Amaero International Ltd: Delivering Efficiencies in 3D Printing

Business model
Amaero generates revenue 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 & 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.

2021 will be a formative year
Amaero enters calendar 2021 with several well-advanced projects and prospects including a purchase order from Boeing for the manufacture of evaluation parts, which is expected to lead to an expanded term engagement for the manufacture of components for Boeing’s defence and space divisions; the tooling agreement with Fletcher Insulation which will likely result in Amaero producing a specialist, frequently replaced tool used in making glass fibre insulation initially addressing the local market before expanding to other key target markets globally; the opportunity to supply and manage a proposed 3D printing centre in the Middle East and the chance to develop and operate an Australian titanium powder manufacturing facility. The company has also had some recent contract wins with Nissan and Raytheon.

Base case DCF valuation is $179m
We have used the discounted cashflow methodology to value Amaero using a WACC of 13.9% (beta 1.9, terminal growth rate of 2.2%) and this derives an equity value of $179m or $0.90/share on the current share count of 197.6m shares. Note that our modelling anticipates additional capital will need to be raised, resulting in additional shares issued. Valuing early stage companies is always a subjective exercise, particularly when the timing of projects and financing is uncertain. We have sought to apply conservative estimates in our modelling and our base forecasts and valuation focus on announced agreements. We have also modelled but not included earnings estimates for global extension of the Fletcher Insulation tooling opportunity, the proposed Australian titanium manufacturing facility and the proposed US$77m Middle East 3D printing centre. These projects potentially add considerable upside to our earnings forecasts and valuation, and are discussed in this report.