Amaero International Ltd: On Track to Deliver Meaningful Revenues by End CY21
Amaero International Ltd
On track to deliver meaningful revenues by end CY21
Amaero International Ltd (ASX:3DA) creates large format, complex components in metal with laser-based additive manufacturing for the defence, aerospace and automotive sectors. The company, works with several of the world’s leading manufacturers of aerospace and defence products, delivering both design & prototype and manufacturing capability. Amaero has provided an update to investors noting that the several opportunities it has before it puts the company on track to deliver meaningful revenues by the end of CY21. The near term revenue opportunities include building a Centre for Additive Manufacturing Excellence in the Middle East, building and commissioning of a 120t/annum titanium powder facility in Australia, and expanding on the purchase order already received from Nissan. The company has also entered an agreement with Rio Tinto (ASX:RIO) to collaborate on the development of the supply chain for Amaero’s high performance, high operating temperature aluminium alloy, “Amaero Hot AI”. Amaero recently reported a better than forecast H1 FY21 loss of $3.01m, compared with our forecast for a net loss of $3.14m. The operating loss (EBITDA) for the half year was $1.91m (excluding non-cash share based payments), a 12% increase in H1 FY20 but below our forecast for a loss of $2.79m, with cost containment the feature. We have made some minor adjustments to our forecasts after incorporating the H1 FY21 result. Our base case valuation has lifted to $0.92/share (previously $0.90/share) as a result.
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.
Near term revenue opportunities defined
Amaero has provided an update on its CY2021 growth strategy which includes the commissioning of a yet to be contracted Australian titanium powder manufacturing facility to support US defence prime contractors, a yet to be contracted but rapidly progressing Middle Eastern Metal 3D printing Centre of Excellence, a potential satellite project and an expansion of the Nissan agreement based on the Purchase Order received for a die casting auto component for the Nissan Leaf electric vehicle for other component parts.
Base case DCF valuation is $0.92/share
We use 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 $0.92/share (previously $0.90/share) on the current share count. As we highlighted in our recent initiation report Delivering efficiencies in 3D printing, we have modelled but not included the potential for expansion of the Fletcher Insulation tooling agreement to its global network, the proposed US$77m (A$108m) Middle East 3D printing facility and an expanded case (1,200t) Australian titanium powder manufacturing facility, which combined could take our base case valuation to $1.17b which equates to $5.82/share on the current share count.
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- Amaero International Ltd: On Track to Deliver Meaningful Revenues by End CY2119 Mar 2021