AML3D: University of Qld Purchases ARCEMY® Module

Business model
AML3D generates revenue from contract manufacturing of components using its WAM process; sales of the 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 possible large-scale use of the WAM® technology.

Sale of ARCEMY® module to University of Queensland
University of Queensland has purchased the smallest ARCEMY® module capable of printing objects up to a volume of 1.5m3 and mass of 750kg. The price paid accords with our price points for AL3’s modules and is another sign that the WAM® process is a well- regarded, flexible, scalable, industrial 3D printing process with strong potential for greater use in heavy engineering and manufacturing applications. We expect AL3 will also supply consumables for the module and participate in future R&D associated with 3D printing processes.

Base case DCF valuation of $71m with upside to $124m
We use the discounted cashflow methodology to value AML3D due to the company’s early stage of development. Negative free cashflow was reported in 2021 and is expected in 2022 and 2023. We expect strong free cash generation thereafter. Using a WACC of 11.1% (Beta 1.5 vs measured Beta of 0.21, terminal growth rate of 2.2%) we derive an equity value of $71m or $0.475/share on the current issued capital of 150.4m shares. Our base case is premised on announced agreements and customer interest levels, with a conservative conversion rate of customer inquiries 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 at $0.829/share. A full discussion of our valuation is available in our recent initiation report Additive manufacturing matures.