Amaero International Ltd - Capital Raised to Deliver on Growth Options

Business model

Amaero generates revenues from several sources including: the design and prototyping of additive manufacturing solutions on a cost-plus basis; from contract manufacturing and tooling on a price-per-unit basis; from the sale of proprietary metal 3D printers and equipment, and 3D printing metal powders, on a cost-plus mark-up basis; from post-sales support and maintenance service fees; and from the rights to commercialise patented proprietary alloys developed by Monash University on a price-per-unit basis. Amaero has the North American commercialisation rights to a range of 3D printing machines, including the world’s largest laser powder bed machine, as well as the powder preparation machines and powder handling and recovery devices. The company owns fully accredited manufacturing facilities in Melbourne, Adelaide and El Segundo, California.

Titanium powder facility is a game changer for Amaero

In an investor presentation (March 17, 2022), Amaero announced it planned to 5x its powder production at its under-construction titanium powder facility in CY2023. The company has previously announced the expansion for CY2025. This will provide an estimated revenue base of $208m per year with the expansion expected to be debt-funded. Amaero highlighted that the ROI on the capital cost of equipment for the facility was less than six months. We have dimensioned the additional throughput, capex and estimated cost requirements of the 5x expanded case for the titanium facility (or 750tpa production) and estimate that it would lift our base-case valuation to $541m or $2.24/share. A 10x facility, which equates to annual output of 1,500tpa, lifts our base-case valuation to $950m or $3.93/share. This does not include Amaero’s other projects such as the Middle East 3D printing centre or the global opportunity presented by the Fletcher tooling contract. We have also adjusted our forecasts for the capital raise, the H1 FY22 and Q3 FY22 results, and our assessment of project timing for the remainder of CY2022.

Base-case DCF valuation is $0.71/share, or $170.1m

Our base-case DCF valuation is $0.71/share based on the new share count post-raise and earnings adjustments we have made for cashflows this year to date. We capture the first phase of the titanium powder facility in our forecasts which is expected to be fully operational by year end and current contracts with Fletcher, Boeing and Gilmour Space Technology but not the Middle East 3D printing centre or larger Fletcher opportunity.