TAYLOR COLLISON RESEARCH
Friday 25, June 2021
Aerometrex Ltd (AMX) MetroMap growth tempered; US 3D still top opportunity

OUR VIEW - SPECULATIVE BUY Despite downgrading our earnings forecasts on slower than expected MetroMap subscription growth, we remain of the belief investors are getting a free option on AMX’s foray into the US market with 3D Modelling to potentially transform the business. AMX has a first mover advantage in 3D having begun operations (locally) in 2012 compared with competitors only recently entering the market. This timing gap in technology development ensures there is no competitor generating the same accuracy or resolution of image, globally. Although not meaningful in earnings terms, the recent order from Google to capture and develop a 3D model of San Francisco highlights the high-quality nature of AMX’s product, especially given Google already operates its own 3D programme. The US 3D market is estimated at $500m and we expect strong revenue momentum once a notable contract is won and potential customers can see application of the technology. With Nearmap (NEA) defending its market position through price cuts, our FY22 forecasts have been reduced to reflect slower market share gains for MetroMap. Despite forecast reductions driving our FY22E EV/EBITDA multiple up to 12.1x, when we remove the US operations, investors are paying a palatable 9.8x for a growing Australian business. We see this as attractive given we expect longer-term traction in the US to surpass current group earnings and hence believe investors are paying little for an asymmetric payoff. We note on consensus figures, NEA trades on an FY22E EV/EBITDA of 40.3x. Despite our positive skew, we have amended our recommendation from Outperform to Speculative Buy to reflect the increased uncertainty of MetroMap growth given NEA pricing behaviour. See page 2 for our valuation breakdown.