Amaero International Ltd: Progressing the Opportunities in Q3 FY21
Amaero International Ltd
Progressing the opportunities in Q3 FY21
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 reported Q3 FY21 operating cash outflow of $1.06m, which included $0.58m in government grants. Cash receipts ticked up to $0.09m and cash expenditure, including research and development costs were down slightly on Q2, demonstrating good cost containment. The company ended Q3 FY21 with $12.6m net cash. Key highlights for the quarter include Amaero successfully printing tooling for the Fletcher’s Glass application in the production geometry which validates Amaero’s patent application and will lead to testing in the production geometry in the production alloy in this quarter; the collaboration with Rio Tinto on the development of supply chain for Amaero’s High Operating Temperature Aluminium Alloy, “HOT AI”, and purchase orders from Nissan Casting Australia for the supply of tool steel inserts and Raytheon Intelligence and Space for additive manufactured components in new materials. Amaero has also appointed 3D printing industry veteran Mr Tuan TranPham to its industry advisory board. Mr TranPham previously held the positions of Chief Revenue Officer at Desktop Metal (NYSE:DM), National Sales & marketing Director at GE Additive, National Sales Manager for Stratasys and National Sales Manager for 3D Systems.
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.
Q3 FY21 result demonstrating progress
Amaero has reported monthly cash burn of $0.35m, an improvement on Q2 FY21’s monthly cash burn of $0.54m. Q3 was a quarter of operational progress. The successful printed tooling of the Fletcher’s Glass application was a major project milestone and has allowed the project to progress towards building and testing the production geometry in the production alloy in this quarter. The collaboration with Rio Tinto on HOT AI has enabled Rio to manufacture a trial batch of the AIMnSc alloy which will be atomised to enable further qualification testing.
Base case DCF valuation is $0.93/share
We have made minor adjustments to our forecasts for the timing of revenues coming to account. This has had minimal impact on our DCF valuation which is $0.93/share on the current share count. As we highlighted in our February 2 initiation report Delivering efficiencies in 3D printing, we have identified considerable upside to our valuation on the range of opportunities Amaero has presently before it.
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