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Market Price: $3.14
Market Cap: $1.4b
Shares Issued: 454m
Nearmap Ltd (formerly Ipernica Ltd) is an Australian aerial location and imagery technology business. Founded in Perth by Stuart Nixon in 2008, the company provides frequently updated, high resolution aerial imagery covering just under 90% of Australia’s population, 68% of the US population and 72% of the New Zealand population. A reverse takeover listing on the Australian Stock Exchange (Ipernica) in 2012 saw the company relocating headquarters from Perth to Sydney. An expansion into the US market in 2014 and NZ market in 2017 have both been well received by customers and executed by management to date. Nearmap has expanded its aerial imaging content to include 3D models of Australian capital cities.
The Disruptor
Nearmap has disrupted the traditional aerial imagery market primarily only accessible to government and large enterprises due to cost and lead times. A surveying company would need to be procured taking photos of areas of interest. Data would be manually processed, stitched together, and delivered on a hard drive disk. This laborious process could take months and executed once every 3 or 4 years at best. Nearmap’s patented camera system and software allows the company to capture aerial photography while seamlessly building digital maps. Content is delivered in days not months at substantially lower cost.
Reporting Season August 2020
Nearmap recently reported a better than expected start to FY21 which is encouraging to see. There was of course a short term impact due to the global health crisis over the second half of 2020, however, the business released a trading update which pointed to increased momentum in ACV (Actual Cash Value) growth approaching pre-covid levels. While early days, this implies NEA will be able to grow ACV by A$13m (24% yoy). A more conservative approach would be implying a 20% growth rate which would have us at A$127m in revenue for 2021 (the lower end of previous guidance of 20%-40% CAGR). Nearmap has reiterated its goal of cashflow breakeven year end 2021 guiding to a cash balance A$32m-A$35m.
Outlook
With all business globally under mounting pressure to further digitise workplaces, we view Nearmap Ltd shareholders as ideally positioned to capitalise on this trend. Nearmap will more than likely offset any short-term headwinds due to macroeconomic conditions via increasing market penetration and take up of new products in the form of artificial intelligence and roof geometry to name a few. The business has flagged ongoing R&D investment to protect margins and maintain pricing power while at the same time executing its land grab strategy. Nearmap’s profitable Australian business highlights the market opportunity of its roll-out in the US. Its business model is highly scalable with a capture once, sell to many (land and expand, etc.) capability. We suspect there are further upgrades and wins in the mail for this business and recommend being a part of the journey.
| Revenue A$ (m) | 114 | 140 | 170 |
| EBIT A$ (m) | -15.5 | -6.6 | 2.8 |
| EPS Growth (%) | 50 | 45 | 75 |
| Debt (short/long term)A$m | 0 | 0 | 0 |
| Capex A$m | 34.5 | 46 | 52 |