𝛼SKAML3D Ltd: Standards Change Speeds Market Penetration
AML3D Ltd
Standards change speeds market penetration
AML3D Ltd (ASX:AL3) was established in 2014 to commercialise WAM® (Wire Additive Manufacturing), an additive manufacturing technology for the cost-effective production of large, high-performance metal components and structures. The company has reported lower levels of customer conversion in Q1FY22 because of the impact of COVID-constrained business development and order completions. AL3 has $5.4m in cash and has been active in developing opportunities in the quarter despite these obvious constraints. The company has advanced connections with academia and will see commercial benefits in both machine sales and technology development from relationships with Deakin University, University of Queensland and RMIT. Boeing, BAe, Keppel and other significant entities are in the process of qualifying parts made using the WAM® process and we expect commercial results to follow. Agreed board retirements prior to the AGM leave AL3 considering roles for two new non- executive directors while manufacturing business momentum is rising in the defence aerospace and subsea oil and gas sectors. A recent ARCEMY® WAM® module sale to RMIT and research partnership with Deakin University broadens commercial opportunities in welding wire development and supply using boron nitride nanotubes to enhance aluminium composites.
Business model
AML3D generates revenue from contract manufacturing of components using its WAM® process, sales of the ARCEMY® WAM® modules and licensing 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.
Commercial announcements
Since the September quarterly, AL3 has announced further purchase contracts to produce metal 3D printed parts for customers in the defence aerospace and energy markets. These are strategically important developments in the process of expanding certification of 3D manufactured parts in various roles – particularly in larger-scale applications suited to manufacture using the ARCEMY® modules. AL3 will manufacture a 500kg aluminium rocket nozzle and a titanium plunger for use in an oil and gas processing plant. This is believed to be the first 3D printed part of its kind. The orders were contracted shortly after the approval of the Additive Manufacturing Standard (API 20S) by the American Petroleum Institute (API).
Board changes
Prior to the AGM, the Chairman, Steven Gerlach, and Non-Executive Director, Kevin Reid, announced they would retire from the board. Existing director Sean Ebert will act as Chairman while the board considers candidates for the vacancies, which are expected to be filled by March 2022. Following these changes, we expect the company will increase operational cadence, bringing a higher focus on speed and flexibility in addressing the potential of the WAM® process. All resolutions at the AGM were passed with more than 95% in favour.
Base-case DCF valuation maintained at $71m ($0.475/share)
We have maintained our valuation range as current developments remain within the base- case parameters. As we see further developments in wire and orders from additional industrial sectors and clients, we expect to see valuation growth. AL3 remains undervalued relative to peers based on EV/Sales ratios.
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