Pointerra Ltd: Upgrading for Airovant Acquisition, Valuation Is $0.94/Share

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416 Views04 May 2021 08:00

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SUMMARY

Pointerra Ltd

Upgrading for Airovant acquisition, valuation is $0.94/share

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. We have incorporated into our forecasts the estimated Annual Contract Value and costs that will be delivered with the Airovant acquisition, announced last Friday. To recap, Pointerra will acquire the business assets and undertakings of US digital asset management business Airovant for US$1m in 3DP shares while the four founders of the business will be engaged by Pointerra on an ongoing basis, each receiving 2m ordinary shares to vest in three equal tranches over three years of continuous employment. We see the earnings impact coming through in FY22 and have accordingly upgraded our FY22 ACV forecast by 10.5%, revenue by 5.3% and EBITDA by 12.6%. We now expect Pointerra to get to US$50m ACV by December 2024 (previously June 2025) and as a consequence our base case DCF valuation has increased to $0.94/share (previously $0.75/share).

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.

Airovant acquisition is EPS positive in FY22
We have incorporated the Airovant acquisition into our forecasts, estimating that the business will deliver an additional US$2m in annual contract value in FY22. After including employment and operating costs, we estimate that Airovant will contribute $0.75m in EBITDA in FY22. The number of shares issued for the Airovant assets will be calculated based on the closing price of Pointerra’s shares at the date the Business Purchase Agreement is executed, which is expected to be in June. However, using the closing price of 3DP’s shares yesterday ($0.59), we estimate that an additional 2m shares will be issued for the acquisition, with another 2.67m vesting on the 1st, 2nd and 3rd anniversary of the transaction providing the founders remain with the company. On our estimates the acquisition is 12.4% EPS positive to our forecasts.

Base case DCF valuation is $0.94/share (previously $0.75)
We use the discounted cashflow methodology to value Pointerra using a WACC of 14.0% (beta 1.8, terminal growth rate of 2.2%). The upgrade to our forecasts has resulted in our base case valuation increasing to $0.94/share from $0.75/share previously. We now anticipate that with the Airovant business on board, and the team’s ability to shorten the sales cycle, that ACV will reach 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 3D Insights data marketplace.

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