Amaero International Ltd: Poised to Benefit from the Foundations Created in FY21
Amaero International Ltd
Poised to benefit from the foundations created in FY21
Amaero International Ltd (ASX:3DA) is a global specialist in metal additive manufacturing for the defence, aerospace and tooling sectors. The company has reported a better than forecast adjusted net loss of $6.18m for FY21, with cost containment a key feature of the result. FY21 was a foundation year for the company with relationships and contract boundaries established. Good progress has been made on key projects with two or more forecast to be commercialised in FY22. The near term revenue opportunities include the recently announced commissioning of a 120t/annum titanium powder facility in Australia, the soon to be signed Centre for Additive Manufacturing Excellence in the Middle East, expanded contracts with Boeing, and the global rollout of a 3D printed tool for Fletcher Insulation to replace incumbent technology. We have made some adjustments to our forecasts, chiefly on timing of rollout with COVID-19 lockdowns and delays in mind. We have rolled our financial model and our base case valuation is now $0.87/share (previously $0.92/share). It is worth noting that our base case forecasts do not include the opportunities discussed above except the 120t/annum titanium powder plant. We have dimensioned these other opportunities, and if 3DA is successful on execution, we could see our valuation rising to $5.58/share.
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.
Better than forecast cost containment in FY21
Amaero has announced its FY21 results with revenues up 332% to $0.5m and an adjusted EBITDA loss of $4.84m. a 13.8% increase on FY20 but largely in line with our forecasts. The net loss was a little lower than our forecast at $6.18m and a 25% increase on FY20. We have adjusted our forecasts to reflect the slightly slower revenue take up profile. This is an adjustment for timing, not a downgrade. Amaero continues on the revenue and earnings trajectory that we have forecast for the group, albeit at a slightly slower pace than our original estimates.
Base case DCF valuation is $0.87/share ($176m)
Our base case DCF valuation of $0.87/share (previously $0.92/share) includes forecasts for the 120tpa titanium powder facility as well as existing contracts with Fletchers (but not the global rollout) and a US defence & aerospace manufacturer. Successful commercialisation of these projects delivers considerable upside to our valuation. As we have previously highlighted this could take our valuation to $1.13b or $5.58/share.
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