Digital Infrastructure Demand Will Drive Long-Term Opportunity In This Undervalued Spatial Data Leader

Catalysts

About Veris

Veris is an Australian spatial data and professional services company that delivers surveying, digital advisory, and data-driven infrastructure solutions.

What are the underlying business or industry changes driving this perspective?

• Rising demand for data rich infrastructure management, including digital twins and AI enabled analytics, positions Veris to win larger, multi disciplinary projects like Suburban Rail Loop. This supports sustained revenue growth and an improved project mix that can drive margin expansion.
• Structural growth in public and private infrastructure investment across transport, utilities, water and defense is expanding Veris' more than $1 billion addressable market. Combined with a weighted pipeline above $190 million, this provides multi year visibility on revenue and earnings.
• Increasing focus by asset owners on lifecycle asset management and resilience, particularly for roads and bridges, should accelerate adoption of platforms such as RoadSiDe and BridgeSiDe. This can expand recurring and higher margin digital revenues and lift group EBIT margins.
• Ongoing digitization and modernization of government and enterprise workflows, reinforced by Veris' Spatial Vision acquisition and growing advisory capabilities, is likely to deepen relationships with blue chip clients and drive higher value consulting work that supports net margin improvement.
• Industry consolidation and Veris' strong balance sheet create scope for selective, accretive M&A in digital and professional services. This can accelerate scale in high margin segments and enhance earnings growth through operating leverage and disciplined capital deployment.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Veris's revenue will grow by 6.5% annually over the next 3 years.
• Analysts assume that profit margins will increase from 2.0% today to 6.0% in 3 years time.
• Analysts expect earnings to reach A$7.0 million (and earnings per share of A$0.01) by about December 2028, up from A$2.0 million today.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 26.8x on those 2028 earnings, up from 20.5x today. This future PE is greater than the current PE for the AU Professional Services industry at 20.5x.
• Analysts expect the number of shares outstanding to grow by 3.76% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.61%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The spatial data and digital twins market is highly fragmented with numerous specialist competitors. If Veris fails to differentiate its platforms like RoadSiDe and BridgeSiDe at scale, pricing pressure and slower adoption could cap revenue growth and limit further margin expansion, constraining earnings.
• The strategy depends on a continued shift from low margin transactional surveying to higher margin digital advisory and consulting. If clients revert to commoditised procurement focused on lowest price, project mix quality could deteriorate, compressing gross profit margins and weakening net margins.
• Veris’ growth plans rely on ongoing strength in public infrastructure and government technology spending. Any cyclical pullback in transport, utilities or defense budgets, or delays in large projects such as Suburban Rail Loop, could reduce the committed backlog and pipeline, slowing revenue and earnings growth.
• The company intends to pursue further acquisitions to accelerate its digital and professional services strategy. If future deals are poorly integrated or fail to deliver the early success of Spatial Vision, integration costs and operational disruption could erode profitability and dilute net margins.
• As digital platforms and analytics become a larger share of revenue, Veris must continuously invest in talent and technology. If wage inflation for specialist staff or rising product development costs outpace productivity gains, operating expenses could rise faster than revenue, limiting improvements in EBIT and profit before tax.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of A$0.26 for Veris based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be A$117.5 million, earnings will come to A$7.0 million, and it would be trading on a PE ratio of 26.8x, assuming you use a discount rate of 7.6%.
  
• Given the current share price of A$0.07, the analyst price target of A$0.26 is 71.5% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.