Pointerra Ltd: On the Right Growth Trajectory

Equity Bottom-Up

443 Views29 Jul 2021 08:00

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SUMMARY

Pointerra Ltd

On the right growth trajectory

Pointerra Ltd (ASX:3DP) provides an end to end, cloud-based data as a service solution for capturing, storing, manipulating and analysing massive 3D datasets in the geospatial sector. It has taken what has been a highly manual, slow and cost prohibitive process and turned it into a fast, efficient workflow solution for 3D data, enabling digital asset management from any device in any location. Its customer base spans pole and power companies, resources companies, construction companies, government agencies, data capture companies and surveyor and mapping companies. Pointerra has reported Annual Contract Value of US$9.8m at 29th July, up US$1.91m, or 24.2% from the ACV reported at 29th April and includes both organic and acquired growth following the completion of the Airovant acquisition on June 7. Pointerra also reported better than expected Q4 operating cashflow of $0.1m, its second consecutive quarter of positive operating cashflow. Cash receipts for Q4 were $1.45m, up 77% on pcp and 6% on Q3. While cash receipts were lower than our $2.5m forecast, cash expenditure was also substantially lower resulting in a better than forecasts net result. Expenditure included investment in new products including Utility Explorer, a business intelligence tool for power utilities. We will wait until the full year results to make any adjustments to forecasts but note that we are confident that Pointerra continues on the growth trajectory we have mapped our forecasts. Our base case DCF valuation of $0.94/share (fully diluted for the Airovant earnout) is predicated on Pointerra getting to ACV of US$50m by December 2024.

Business model
Pointerra offers a suite of Software as a Service (SaaS) products to its clients: Data as a Service (DaaS), Analytics as a Service (AaaS), and Data Processing as a Service (DPaaS). Pointerra’s DaaS offering manages 3D data using its digital management platform and is priced according to the amount of data (in terabytes) that Pointerra hosts on behalf of the client, and the number of users required. Additional revenue is generated from processing client data (DPaaS) and building and/or deploying analytics tools (AaaS) to interpret the client’s 3D data. Pointerra has also recently soft-launched its 3D data marketplace which aims to sell insights into assets condition though subscription- and event-based models.

Positive momentum in cash receipts and ACV
The company noted that the growth in cash receipts came from both existing and new customers across the suite of services with several new customers from a range of industries – US & Australia aerial & mobile mapping, US power utilities, telcos in both the US & Australia, mining, oil & gas in both the US & Australia, and Architecture, Engineering & Construction across the UK, US & Australia. ACV growth was derived both organically and as a result of the Airovant acquisition. Pointerra also noted that during the quarter it had secured, from an existing customer, the first order of data and analytics insight from its data marketplace 3Dinsight.ai. While not financially material, the order is an important milestone in the launch of the initiative. We have no assumptions for 3Dinsight.ai in our forecasts.

Base case DCF valuation is $0.94/share
We use the discounted cashflow methodology to value Pointerra using a WACC of 14.0% (beta 1.8, terminal growth rate of 2.2%) and this derives a base case valuation of 0.94/share. Our valuation is predicated on ACV reaching US$50m by H1FY25. We have dimensioned an upside case whereby ACV hits US$50m by H1FY23 and this delivers a valuation of $1.81/share. Further earnings upside can be derived from 3DP’s 3Dinsight.ai data marketplace which we have not yet included in our modelling, being very early stage.

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