Fundie backs his ‘worst performer' to reach greater heights

What do the pope, 3D aerial imagery and a Newcastle-based fund manager have in common?

For starters, fund manager Luke Winchester retaining aerial imagery tech company Aerometrex (ASX: AMX) on his portfolio despite being one of its ‘worst performers’.

Raising $25 million in its IPO, Aerometrex listed on the ASX in December 2019, one of the last few months of certainty before markets were plunged into the chaos surrounding COVID-19.

Speaking to Reach Markets on our The Insider: Meet the Fund Manager in June, Mr Winchester, who is the MD and CIO of Merewether Capital, defended the aerial mapping business saying there was an interesting conversation to be had around where the markets sat with microcaps at the time.

“These microcaps are trading at such irrational levels that theoretically you could wind up the business tomorrow and generate a positive return,” he said.

“When the markets are scribing zero-value to an operating business, it usually suggests there’s some irrationality there.”

Moving away from the markets and focusing on the business, Mr Winchester affirmed his faith in the company’s 3D modelling technology, a space in which he viewed  Aerometrex as market leaders.

“They’ve got some large blue chip clients. If you do any work around startup technology businesses that are trying to overlay technology or analytics on a 3D model, they all use Aerometrex 3D models,” he said. Watch the full The Insider: Meet the Fund Manager session.

Aerometrex’s CFO Chris Mahar joined us on our The Insider: Meet the CEO event in September where he explained in detail about the company’s three core product lines, how the company has performed and some of its key achievements. Watch the full The Insider: Meet the CEO session.

“2D aerial imagery, delivered by our MetroMap program, is our [Data as a Service] DaaS subscription model,” he said.

Major use cases for MetroMap include planning, building, measurements for critical infrastructure, urban planning, asset management and more. RACV partner Landchecker is one of MetroMap’s biggest users.

According to Mr Mahar, a key strength of the MetroMap program is its channel sales partner model. “As of June 2022, we had approximately 28 partners; they contributed about $1.1 million of the total ARR.”

Talking about the second core product he said “In terms of our 3D modelling products, we are the world leaders in high resolution capabilities.”

Considered by Mr Winchester as Aerometrex’s ace in the hole, the product enables the company to build digital 3D image catalogues of entire cities that can be used in applications such as painting and visualisation, smart city projects and urban planning.

At the time of speaking, Mr Mahar indicated that Aerometrex had catalogues of 20 major cities across the US, Australia and New Zealand.

“We’ve done things like the papal visit to Philadelphia in 2015, that was done in conjunction with the Philadelphia police – they used the model for event management, placing stages, security, line of sight, shooting safety and key amenities for crowd control,” Mr Mahar said.

LiDAR which stands for light detection and ranging is Aerometrex’s third product offering. LiDAR data has broad application and can be used in environmental mapping (including floods, tree-canopy coverage), mining stock, forestry management and consultation for planning.

“As a whole the company acquired the LiDAR business in 2015. At the time it was turning over $1.5 million, at the end of June 2022 it was turning over $11.3 million following investments into additional revenue generating assets,” Mr Mahar said.

Speaking about the company’s financial performance, Mr Mahar mentioned the notable increase in FY22 earnings compared with the previous financial year: $25 million revenue (up 19.5%) $7.7 million EBITDA (up 168.9%) and $6.8 million annual recurring revenue (up 42.4%).

He was keen to point out the continued upward trajectory of Aerometrex’s revenue growth.

“We generated $5 million in positive cash flow from our operations which was reinvested into the business and assets for future growth opportunities,” he added.“And we’re looking to build profitable and sustainable value across all of our three product lines.”

Click here to view more videos from Luke Winchester’s The Insider: Meet the Fund Manager session, or click here to view the full The Insider: Meet the CEOs session.

Past performance is not a reliable indicator of future performance.

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