Aerometrex's geospatial mapping tech set to capture demand, broker slaps high price target

Sequoia has set a 50-cent target price for Aerometrex, an aerial mapping and geospatial specialist
Aerometrex’s revenue has been rising 20%, with key partnerships boosting growth
With nearly $10 million in cash reserves, Aerometrex is well-positioned for growth

Analysts at Sequoia have slapped a target price of 50c on Aerometrex (ASX:AMX), versus the current share price of 36c.

The analysts believes AMX could be an emerging standout player in the field of aerial mapping and geospatial insight, a market that’s been growing at double digit pace and is projected to reach $5 billion by the end of the decade.

This growth has been fuelled by increasing demand for high-quality mapping data and enhanced image capture.

The integration of artificial intelligence (AI) and machine learning (ML) is further propelling this industry forward, making it an exciting field with vast potential, says Sequoia.

Solid results

In the first half of 2024, Aerometrex reported a 20% increase in revenue, reaching $12 million.

This growth was largely driven by a 50% rise in revenue from LiDAR projects, a core segment of its business.

LiDAR, or Light Detection and Ranging, uses laser technology to create detailed 3D maps.

MetroMap, Aerometrex’s cloud-based service that provides high-quality 2D imagery, also saw a 14.7% increase in subscription revenues.

MetroMap’s 2D imagery is used for geospatial analysis, offering detailed and up-to-date images that assist in mapping and data analysis.

Urban planners and developers rely on MetroMap for planning and managing city development projects.

In the property and real estate sector, it helps with property assessments by providing accurate visual data.

Infrastructure managers also use MetroMap for monitoring and maintaining infrastructure with precise imagery.

Partnerships are boosting growth

Another key driver of Aerometrex’s growth has been its strategic partnerships, says Sequoia.

In April, the company signed a crucial deal with WSP Australia, a leading engineering services firm in the infrastructure and property sectors.

This partnership involves WSP purchasing a fixed number of MetroMap licenses, with the option for additional purchases throughout the contract.

This deal is expected to generate a minimum of $600,000 in revenue for Aerometrex.

The company has also solidified its position through agreements with approximately 30 organisations across various industries.

One of the most critical partnerships is with Landchecker, a property tech company providing comprehensive property data. This multi-year deal, announced in May 2023, guarantees a minimum payment of $2.65 million over 38 months.

Aerometrex is also taking strategic steps to enhance operational efficiency and reduce costs.

Outsourcing its MetroMap capture program to a third party, Aero Logistics, is expected to boost aerial capture capacity and cut costs related to aircraft and image processing by 10-15%.

“From a financial perspective, the MetroMap business model is simply about leveraging a multi-use asset against a rising user base,” says Sequoia.

“Once breakeven has been achieved, increasing scale delivers an outsized impact on profitability.”

LiDAR’s strong pipeline

Looking ahead, the Australian geospatial market is expected to double to over $200 million by 2030, with Aerometrex targeting a larger market share.

Despite facing competition from former ASX-listed Nearmap, the company’s strategic focus should position it well for capturing additional market share.

The LiDAR division, currently Aerometrex’s largest business unit, is projected to continue its solid performance for the next few years.

Although revenue from LiDAR projects is project-based, the company’s efficient operations and robust order pipeline suggest a stable revenue flow.

“The dynamics driving demand for LiDAR remain positive and Aerometrex anticipates market growth at around 6% – 7% pa through to 2030,” said the note from Sequoia.

Another emerging opportunity for Aerometrex

Aerometrex’s 3D modelling business segment, known for its “blue sky” potential by other analysts, represents a nascent but promising market.

While revenue from this segment can be volatile, the company’s efforts to build a presence in the US indicate potential for massive growth. However, consistent revenue from 3D modelling may take time to materialise, says Sequoia.

Financially, Aerometrex is in a strong position.

With cash reserves close to $10 million and ongoing efforts to achieve cash flow positivity, the company is well-equipped to support its operations. Additionally, potential sales of surplus assets could further bolster cash reserves.

“Although, there is still some way to go before the company is cash flow positive, the gap is narrowing, and cash resources are expected to be sufficient to support the business in the meantime,” said Sequoia.

“In our initiating coverage report on Aerometrex published in November 2023, we argued that a valuation in the range of 40 cents to 61 cents was warranted.

“This was based on the positive strategic direction of the company together with a favourable market environment and with reference to the buyout value of Nearmap, and the valuation of similar companies in Australia and overseas.

“We have maintained our valuation and our price target of 50 cents,” Sequoia concluded.