ASX Shares Nearmap (NEA)

Hi, the idiot's way to buy and sell shares seems to work. I sold 1000 shares at 1.77 and it immediately went up to 2.82 so I sold 350 shares at 2.84

Will it really go up when I sell?

KY

 

Hi, a couple of people have expressed some curiosity about my 1000x [close enough] share so I'm putting up some numbers.

I bought 50000 shares at 3.9 It promptly dropped to 3.5 and I bought another 50000 shares. It briefly traded at $3.06 twice. So, not quite 1000x but close.

So whither will it go?

In FY19, the earnings are 78+M over 447M shares. This includes the 70M raised through private placement at 1.80 The earnings then become less than 25 cents per share

At $3, the PE ratio would be around 25-30x

The market has now priced in the potential earnings.

The potential earnings are expected to reach 200M and that is a conservative estimate. USA had only been operational one and a half years, selling to 2 states at first. It stands at around 35M currently. Canada will show earnings in 2019. It will at least show 50M eventually. NZ had been very slow, it's likely to be below Aus, maybe 20M. Australian sales have matured and not likely to be above 50M

Even if the US growth falls below expectations, the total group sales will hit the 200M quite easily.

If we take a 20x PE ratio, the price for NEA will be slightly above $4.

If the share price reverts to $2.50, I'll sell myself to raise money to buy back the shares I sold between 2.84 and 2.98!!

We must not forget that these estimates are conservative. The US and Canadian markets are very large. To make the 200M mark, US only need to show 60-70M

The sales model is repeating and like service providers, it can also be a pay as you use thing. Even Microsoft had to pay 1.8M out of court settlement and that was when NEA didn't have teeth!!

I certainly hope I'm right. My only regret is that I've sold so many shares!!

KY

 

This doesn't make sense to me. FY19 hasn't happened yet ! 1H had $ 36 million in revenue, but earnings were about -11m. The PE ratio is 0,it means nothing anyway what is important is the the value to price and the LTV, which is annual of annual subscriptions which is $78m X gross margin divided by retention rate. What else that is important is that they have $81 million in cash to accelerate sales and marketing. The more they spend the more the future profits. Like many of these companies including A2M and XRO if you can spend $1.00 to get 2 back getting a 100% return , it is better than those that give out a 5% earning.

 

Also you must be a major shareholder of NEA 100,000 shares for an average 3,7c = $3,700 x 1000 = $3,700,000

 

hi, you all know your numbers better than me. My understanding of the report must be very flawed. And after I had made the post, I realized I had exaggerated the 1000x by rounding up!! I'm an optimistic person!!

I need to check again because I thought that sales in Australia alone were over 40M last year.

thank you for your responses.

ky

 

hi, I've checked, for my own satisfaction and welcome anyone who has better maths to respond or criticize.

h1 FY19 US sales 17.6M, NZ 4.5M

I thought I was pretty certain last FY, the total sales were over 40M, NZ no contribution

So for FY19, thank you for pointing out the 2nd half hasn't eventuated yet, if Aus retained 40-45M, US to grow at the same rate [I rather think it might accelerate because of aggressive marketing] should be above 20m making a full year number of 40M and NZ a modest 10M Canada as yet unknown but with the same push as the US, a possible 15M

So the total sales I make it to be 100M or thereabouts.

I can't guess what the profit is.

I did a very simplistic calculation using that number over the total number of shares.

We have 4 months to see what the price will be in August 2019.

ky

 

Hi Fargo,

thanks for this. I swore I wasn't going to say any more about NEA but today the price is 3.05 so good luck to me for intending to pick up more shares at 2.60

From your post, I think you don't hold any NEA shares. At the highest in 2016, I had 903000 shares. I now hold only 100000, more fool me.

Have you given any thought to why the PE is 0 and the earnings are -ve?

I have and that is why I'm convinced that come August the price will be around 3.95

KY

 

Hi Fargo, sorry, I just saw your post that you bought at 40 cents. and it looks like I'll never be able to buy at 2.60!!
Price now 3.15

 

Hi KY I am no expert on Jargon, but I understand earnings and revenue are different, but a lot of people have cant understand the difference. Earnings are profits that are taken. P/E ratios is a way some people compare profitability. but don't realize it is meaningless. NEA hasn't paid a dividend or realized a profit. It actually spent all the revenue it earned plus what amounts to 3 cents per share. WHAT IS IMPORTANT IS VALUE PER SHARE. Now by spending that money a once last year, they will have recurring revenue , get that expenditure back year after year , get it back many times over. The revenue will continue to be reinvested for a few years to increase revenue unitil growth cant be sustained and maturity, then it start will paying increasing dividends at which point some will buy and demand dividends instead of reinvesting profits, competitive advantage lost, the founder and CEO's will have left with the profits, there will be disrupters competing, at that point you will need to keep an eye on retention rates and when they start to fall take a hedge on the disruptors by taking a small position in those . NEA has returned 215% in value in the last 12 month because it is rapidly growing revenue in the USA at 30% all for the cost of 3c a share for the year.

