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Amaero eyes US defence market with 3D printing technology

Amaero eyes US defence market with 3D printing technology
Frost & Sullivan believes that the additive manufacturing sector is fast-growing, where turnover globally is expected to hit $US23.6 billion 2025, from approximately $US11billion in 2018.
Nov 21, 2019 By Simon Herrmann Tags: IPO

ASX code: 3DA

Shares on offer: 40 million

Listing price: 20c

Market capitalisation: $34.97m

Listing Date: November 25

Rating: 2.5/5 — suitable for speculative growth investors

The 3D printing process builds a three-dimensional object from a computer-aided design model, usually by successively adding material layer by layer, which is why it is also called additive manufacturing.

Frost & Sullivan believes that the additive manufacturing sector is fast-growing, where turnover globally is expected to hit $US23.6 billion 2025, from approximately $US11billion in 2018.

Founded in 2013 in collaboration with Monash University, Australian technology company Amaero International seeks to realise commercial opportunities in this space, providing 3D printing services to a range of customers in manufacturing. Research & development, aerospace and defence.

Strategic partnerships with Monash University and the University of Adelaide allow Amaero to develop additive manufacturing capabilities and leverage in-house expertise and equipment. 

Amaero will seek to raise $8 million at 20 cents a share for the IPO, in a deal valuing the company at almost $35million on a market capitalisation basis.

In September 2017, additive manufacturing specialist Titomic (ASX:TTT) listed on the ASX at 20 cents per share with a market capitalisation of $22.7 million. Subsequent to its IPO the value of the company soared over 10-fold despite being heavily loss making. While the recent share price performance has been poor, Titomic is still valued at over $150 million. 

Amaero will utilise the funds to pursue a multi-layered growth strategy, focusing on short-medium and long-term opportunities across various sectors. While the manufacture of tooling and prototype services are immediately addressable opportunities, the company expects to expand into the defence and aerospace markets.

Amero also set up an office in California, USA as the board is confident that the company will expand into the lucrative US defence market.

However, with revenues of less than $200k per annum for the financial year 2019, down from $480k during FY2017, Amaero remains reliant on external capital to fund its operations. Significant expenditure will be incurred in executing its business and marketing plans, and it remains uncertain if and when Amaero will be able to take advantage of commercial opportunities, in particular in the USA.

Amaero has a sound capital structure with cornerstone investors, a small degree of free float and a significant portion of escrowed shares. While long-term success is not guaranteed and positive newsflow is required to support the valuation over the long-term I think post-IPO demand could be strong, not least because of Titomics’s history.

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Simon Herrmann Author: Simon Herrmann Nov 21, 2019

Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.

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