I recall @cocoman asked @Katoom (who has been inactive since 2015) on the issue of: "Do you think it (ie NEA) has a clear niche that it is operating in that is different to digiglobe (ie. DigitalGlobe)?"
To which @Katoom responded with:
"NEA is one regulation away from being obsolete if DigitalGlobe are approved to use global images of 10cm. With the recent approval for 30cm images, that will already be more than sufficient resolution for large number of customers US and worldwide.
The resolution restriction on commercial satellites is from the cold war, apparently lawmakers are keen to see it removed in attempt to fend off Chinese and Indian commercial satellite companies. If there is going to be commercial satellites above providing 10cm images, US Govt would naturally want those images to be provided by a US company supported by technology from US companies like Lockheed Martin.
Since Digitalglobe bought out GeoEye last year they now have the monopoly.
Also it seems to help Digitalglobe become the worlds main provider of satellite hi res images, US Govt has passed laws to restrict exports of hi imagery satellite technology to likes of China and India."
Back in 2014, as most of you would have guessed, the words that had scared me the most were, "NEA is one regulation away from being obsolete". But I did eventually ended up buying into NEA after a long thought process as I worked my way in eliminating each of my initial concerns below:
1) What if regulators allowed higher resolution satellite images be used & hence directly competed with Nearmap? 2) What if regulators restricted Nearmap's distribution of higher resolution images and hence erode one of their main competitive advantage away? 3) What if regulators required more vetting of users and hence increased Nearmap's administrative costs and impacted their profit margins?
Concern 1 is an Aerial Imagery vs Satellite Imagery debate and regardless of the eventual "regulated" resolution, cloud cover, atmospheric conditions, & the costs of launching and maintaining Satellites vs flying low cost Cessna planes will always benefit Nearmap. So concern 1 is a non issue.
Concern 2 could similarly erode Nearmap's main competitive advantage of providing "Clear" images to end users if regulators had forced Nearmap to distribute lower resolution images, but if this was the case then any other image provider such as EagleView will also have this same constraint place on them and therefore we all go back to competing on the grounds of cost, tools & features, obliques, 3D, and historical image archive etc... All of which Nearmap should excel at. So concern 2 is also a non issue.
Concern 3 is really not very significant in terms of impacting Nearmap's financials because most of it's large subscriptions will no doubt be large government and large corporation accounts that will already have their own internal user security administration and strict data privacy processes. So the only concerns are with the single man "solar" type business user accounts. With these, Nearmap can always restrict either image resolution and/or geographical regional accesses to sensitive national locations (eg. no detail 8cm views onto the roofs of the White House etc...). So concern 3 is also a non issue as far as making a significant dent in the bottom line is concern.
Now fast forward into 2019, the most important thing that investors will need to understand is HOW these "National Security Concerns" might materialise and how this will impact Nearmap's business model. But unless regulators end up dictating a firm No Fly and No Image Capture policy against EVERY geospatial image capture company EVERYWHERE, I'm sure selling frequently updated high res or frequently updated low res images will continue to be a lucrative business for Nearmap in the future.
NEA Price at posting:
$2.79 Sentiment: Buy Disclosure: Held
