Amaero International Ltd: Sign-Off Secured for 120tpa Titanium Alloy Powder Plant

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.

Progressing the first of four major projects previously flagged
Amaero has secured board sign-off for the development of a 120tpa titanium alloy powder plant, one of four projects outlined by the company as key to underpinning its commercial success. The facility, which will be built in Melbourne, will generate annual revenues of ~$30m once fully operational. We have small contributions from the plant in our FY22 forecasts as it is tested and commissioned with it fully operational by December 2022. Development of this project is expected to set the groundwork for an expanded 1,200-1,400 tonne Ti powder plant which we have dimensioned but not included in our valuation. Successful commissioning of a larger facility adds considerable upside to our earnings forecasts and valuation. However, we caution that decisions on such a plant are some time away. Nearer term, the market awaits for decisions on the $108m 3D printing centre in the Middle East and the global opportunity being presented by the Fletcher tooling contract. Again, neither of these are reflected in our current forecasts or valuation.

Base case DCF valuation is $0.93/share
Our base case DCF valuation of $0.93/share includes forecasts for the 120tpa titanium powder facility as well as existing contracts with Fletchers and a US defence & aerospace manufacturer. 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 and this view is unchanged.