Pointerra (ASX: 3DP) (OTCPK: PTRRF) shares are up 95% this morning. 3DP shares have leapt on the back of a contract win announcement. But it's possible to think that this is ever so slightly overdone, too cooked. Excitement is indeed excitement but it's possible for share prices to rise above objective value when the market does get all interested.
The actual business line at Pointerra: “Pointerra Limited provides a cloud-based solution for storing, processing, managing, analyzing, extracting, visualizing, and sharing 3D data. The company offers Pointerra3D CORE, a baseline platform that provides access and 3D data workflow; Pointerra3D ANALYTICS, a digital twin to enable intelligent analysis of physical assets; and Pointerra3D ANSWERS delivers predictive insights that enable definitive answers to physical asset management questions.” We can see that this is an interesting line of work. The cloud, we're rolling out sensors for this and that all over the world, connecting everything up. We're adding AI to aid in interpreting such data. This is indeed one of the ways that advancing tech makes the world more productive. It might not be quite as sexy as a new social media network but it is value additive and can therefore be charged for.
Pointerra share price from Google Finance
As we can see this new contract is seen as being somewhat transformative. But what is that new contract for Pointerra? “3D geospatial/cloud data tech company Pointerra (ASX:3DP) has a positive announcement based around a 10-year energy utility program in the States. Its existing customer Entergy, a Fortune 500 company, has selected Pointerra's US EPC partners for its 10-year, US$15 billion grid resilience CAPEX program.” Well, yes. It's the total capx program that's $15 billion. Pointerra is a supplier to a supplier of that at best.
However, we can take a guess at revenues, from Pointerra: “Over the term of the Program, Pointerra will be paid a price per pole/structure inspected and analysed using Pointerra3D. The Company expects that up to 4 million poles could be inspected and analysed using Pointerra3D during this time. Pointerra has previously been paid between US$20 and $40 per pole for similar processing, inspection and analysis work. The rate for this new Program has not been finalised however the Company expects it to lie within this range and revenue from this Program is expected to commence during FY24.” We'd expect, in bulk, it to be at the low end of that range ourselves. So $80 million in revenue? Over a decade, the length of the program?
Well, compared to current revenue: “During the quarter ended 31 March 2023 the Company received A$3.26 million in customer receipts,” So, $13 or $14 million a year. This new contract is worth perhaps $8 million a year. So, roughly a 50% uplift in revenues. Minus whatever costs of performance are. Yes, this is a transformational deal. But a 100% uplift in the market capitalisation as a result?
It is possible that's getting too excited.
