𝛼SKAML3D Ltd - FY22 Revenue Up, Strategy Clear
AML3D Ltd
FY22 Revenue Up, Strategy Clear
AML3D Ltd (ASX:AL3) was established in 2014 to commercialise the patented WAM (Wire Additive Manufacturing), an additive manufacturing technology for the cost-effective production of large, high-performance metal components and structures. The company reported a positive Q2 result with increasing interest in large-scale 3D printed parts from aerospace and energy companies. AL3 is supplying two machines to universities in FY22 and expects another sale in Singapore. The company has sufficient cash for six more quarters at current burn rates. Interest levels following the issue of the American Petroleum Institute’s Additive Manufacturing Standard have continued with improving relationships and order flow from major North American oil and gas engineering clients. AL3 is focused on expanding acceptance of the WAM process for fast, high-quality, on-demand manufacturing and has scheduled a Corporate Update Webinar on 14th April. The company expects to highlight the benefits of the WAM process to customers, including higher strength, lower waste, and smaller manufacturing footprint. AL3 maintains a strong focus on immediate value drivers but the presentation will likely emphasise the strong medium- and long-term prospects for the process and the company.
Business model
AML3D generates revenue 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.
Confirms FY22 revenue > A$2m
The quarterly result showed promising trends and rising interest in ALM3D’s ARCEMY machines and WAM technology. Management is clear in the presentation pack (released prior to the webinar) that these processes are bearing fruit and that immediate, medium- term and long-term value drivers are real and growing in impact. Nevertheless, as management emphasise, the process of moving from customer enquiry through the steps to full implementation of and integration of the WAM process is taking time. The global challenges of the past two years have clearly impacted the speed of take-up. At this stage we reduce our estimates for FY22 slightly to reflect these timing issues but make no adjustment to FY23 given the strong signs from North American customers.
Base-case DCF valuation of $64.5m maintained
We’ve used the discounted cashflow methodology to value AML3D due to the company’s early stage of development. We currently expect strong free-cash generation from FY23. Using a WACC of 11.7% (Beta 1.5 vs measured Beta of 0.21, terminal growth rate of 2.2%) we derive an equity value of $64.6m or $0.43/share on the current issued capital of 150.4m shares. As we highlighted in our 13 October Initiation Report Additive Manufacturing Matures, our base case is 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. Our high valuation is at $0.75/share and note our downside valuation is $0.20/share relative to current market price at $0.096.
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