While we await an update from NEA, I thought I would provide my thoughts about FY22 performance based on information already provided, or which can be extrapolated based on NEA’s guidance and my reasonable assumptions on trends (Note that FY22 starts in less than 3 months time):
1.Current trends indicate that NA will equal ANZ in size by the end of FY22 (only just over 14 months away)
2.NA is already back to growing at > 40% pa at 31 December 2020, after a temporary dip to 27% at 30 June 2020. Assuming NA growth continues at 40%, the growth in cash received from customersin FY22 will be approximately $18-20M, more than double that of ANZ.
3.My model indicates that NA is likely to be cash flow positive in FY22, unless NEA decides it is in shareholders’ best interests to increase investment for growth. Gross margins for NA are likely to continue growing very strongly due to revenue growing much faster than costs (NEA increased NA gross margin from 35% to 53% in only 6 months from 30 June 2020 to 31 December 2020). ANZ gross margin is already at 93%, and is a guide as to what we can expectfrom NA.
4.NEA as a whole (including NA, ANZ and corporate costs) is likely to be generating positive cash flows exceeding $35M by FY22. Because of the size and growth of NA, NEA cash flow should then grow rapidly. This will be sufficientto start funding expansion into other territories, without the need for further capital raisings.
5.NEA has said it is on track to roll out HyperCamera3 in FY22. This will further improve efficiency, quality, margins and service to customers. In particular it will:
a.significantly lower cost per square km of capture;
b.allow NEA to expand coverage at higher fidelity while keeping costs under control;
c.help further improve NEA’s customer offer, particularly in NA;
d.allow NEA to expand into other territories at lower cost.
6.In FY22, there should also be continuing gradual improvement in NEA’s content and targeted industry vertical solutions.
7.Beyond FY22, there is a very long and rapid growth trajectory in NA due to the size of the market, the quality and ongoing improvement of NEA’s offer and the low current penetration of that market.
The above is why I believe that the long downturn in NEA’s share price is about to end. The upcoming positives are just too significant to ignore. Focusing on the past would be a mistake IMO.
P.S. For those who think my post is just a positive ramp, I should point out that in my post of 29 December 2020 at 10:38 (Post #: 49841142), I predicted a 6 month growth rate in NA of 17.4% for 1H21. In fact it turned out to be 21.9%. I admit that I slightly overestimated the ANZ growth, but IMO, NA growth is the more important. I do try to be conservative with my assumptions and estimates.
