NEA.AX - Sophisticated aerial imaging services

6 Jun 2019

 

 

 

 

About

  • Nearmap is all about aerial imagery, but with images captured using sophisticated plane-mounted cameras it is able to deliver these more frequently, at higher resolution and at oblique angles. Further, images are updated within days of capture and comes with a rich, industry specific tool set. 

  • Nearmap provides high-resolution 2D and 3D satellite imaging of buildings and infrastructure in fields such as telecommunications, utilities and construction.  

  • Its 3D product would help it push more into markets such as urban planning and construction, enabling companies to see how a structure would look in an environment, or what the view would be from the 12th level of an apartment block.

  • Customers come from a wide range of industries, including insurance, government, construction, solar, utilities and more.

  • A key value proposition is that it saves clients costly and time consuming site visits.

 

Opportunities

  • Nearmap may have doubled its market valuation since January, earning it a spot in the S&P/ASX 200, but the aerial imaging company says it has plenty of growth ahead, with less than 1 per cent penetration in the fast-growing American market.

  • The company's strong growth in the United States has been a selling point for investors, who were buoyed by its progress after the release of its half-year results in February.

  • A critical pillar of the growth story is its expansion into the USA. Unlike most Aussie companies, Nearmap is experiencing some real success here and the opportunity remains vast. The company estimates the total addressable market to grow to US$4.5b by 2025.

  • While there was still plenty of room for growth in Australia and the US, the company was built to be global, he said. "We’re launching into Canada and beginning our first [image] captures there in the next few weeks. But it was a capital light expansion because we can use existing US staff for sales," he said.

 

Financial

  • Nearmap provides its aerial imaging services on a subscription basis rather than as a one-off contract and updates its images a few times times a year, which is one of its biggest differences to incumbent competitor EagleView. .

  • In its interim results for 2018-19, Nearmap reported a 45 per cent jump in revenue to $35.5 million, while its net loss narrowed to $2 million, down from $6.5 million in the year-earlier period. Sales at the most recent half grew by 45% and Nearmap should be profitable in the following financial year.

  • With around $80m in cash, there’s plenty of dry powder to support operations through to profitability, and earnings have the potential to explode as the business moves past the break-even inflection point.

  • Sales have been growing at an accelerating rate, the business is debt free with $80m in cash, and the business delivered positive operating cash flow as of the most recent half (HY2019).

  • The business enjoys a high level of recurring revenue, >90% customer retention, and has a high degree of operating leverage. Each new customer is, in principle, able to be serviced with very little incremental cost. So as sales grow, net margins should expand.

  • Nearmap considers its annual contract value (ACV) as its key growth metric. In the United States its ACV jumped to $US17.6 million ($24.6 million), more than double where it was 12 months ago, while in Australia it now has an ACV portfolio of $53.3 million.

  • Nearmap's $1.5 billion market capitalisation values it at 19 times revenue. This is likely to rise even further in the short-term, given its arrival in the S&P/ASX 200, which will prompt index funds that build stock portfolios based on sharemarket indices to buy its shares.

 

Competitive Advantage

  • Nearmap enjoys some major competitive advantages. As an early mover in this space, it has a deeper repository of images and data. That not only offers a greater value proposition to customers, but gives it a real advantage in developing new products.

  • Nearmap's camera system is also considered by analysts to be best in class, able to capture several viewpoints to stitch together images to create a 3D representation

  • The new AI product is a perfect case in point…Nearmap’s new AI feature enables its system to detect and measure change. Like most AI advancements, such capabilities require large data-sets to train the system, so new entrants — without such resources — are at a significant disadvantage. Indeed, management boast they have a “multi-year advantage” over their closest competitors.

  • Also, as the company increases its market lead, and captures more customers, increasing operating cash flows are able to support increased R&D efforts. This creates a virtuous loop whereby superior technical capabilities enable greater market share, which delivers increasing profitability and underpins further R&D, which extends technical superiority…and so on

  • Nearmap 3D, which enables customers to visualise and measure cities in 3D from any direction, is another example of the company’s increasing lead on competitors.

 

Management

  • 28 Mar 19: Robert Newman Buy 400,000 @ AU$2.71 (AU$1,084,000)

  • Dr. Robert Melville Newman, also known as Rob, B.Eng(1st Hons), Ph.D., has been the Chief Executive Officer, Managing Director and Executive Director at Nearmap Ltd. (Alternate Name: ipernica ltd.) since October 15, 2015. Dr. Newman is a Co-Founder and Investment Director at Stone Ridge Ventures. He served as Vice President of Marketing and Product Management at Bay Networks, Inc. He was a Co-Founder and Chief Executive Officer of Atmosphere Networks, Inc. He served as an Investment Director at Foundation Capital. He has established a unique track record as a successful Australian high technology entrepreneur in both Australia and Silicon Valley. He has twice founded and built businesses based on Australian technology and both times successfully entered overseas markets. As a Venture Capitalist, he has extensive experience in identifying and helping grow companies with significant commercial potential, especially those addressing overseas markets. In the 1980's, he was a Co-Founder and Inventor of QPSX Communications Pty Ltd. After founding the company, he provided the technical leadership and product strategy. He was instrumental in establishing QPSX as a worldwide standard for Metropolitan Area Networks. He serves as the Chairman of Xelor Software, Inc. He served as the Non-Executive Chairman of Pointerra Limited until June 30, 2017. He served as the Non-Executive Chairman of Nearmap Ltd. and also served as its Non-Executive Director from February 17, 2011 to October 15, 2015. He served as Non-Executive Director of Pointerra Limited since June 30, 2016 until November 9, 2018. He served as a Director at Soil Sub Technologies Ltd. since July 2016. He served as a Director of Dimerix Limited. He has been recognized with a number of awards including the Bicentennial BHP Pursuit of Excellence Award (Youth Category) and Western Australian Young Achiever of the Year 1987. Dr. Newman's formal qualifications include a PhD and Bachelor of Electrical Engineering (1st class honors) from the University of Western Australia

 

 

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