𝛼SKAML3D Ltd - AGL Begins 3D Printing Power Station Parts On-Demand
AML3D Ltd
AGL begins 3D printing power station parts on-demand
AML3D Ltd (ASX:AL3) was established in 2014 to commercialise the patented WAM (Wire Additive Manufacturing) process, an additive manufacturing technology for the cost-effective production of large, high-performance metal components and structures. The company has reported a positive outlook with Q3 results and forecasts a strong revenue and cashflow quarter in Q4. AL3 is currently building three machines for delivery in FY22 and expects another sale in Singapore. The company has orders for two more machines to be delivered before December. AL3 is focused on expanding acceptance of the WAM process for fast, high-quality, on-demand manufacturing. AL3 continues to invest in R&D to increase machine capacity, speed and strength. Similarly, partnerships with Deakin University in advanced materials will likely allow lighter, stronger products to be manufactured using AL3’s patented WAM process and likely provide additional commercial opportunities in supply of welding materials. AL3’s announcement of a supply agreement with AGL Energy Ltd (ASX:AGL) is a significant step on the path to fully integrating 3D printing and the WAM process into corporate supply chains. Adding the capacity for locally supplied, on-demand, parts has the potential to rebalance logistics and strategic challenges back in favour of the remote user of those parts.
Business model
AML3D generates revenues from contract manufacturing of components using its WAM process, sales of the patented ARCEMY WAM modules and licencing revenue from these sales after the first year. The company has a manufacturing facility in Adelaide, additional capacity under development in Singapore, and a strong level of interest in machine purchases due to the large scale possible using the WAM technology. AL3 is developing three revenue streams: contract manufacturing in Adelaide, machine manufacturing and sales globally, and potentially supply of high-tech welding media for additive manufacturing and other uses.
AGL enhances supply-chain with on-demand parts
AGL has signed an agreement with AL3 to supply power station parts on-demand from the Adelaide facility. The initial order is not significant financially, at $55,000, but is a first step to integrate the WAM process into industrial supply chains. The agreement provides a large signpost to the capability of AL3’s ARCEMY modules to transform modern industrial supplies and production processes.
Base-case DCF valuation of $65m
We use the discounted cashflow methodology to value AML3D due to the company’s early stage of development. As we highlighted in our 13 October 2021 Initiation Report, Additive manufacturing matures, our base case remains premised on announced agreements and customer interest levels with a conservative conversion rate of customer enquiries to manufacturing and machine sales. We have additionally modelled a better and worse profile of future sales based on estimates of market penetration over time. We feel there is considerable upside possible in this valuation with our high valuation still at $0.75/share. This valuation will be adjusted as risk-free rates rise.
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