The Nearmap Ltd (ASX:NEA) share price is 36% off its 52-week high – let’s take a look at some potential reasons for the decline.
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It has been an interesting 12 months for shareholders of ASX aerial imagery company Nearmap Ltd (ASX:NEA). After falling as low as 83 cents during the COVID-19-inspired sell-off back in March 2020, the company’s shares posted a valiant recovery, soaring to a 52-week high of $3.22 by late August.
But since then market interest in the company has waned, and the share price has slowly edged back down to $2.07. Shareholders no doubt will be hoping that Nearmap’s investments in its growth initiatives will translate to higher returns over the next few years.
What does Nearmap do?
Nearmap provides high resolution aerial images to business and government clients. It gives private companies and government agencies the ability to conduct virtual site visits without ever having to physically leave their offices. This allows people working in fields like engineering, infrastructure development, mining and construction to plan and analyse complex projects.
How has the company performed?
Nearmap’s FY20 financial results, released in August, were well-received by the market and helped push the share price up to its 52-week high. Statutory revenue jumped 25% year-on-year to $96.7 million, and Nearmap’s annualised contract value portfolio increased by 18% to $106.4 million.
The makeup of the contract portfolio also shifted favourably over the year: over half the portfolio was made up of premium content subscriptions, and 43% of contracts incorporated multi-year subscriptions. This meant that average revenue per subscription increased 11% year-on-year to $10,178.
Why has the share price declined?
That might leave you scratching your head and asking why, if the company has performed so well, its share price has declined so markedly since August.
There are a couple of potential reasons.
Firstly, Nearmap conducted a series of successful capital raisings since it released its results. In September, the company announced it had completed a $72.1 million institutional placement at $2.77 a share, a discount of 4.2% on the 9 September 2020 closing share price of $2.89.
Then, in October, it announced it had raised a further $23.1 million through a retail share purchase plan (SPP). Shares issued through the SPP were priced at just $2.30.
Each of these capital raisings diluted the share price, forcing it down.
Secondly, despite its strong revenue growth, Nearmap’s statutory loss after tax blew out during FY20 after the company made significant investments in various growth initiatives throughout the year. Nearmap’s loss increased from $14.9 million in FY19 to almost $37 million in FY20. The company’s earnings before interest, tax, depreciation and amortisation expenses also declined year-on-year, from $15.5 million in FY19 to just $9.1 million in FY20.
What is Nearmap forecasting for FY21?
In a market update released in November, Nearmap stated that it expected annual contract value for FY21 to be between $120 million and $128 million, representing year-on-year growth of between 13% and 20%. It also stated its intention to invest a further $10 million to $15 million in growth initiatives throughout FY21.
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Rhys Brock owns shares of Nearmap Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Nearmap Ltd. The Motley Fool Australia has recommended Nearmap Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.