Why Aerometrex shares have doubled their IPO price

Profitable with a good balance sheet and 30 year operating track record this looks a small cap to watch. 

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There’s still a lot of appetite for tech-based IPOs if the vertiginous rise of Aerometrex Ltd (ASX: AMX) shares is a guide.

The aerial mapping business issued 25 million new shares at $1 each for its IPO on December 9 with the stock doubling in value to $2 just one week later. 

Based on 94.4 million shares on issue Aerometrex is now valued by the market at $189 million, with it posting a net profit after tax of $2.57 million on sales of $16.1 million for the financial year ending June 30 2019. It also made an operating cash profit of $5.09 million to suggest it’s quite rare as an already profitable new tech listing. 

Notably, most of its sales are currently achieved on a project basis where it maps the ground for enterprise clients using airborne lasers. Close to half its total revenue also originates from public sector clients that commonly demand the on demand aerial surveying projects. 

Notably, it’s looking to build out its subscription or data-as-a-service offering to clients that would generate more recurring revenue potentially at very high gross profit margins. In this sense it’s a potential competitor for Nearmap Ltd (ASX: NEA), but still a long way behind it. While Nearmap for example could also look to push into Aerometrex’s mapping-on-demand space so competition is a two-way street. 

Overall though, it’s not hard to see why Aerometrex’s valuation surged last week given it’s already profitable.

Moreover, it now has the cash on hand it needs to to invest in sales, marketing, product development and other sources of new client acquisition. 

It looks a small cap to watch. 

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Motley Fool contributor Tom Richardson owns shares of Nearmap Ltd. The Motley Fool Australia owns shares of and has recommended Nearmap Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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