies


  1. Manufacture of Precision Metal Parts

  1. Cust2Mate (79%).  Their product is Smart Carts  A brief description of the business is included in the link below:



The Company's smart cart has several advantages over self-checkout stations.  Cart users can avoid lines for payment and the need to take the groceries out of the cart. Self-checkout does not necessarily avoid lines.  The cart allows fruit and vegetables to be weighed in the cart and automatically identifies the item. The cart is also unique with an internal weight scale to prevent errors and theft, components preventing the stealing of the cart itself, navigation capabilities, advertising and various forms of digital payment 

Background articles on Smart Carts


https://vimeo.com/839846404  Cust2Mate in action at Carrefour





Why Smart Carts?


Customer Benefits:


  • Reduced waiting time

  • Personalized Promotions

  • Better product info

Retailer Benefits:


  • Increased Sales per basket

  • More efficient use of space.  Fewer checkout aisles needed.

  • Data Insights

  • Reduced labor costs

  • Reduced Theft; 5 layers of protection-Scanner, AI cameras, smart security scale, RFID

Recent Positive Developments for Smart Carts


  • Walmart, Wegmans Hyvee and others have dropped scan-and-go given significant shrinkage/theft

  •  More cars in the field receiving positive customer feedback; it's still early in the deployment cycle but early returns from Israel and European retailers bears evidence of value proposition for Retailers and Consumers



New CEO Guy Mordoch focused on transitioning from R&D to growth stage company and has already made a mark with impressive accomplishments in last 12 months:

  • Yochanof; Israeli Supermarket chain of 35 stores 

    • Fulfilled order for 1300 carts with positive feedback

    • 73% customer retention

    • Average purchase is 158% of regular checkouts and 171% of self-checkout

    • Improved insight into customer behavior and targeted promotions

    • Intention to acquire another 1700 carts


  • HaStok (40 Stores in Israel)  in May ordered 1,000 carts at an investment of $8 million


  • IR2S Partnership for 30k carts.  The first tranche goes to Monoprix (700 Stores) and Casino Group (10k stores) will follow 



  • New pilot with Singapore’s largest supermarket chain FairPrice

  • Carrefour (#7 global grocer) had a successful pilot



  • Strategic Deal with Accenture.  This is a real validation of the Cust2Mate product/technology.  Accenture and NCR will be pitching the A2Z platform globally and providing the service contract on the back end as a differentiating offering

  • Cart 3.0 will be a lighter model without a scale that will be 60% cheaper to manufacture.  The earliest cart design cost $4k and this one gets the cost down to $1k.  This will serve customers better as it will be less bulky and the breakeven for the company on the cost to manufacture goes down considerably.  In addition, the proposition for the retailer becomes more compelling as Cust2mates model includes revenue sharing and the benefits of higher basket size, lower, shrinkage, footprint cost reduction.  A lower cost cart increases cash flow to the retailer as well.  Financing options to scale the rollout of carts become more readily available

Thoughts on A2Z valuation:


  • The 3 non-Smart Cart subsidiaries are likely to be spun off at some point and are assumed to have negligible value.  Precision Metals generates $3-4mm in revenue per year.  Anything at all for these subs would be considered icing on the cake

How about the smart cart division?  It is an inherently imprecise analysis but there are some reference points.

  • Caper was acquired for $350mm in 2021 by Instacart.  They had one pilot in Shoprite.   Caper revenue was approximately $5-7mm in 2021 and is buried in the Instacart Enterprise Platform segment which is part of other revenue.  Lack of disclosure in the S-1 likely indicates not a lot of growth there.  A2Z today has a more advanced product with verified orders and an EV of only $55 million, down from $300mm despite being further advanced commercially and technologically.


  • Standard Cognition had a valuation of $1B at year end 2022 with $12mm in revenue. TracxPoint in 2021 had a similar valuation.  https://tracxpoint.com/


  • TAM analysis. The global smart shopping cart market was estimated at about $932 million in 2020, with expectations to reach roughly $4 billion by 2026, a CAGR of 27.6%.. A recent study conducted by Anyline suggested that 77% of the 1,500 people they surveyed are more willing to shop at a store that offers scan-and-go (self-checkout).

New business model coming into focus next quarter

  • Subscription Model includes an upfront payment, multi-year subscription agreement and monthly subscription fee which includes software updates, support and maintenance.  Additional fees for add-on features can be charged, and revenue recognition on a monthly basis allows for steady growth with the installed base of smart carts. Cust2mate has already guided that data and retail-sourced revenues will commence in Q4 of this year

Modeling assumptions:

  • Monthly SAAS payment of $100-125, # Carts per store, #Stores Annual Revenue, Margin


  • Upfront payment of $400-500 by retailer for cart







Annual Revenue








$      30,000,000







$    138,000,000







$    432,000,000







$    900,000,000







$ 1,560,000,000







$ 2,700,000,000

Cust2Mate is burning approximately $1mm in cash per month with beefed up staff ahead of the 3.0 cart launch.  At the bottom end of the range (25k carts) which represents rollout of only half of the 2 deals already signed they start to make money and in the middle scenarios the business becomes very profitable.  Assuming a 50% GM on SAAS revenue and $20mm in annual opex, that translates into fully taxed earnings of $.90/share.  It might take a few years but anything approaching that trajectory would create huge upside in the stock.  The US has an estimated 63k supermarkets and grocery stores .  At an average of 150 carts per store, that implies over 9 million carts for supermarket and grocery alone. Even if we assume a 20% maximum penetration rate given that not all store sizes/types likely qualify for smart carts and a 10% market share for Cust2mate, that would result in a scenario between the second and third above with massive revenue and profit potential.  At 1.60 a /share, this is a cheap call option on a potentially enormous market opportunity.  A2Z hardly needs to be the winner in the industry to produce massive upside for investors.  






Stalled rollout

Competition takes preponderance of share (Veeve is aligned with Kroger and Albertsons)

Utilization of carts trails off as penetration reaches larger scale


Source: Company reports, SEC filings.  

I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise do not hold a material investment in the issuer's securities.


Spinoff of non-core subs

Meaningful revenue acceleration from 2 signed deals




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