 

Hi Fargo, thanks for your input.

That's why I use the revenue to try and guess the value per share. I looked at A2M and the number is eerily similar. The revenue 688M divided by the number of outstanding shares equals 12 point something.

for NEA, the 1st half results will be overtaken by the 2nd half, due in August, because of growth in US, starting sales in Canada and slow growth in NZ.

If the total revenue is 98M, then the priced in value per share is close to $4.00 and the price relative to revenue is 12x

I understand that l'm no expert but I have to believe in something in order to take on a course of action.

I'll not sell any more shares but if I see an opportunity, I'll buy a few more.

KY

 

NEA has a capital light high gross margin business model . It doesn't need a lot of money to grow the business it doesn't have high overhead costs it doesn't have to buy machinery, dig holes, build factories and production lines, or employ an army. It is products is designed and made once except for some upgrades occasionly then sold once twice a thousand times and get paid for monthly or yearly, recurring revenue for little expense only marketing costs and sales commissions paid once. Just has initial high marketing and development cost. This can be another WAAX stock and you cant compare it by price to earnings like capital heavy companies. It has a long way to run and is still perhaps the best place to invest money at the moment if you aren't too over weight. There is risk from Alphabet or Apple if they upgrade their mapping software but they are concentrating on other things.

 

I wouldn't wait to buy more shares this has exponential growth potential. These stocks can be volatile may fall lower but bounce higher than other stocks. It is just the market functioning [properly and doing what the market is supposed to do.

 

Hi Fargo, thanks for your insight.

I'm happy that I posted on this forum because you all give valuable opinions whether right or wrong doesn't matter as much as that the comments make me think and research more and weigh my own opinions.

I think NEA would have started with the most populous cities and the US is actually not as big as I originally thought. New York has around 8M and the next largest LA has only 4M

I don't know this for sure but I think they sell to airports and transport hubs. In which case, the revenue will not stop because these places will use the camera services provided by NEA.

Apple or Alphabet or whatever can upgrade but I think the risk of competition is not very high. NEA had taken out patents very early on so the more sophisticated technology of the sky cameras will not be available to the early providers like Googlemaps. [I read somewhere that the original founder of NEA sold to Googlemaps]

I wonder when or if NEA will start operations in Europe? The size of the Europen cities is a mind boggling 10x that of US and all concentrated over a very small area.

I'll most definitely hang on to my shares!

KY
.

 

Hi, I bought 5000 shares today at 3.44

KY

 

https://commsec.api.markitondemand....pdf?access_token=fYzsvUYJUwwjMoTT3s6i2sUEOfft

Tumbling Dice..

 

Hi Willair, I'm putting my house on the market because I don't want to sell my shares. the reason I bought at the high price is because it's not my money. My godson sent me 30K.

NEA is one for the long haul. I'd not recommend short term thinking.

the reason lies in the 81M.

they spent 6M to begin the NZ operations, 7M on the US expansion. these monies came from their small cash holdings of around 20M

How much would Canada cost? 10M? So why did they find it necessary to raise 70M extra?

Why did Microsoft settle out of court at a time when NEA didn't have the capacity to fight with them?

NEA must have IP that's worth a lot. They actually announced the technological developments with quite a bit of fanfare. I didn't pay enough attention because I don't have the knowledge.

So, who would use the Hyper cameras?

You used to subscribe to NEA. Who would you say NEA's new customers are? The answer may be very illuminating.

Obviously, I'm just guessing but so far, my guesses have been spot on.

KY

 

Hi again, I always get things wrong. It's Red Wing who subscribed to NEA, not you.

So, to answer my own question: I think NEA has moved far away from the small retail customers like Red Wing.

I'd hazard a guess that the airports and pilots have a use for the Hyper cameras. I used Google maps and I thought how wonderful it was to be able to see the street and the house and their neighbours too.

If I were a pilot, if I could see the ground, would that not tell me where I am?

So based on these maybe wild guesses, I'd use every price correction to increase my holdings.

Of course, like all of you, I don't have enough money top do what I want to do!

KY