Nearmap Ltd

Global Aerial Imagery Market is Estimated To Be USD$7.4 Bn: Nearmap Ltd (ASX: NEA) has an engagement in online aerial photomapping via its 100% owned subsidiaries, Nearmap Australia Pty Ltd, Nearmap US, Inc. and Nearmap Remote Sensing US, Inc. The company recently announced the issuance of 125,000 fully paid ordinary shares on conversion of ESOP options at value of $0.56 per share, effective from May 24, 2019.In the presentation, NEA highlighted that global aerial imagery market is estimated to be at USD$7.4 Bn (2018), growing to USD$10.1 Bn in 2020.

H1FY19 Performance: The Company’s annualised contract value (ACV) grew 42% in the previous 12 months to $78.3 Mn, with continued record US growth and a strengthening market leadership position in Australia. Global customer numbers increased to over 9,300, with group average revenue per subscription increasing to $8,410. Total revenue of $35.5 Mn was up by 45% in 1HFY19 as compared to the prior corresponding period where the same was $24.4 Mn.

Its EBITDA was reported at $8.1 Mn as compared to $1.2 Mn in 1HFY18, demonstrating the scale economies of investment put in place over the preceding 18 months. Operating cash inflows (excluding interest, taxes, and the deployment of capital proceeds) was reported at $2.2 Mn as compared to cash out flow of $3.3 Mn in 1H FY18.


H1FY19 Key Metrics (Source: Company Reports)

What to Expect: As per the management, Nearmap is now positioned to continue its growth, together with accelerating its strategic objectives. 1H FY19 has been another successful period of strong growth for Nearmap and it is well positioned for continued growth in H2. Its recently released products and features will be complemented by further exciting products planned for launch in H2, including 3D content visualization through MapBrowser. With its unique technology and business model, which is difficult to imitate, the Company is expected to scale for a global opportunity and become the world’s leading provider of subscription-based location intelligence.

Stock Recommendation: Its EBITDA Margin for H1FY19 stands at 23.6% which is better than 5.5% in H1FY18. Its current ratio for H1FY19 stands at 1.98x which is better than the prior corresponding period where the same was 0.92x, implying a better liquidity position to address its short-term obligations. Hence, considering the aforesaid facts and current trading level, we recommend a “Hold” rating on the stock at the current market price of $3.770 per share (up 9.593% on May 28, 2019, owing to the positive view of market participants in the company as it is well positioned to grow its market share in the United States materially in the coming years).
 

Mineral Resources Limited

Decent Outlook: Mineral Resources Limited (ASX: MIN) has an engagement in the integrated supply of goods and services to the resources sector. The Company recently announced a change in its director’s interest where Timothy Roberts increased its stake by acquiring 1,269,480 ordinary shares at the value of $18,893,487.44 via on-market trade, taking the final holding to 3,276,864 shares.

H1FY19 Performance: Revenue decreased by 35% pcp to $555 Mn in H1FY19, and NPAT decreased by 92% pcp to $13 Mn. The low performance was due to the suspended Direct Ship Ore (DSO) activities at the Wodgina Lithium Project in September 2018 in favour of higher-value beneficiation of spodumene concentrate. MIN also experienced delays in approvals for the start-up of the Koolyanobbing Iron Ore Project, resulting in first ore shipped in December 2018 rather than at the end of September 2018.

It received lower pricing for its iron ore from the Iron Valley Project, due to higher discounts for fines and impurities. The Board of Directors declared a fully franked interim dividend of AUD 0.1300 with record date and payment date of March 18, 2019 and April 17, 2019, respectively.


Key Metrics from FY07-FY18 (Source: Company Reports)

What To Expect: Its FY19 Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) at a consolidated group level is expected to be between $360 million to $390 million. This is predicated on various assumptions including pricing for lithium (spodumene concentrate) and iron ore. Major assumptions include Spodumene concentrate price at US$682.38 per tonne (6%), CFR 62% Fe at US$83.89 per tonne, and AUD/USD at 0.723 cents.

Stock Recommendation: Its gross margin for H1FY19 stands at 95.9% which is better than the industry median of 41.6%, showing its better position to manage its operating expenses than its peer group. Meanwhile, the share has risen 6.48% in the past six months and is trading slightly below the average of 52 week high and low prices of around $15.895 with reasonable PE multiple of 23.19x, proffering a decent opportunity for accumulation. Based on the foregoing and decent outlook, we reiterate our “Buy” rating on the stock at the current market price of $15.560 (up 2.91% on May 28, 2019).   

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