Buy: A First to Market Service, Large Pipeline of Trial Customers and a High Margin Operating Platform at Scale

Aeeris Limited AER

Recommendation BUY

Price $0.13
Price Target $0.32
Market Capitalisation $7.1m
Shares on Issue 54.8m
PER – FY2017 23.1x|
Yield – FY2017 0.0%
NTA – FY2017 $0.05

Leader in Geospatial Asset Protection

AER is a leading Australian geospatial company that has developed innovative products for the workplace safety, asset and contractor management sectors. These products automate manual incumbent processes creating substantial cost savings and increased business continuity, they include:

Early Warning Network – Enterprise asset risk management software that increases business continuity and safety by providing targeted, relevant, location specific event intelligence – that customers leverage to make smarter decisions, reduce financial exposure, obtain cost savings and create new business opportunities.

Safe@Work – A cloud based mobile location software solution with smart technology functionality that automates employee and contractor management services.

View360 – Geospatial imagery platform developed by customer demand for the government and insurance industry.

Strong Growth Outlook

AER has continued its strong growth from 1Q FY16 with 25% growth in cash receipts to $0.4m for 2Q FY16, off a low base. Veritas Securities forecasts FY16 Revenue to increase by 87.9% to $1.8m, driven by:

• An improved corporate structure, new products, increasing scope and complexity of existing customer contracts and the benefits being realised from the enterprise pricing restructure.
• Improved brand awareness around revenue and cost efficiencies of the products.

We expect further growth in FY17 and a move to profitability with Revenue growth of 92.2% to $3.5m and an EBITDA of $0.3m.

We view these forecasts as conservative, with the leverage from the technology platform increasing significantly on a growing customer base. Revenue is high margin at scale, with both procurement and setup costs recovered and a recurring subscription revenue model.

Valuation and Recommendation

We initiate coverage with a BUY recommendation and a price target of $0.32 per share, based on:

Leading market position – First to market opportunity and the rapid acquisition of major blue chip customers has validated the benefits of the products.

Growth – A large pipeline of corporate prospects to underpin growth and Cash Flow breakeven in CY2016.

Valuation – Trading at a 146% discount to our valuation of $0.32 per share.

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