I just did a quick review given the activity here.

Could you not call Aerometrex deep value now based on NTA?? While some time has passed since end of half year results. Current share price is sitting around the 1HFY22 quoted NTA per a share. Another 50% drop and AMX would be sitting at the cash level only, and according to the CASA aircraft register the bank only holds registration over one of their Australian registered aircraft (though this is likely a very rough method of determining such a fact).

While I do agree, always wait for the sediment to return before buying. To me (from my 10-minute review) the market is basically saying this is only worth the physical assets and should wind up because it will never make a profit... Is that really the case? Adding this one to the watchlist...

@Dominator you are correct it currently trades less than the value of their cash and depreciated value of planes on the balance sheet. I've emailed management about the long term value that could be created by doing a sale and leaseback of the planes (which NEA does) and buy back as many shares as they can at these levels.

Nonetheless this has been a painful holding for me, especially so because the business really hasn't underperformed my expectations giving me a clear sell or trim signal. Yet another reminder how in micros the short term is controlled simply by buy/sell liquidity.

@Wini what was the feedback you received? Normally there isn't a line up of people willing to buy general aviation aircraft.

Taking a deeper look today, to buy in I would really like to see some free cash flow/operating profits or at least getting to break even. I don't know if I have this right but looks like the cost of obtaining imagery for Metromap is listed in the investing cash flows, so while operating cash flows look good, when you factor that in taking the images and equipment costs required for their products the result is negative cash flow. It is surely hard to do a buy back when you aren't cash flow positive.

Being in the aviation industry I know how many aviation companies struggle with profitability. I can see why Aerometrex is trying to get out of project based work, they would be competing against other smaller general aviation operators that can do standard project based aerial survey work. Often these companies are operated by people who just want to be able to go flying for a living. I can see the incentive to the Metromap DaaS model as the same set of images/survey information can be sold many times over. Which means great potential for operating leverage if Aerometrex is able to get to a point where they can cover their costs.

@Dominator Haven't heard back but I suggested PTB as someone who may do it with their newly launched Leasing division. At the end of the day there are plenty of aircraft lessors, they are decent assets.

Market clearly wants profits and cash flow (not just AMX but in general), I suspect the core business could be self sustaining but MetroMap requires investment in the platform (and remains to be seen whether a solid return can be earned given NEA dominates the space) and the 3D opportunity is similar where they need to capture cities before they can be licensed.

Also your take on the cash flows is correct, they capitalise capture costs and amortise over a couple of years. It's important to understand accounting profits v cash flows with this one.

Understood on the operating lease through someone like PTB, makes sense as a way to raise cash without significant dilution at this point. Sorry I initially thought of leasing as in selling the aircraft to a different (private) owner then asking to lease the aircraft back on a per hour type arrangement, some flying schools do this. Allows the owner to use their aircraft when they want to but share around the cost of aircraft ownership. The aircraft AMX operate are getting a bit too big for most private owners.

How do you see the path to profitability occurring (hopefully without a dilutive raise)? Focus on the Australian offering, get our market to profitability and use it as a test bed then expand into the US or is the US where the real opportunity is here so expanding as fast as possible there is important? As a shareholder would you be happy with a capital raising to facilitate the growth required to get to profitability?

A capital raise at these levels would be devastating. I think there is a very clear path to profitability, $12m cash in the bank + $3.6m from sale of property - cash burn in 2H (~$1-2m?). MetroMap could probably be profitable at current levels on a steady state capture basis but the battle with NEA means further investment in sales and R&D is likely. That said it could be wound back if required.

US 3D expansion is the big lever for profitability. When I spoke with the CEO a few weeks ago he said they are already changing their go to market. Previously they were capturing a city before having any customers through a "build it and they will come model". Which had worked to a degree but burns a ton of capital up front. Now they are trying to not capture a city unless they have a cornerstone client (WSP I believe most of the time).

It would be nice to get more visibility on the path to profitability without having to make these assumptions though. But at the end of the day, trading less than liquidation value makes no sense and I think the IP they have created in their 3D division is genuinely valuable. If an Eagleview or Nearmap wanted to flesh out their 3D offerings it would be much easier to buy AMX than build it internally.

@thebehavioralinvestor agree not a company to be wound up, there is potential (especially compared to some of the crap companies you find on the ASX). More a commentary on how crazy it seems to me that shareholders would sell shares at the current price, you might as well just hold on?

@Wini Appreciate you sharing the insights you have provided. Seems like a very sensible path to profitability. An alternative outcome of a buyout is interesting.

It is hard to argue this isn't worth picking up at tangible book value, especially when a large amount of that value is cash. Will have to do a deep dive here and look to begin with a smaller position until a neutral/profitable cash flow pathway is actually occurring.

Hi @Wini

Genuinely curious as to what everyone thinks AMX moat on 3D capture is? Is the tech that great? Superior to Nearmap? Patent protected? Something attractive for a competitor to takeover and roll up or just a bit of a technical merger headache with no real competitive edge?

Nearmaps Moat here and in the US is it’s AI foundation mapping innovation. There is just so much back catalogue of data to build these models from. The more data the better the model. Nearmap just has so so much more data than competitors. AI maps need data input. This 2D and now 3D data is building in the US with extensive lead time. I would suggest the data capture of Nearmap would be pretty hard to catch up to for AMX to really be relevant.

With the Hypercam 3 tech roll out launching for Nearmap here and in the states, does AMX have something unique to offer?

The US is always touted as the holy grail of mapping expansion due to the huge population and revenue opportunities. Expansion here is no mean feat as any Nearmap holder will tell you. Not only do you have to land grab for market position from incumbents like Eagleview, you will undoubtedly have to contend with likely litigation as US companies obviously will fight to protect their turf from foreign companies. Will AMX be here in 10 years? Or even 5 years? Does it have to cash backing to expand?

Hey mate, NEA does offer a 3D product but it is a bit different. NEA used a composite of their oblique 2D capture to create a 3D model. It's fine for larger scale stuff, but AMX have specialised it with low level capture using helicopters and supplementing with street level capture where applicable. Beyond the capture you can also create a moat around the processing and how AI fills in the gaps of the capture as well as the analytics over the top.

But be aware the space is nascent. It is growing quickly though, particularly with the improvement in platforms like Unreal and Cesium engines to essentially use the 3D city models to create "video game" worlds for analysis. A combination of better 3D model quality with better platform features is seeing an explosion of use cases. I get a lot of comfort that AMX has a leading product (for now!) simply due to the fact anyone looking to develop tools over the top over 3D data is using AMX captures.

But you raise fantastic points. In the grand scheme of things they are competing against much better capitalised peers. So far NEA has been content to offer 3D through their traditional capture which drastically lowers capex but there is a risk they get left behind as the industry seeks higher quality data inputs. I'm not exactly sure what Eagleview are up to, I'll go check it out.