We believe Veris is a potential long-term opportunity for investors which has arisen due to short-term concerns about its surveying division’s margins. It is our view that this is a distraction from the longer-term potential that the company has which is to become a national leader in a diversified array of services including town planning, high margin geospatial services, communications and other professional services.
In addition, unlike many companies in this market capitalisation range, Veris has the benefit of already having a significant revenue base, which was ~A$120m p.a. as per the last financial year. Because of this relatively large revenue base, even an incremental improvement in existing margins in surveying could produce a material improvement in the group’s total EBITDA.
Further to this, we believe that the new Veris Group is more diversified than it was historically as a result of the Elton Consulting acquisition. The continued growth in higher-margin business segments and activities such as geospatial could also help increase margins for the Veris group over time. Diversification of revenue streams will also provide Veris with earnings resilience in the face of any downturn in any sector or region.
Key risks include, but are not limited to, the company's debt facilities which mature in November 2020 and the relatively low barriers to entry in surveying which may continue to pressure margins.
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