Which IPO has more potential: Aerometrex (ASX:AMX) or Nuchev (ASX:NUC)?

The last week has seen two successful ASX IPOs — with Aerometrex Ltd [ASX:AMX] and Nuchev Limited [ASX:NUC] both posting big gains on entrance.

At time of writing, Aerometrex shares are up 85% to $1.85 and Nuchev shares are up nearly 50% to $3.90 since their listing.

We look at what these two companies bring to the table and their future potential. Its goat milk infant formula versus aerial imaging in the ultimate ASX IPO showdown.

Aerometrex and Nuchev share prices both quick out of the blocks

Investors were clearly enthused on both companies, with AMX shares debuting at more than double the $1 IPO price.

Nuchev shares also moved quickly on listing, with the memory of what happened to A2 Milk Company Ltd [ASX:A2M] perhaps driving FOMO.

Operating in very different industries and having comparable market caps we now turn our attention to their prospects…

In the (more) fundamentally sound corner: Aerometrex Limited

The strength of Aerometrex lies in its ability to return a profit.

In 2019, their profit after tax was $2.57 million, up around 40% on its $1.83 in 2018.

Revenue was up also up 22.7% to $16.1 million.

They are going after growth in a number of ways.

For instance, their property, plant and equipment went from $8.76 million to $9.8 million in 2019.

They also hired eight more employees and are progressing a program to design and manufacture their own camera system.

With a back of the envelop calculation using 94.4 million shares on offer and $2.57 million in profit, their basic earnings per share (EPS) would be roughly 2.7 cents a share — not ideal.

This excludes the dividends it paid.

Taking their price per share of $1.85 and dividing by the EPS you get a (rough) P/E of 68.5.

But by tech stock standards this isn’t all that bad — especially considering that they have a compound annual growth rate of 29% over the last two years.

In the growth corner: Nuchev Limited

Nuchev is a bit different than Aerometrex in that it had an after tax loss of $13.5 million in 2019, down from $14.1 million in 2018.

So P/E isn’t relevant here.

You could do a back of the envelope price-to-sales ratio, though.

You take its current stock price of $3.90 and divide by sales per share.

Its receipts from customers are $9.7 million and there are 32.18 million shares on issue giving you 30.1 cents in sales per share.

So a rough price-to-sales ratio of 12.95, which investors would like to see come down over the coming quarters.

The key for Nuchev will be tapping into the immense potential behind the goat infant formula phenomena, with a specific focus on China.

Their prospectus notes that it has a compound annual growth rate (CAGR) of 16.6%.

As of their most recent annual report and with regards to China, they are still waiting on their SAMR (State Administration of Markets Regulations) registration. They say they are confident of achieving this.

The problem, as I see it, is that there are a number of competing companies in the infant formula space.

This includes the giant that is A2, Bubs Australia Ltd [ASX:BUB] and Bellamy’s Australia Ltd [ASX:BAL], which has just been acquired by China Mengniu Dairy Company Limited.

How Nuchev fits into this jigsaw remains to be seen.

Conclusion — both have appeal

Both companies are exciting and although they operate in wildly different industries — each has their own growth trajectory.

Depending on what type of investor you are, you could opt for either.

If you want a company turning a profit, Aerometrex has this.

If you want a company that could ride an industry wide wave, then Nuchev would appeal.

The coming months will show us which company investors really back.

Regards,

Lachlann Tierney,

For Money Morning

PS: Our publication Money Morning is a fantastic way to get out in front of the big trends moving the world of finance. We talk about the most innovative stocks on the ASX, including tech stocks like Aerometrex. Last week we discussed cyber security stocks and the rapid rise of Vault Intelligence Ltd [ASX:VLT]. It’s up nearly 60% in a year. Learn all about it here. Best of all, it’s free.


Lachlann Tierney is a writer for Money Morning and has been investing for nearly a decade. With a Masters of Science from the London School of Economics, he brings a sound understanding of global markets to his writing. Lachlann is interested in emerging technologies, energy solutions and helping people invest their money wisely. Recently he has been working with Ryan Dinse. Ryan is involved in three publications:


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