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Martin Aircraft: Two Years After IPO - Will the Stock "Take Off"?

Martin Aircraft: Two Years After IPO - Will the Stock "Take Off"?
The Martin Jetpack intends to address critical limitations of historical jetpack devices surrounding flight time, fuel supply, safety, and payload.
Apr 21, 2016 By Tim Morris Tags: MJP

Martin Aircraft Company Ltd (“Martin Aircraft”, “the Company”) is a New Zealand based technology company focused on micro light aircraft. It owns Intellectual Property (IP) surrounding the Martin Jetpack, a one person, petroleum powered aircraft capable of vertical take-off and landing. The Martin Jetpack technology has a development history spanning over 30 years with its first manned, unassisted flight recorded in 2007. During 2014, the Company’s latest working prototype was authorised by the NZ Civil Aviation Authority.

The Company was founded in 1998 to commercialise the Martin Jetpack technology which was first conceived in 1984 by Glenn Martin, current Non-Executive Director. Since 2004, New Zealand based venture capital fund, No. 8 Ventures, has provided financing to support technology development.

Subsequently the Company has engineered several working prototypes, the latest of which received certification from the New Zealand Civil Aviation Authority in August 2014.

Asset Overview – Martin Jetpack Technology

Martin Aircraft Company’s primary asset is IP surrounding the Martin Jetpack technology, which is being used to develop unique micro light aircraft, capable of manned and unmanned flight.

Conceived in 1984, the technology has been developed over three decades, attracting investments totalling A$17million prior to its IPO in December 2014.

Several working prototypes have been developed utilising the technology, which is characterised by a petroleum based fuel source and vertical take-off and landing capability.

The first manned unassisted flight of a Martin Jetpack prototype was recorded in 2007, whilst an unmanned, remote controlled version achieved this milestone in 2010. The latest working manned prototype, P12.2 was certified by the NZ Civil Aviation Authority during August 2014. Patents covering the technology have been secured in major global markets.

Industry Background – Aviation is Highly Regulated

Aviation is a highly regulated industry and civil aircraft typically need to meet registration standards of national industry bodies. The Martin Jetpack technology is being used to develop a class of registered microlight aircraft also capable of servicing demands currently met by light helicopter, emergency, and unmanned ariel vehicle devices.

Collectively, these markets have been estimated to attract annual expenditures in the order of US$75billion, the largest of which is the market for emergency response systems. Frost and Sullivan estimated the global ‘first responder’ to exceed US$50billion.

Development of the Martin Jetpack devices has been considered in light of existing micro light commercially available aircraft, which range in cost between US$75,000 to US$250,000. Application of the technology can also overlap with demands presently serviced by light helicopter, which cost between US$270,000 to US$2million.

Whilst similar ‘jetpack’ or ‘rocket belt’ technology has existed for over 50 years, operational constraints have largely limited their application to entertainment and stunt performances.

Features and Benefits

The Martin Jetpack intends to address critical limitations of historical jetpack devices surrounding flight time, fuel supply, safety, and payload.

Historical devices were limited to flight times of 22-75seconds, restricting distance, height and parachute functionality. Typical fuel supply was hydrogen peroxide, availability of which is severely restricted in terms of regulation and logistics.

The Martin Jetpack has a flight time of 30minutes, and is powered by a common petroleum based fuel supply. A ballistic parachute safety device is presently being incorporated into the latest prototype.

Relative to other commercially available microlight aircraft, the technology offers unique capability for vertical take-off and landings, broadening its application to confined, dense, and restricted topographies.

Commercialisation Strategy

Martin Aircraft has focused on developing working prototypes, securing regulatory certifications, and IP protection for the technology.

Patents have been registered in Japan, New Zealand, South Africa, US, Eurasia, Australia, China, and Israel. Patent applications are pending in Brazil, and Canada.

During August 2014, the Martin Jetpack P12 attained New Zealand Civil Aviation Authority (CAA) authorisation to fly manned and pilotless (via remote control). Further permits will need to be secured to certify the device in other jurisdictions.

Martin Aircraft understands that some countries will allow a direct transfer of permits based upon the New Zealand permits; other countries may require tailored approvals process including the inspection of the aircraft.

Recent domestic certification provides a platform for the company to advance the present prototypes into a commercial product. Technically, the company intends the streamline the device’s assembly process for scalable manufacturing, and enhancing safety features such as the parachute.

The Company intends to conduct manufacturing of the aircraft at its new facility in Christchurch, New Zealand. Established in September 2014, the Company estimates the facility should provide manufacturing capacity for 500 units per year. To date prototype components have been sourced domestically from multiple suppliers.

Economics – Martin Aircraft Aims to be Cost Effective over Small Helicopter

Whilst a commercial version of the Martin Jetpack remains under development, the Company expects to price devices in the order of US$200,000, which is comparable to a low cost aircraft and less expensive to purchase and operate than a small helicopter.

The estimated combined price and operating costs of a Martin Jetpack are expected to amount to only 30-40 per cent of that of the world’s most widely sold small helicopter, the R22, which costs $270,000 and an estimate of $145 operating costs per hour flown.

Full utilisation of the Company’s existing estimated manufacturing capacity could therefore attract revenues in the order of $100million pa. