Edison Investment Research Limited: 1Spatial (SPA) - Validating spatial data across the globe

London, UK, 17 February 2022

1Spatial (SPA) - Validating spatial data across the globe

1Spatial (SPA) announced a three-year contract worth c $0.8m with the State of Montana for its Next Generation 911 solution. The Montana contract, along with recent large contract wins, the accelerating pace of new business, the transition to a higher-margin SaaS business, increased collaboration among data users and success with the 'Land and Expand' strategy should support a c 6% CAGR through FY23 and improved margins. We remain encouraged by the long-term potential of the geospatial industry and see scope for further acceleration. While it does trade at a sizable discount to its software peers in terms of price/revenue and EV/EBITDA multiples, we see opportunities for the gap to be reduced, and now is the time for SPA to capitalise on them.

1Spatial trades at 12.4x FY22e EV/EBITDA, a significant discount to its software peers, and using a peer multiple of 27.7x implies a share price of 99p, about 117% above the current price. While much of the discount reflects SPA's current lower growth and margins, if the pace of contract wins is maintained and 1Spatial continues to execute on its land and expand strategy, we anticipate there could be a reduction in this valuation gap.

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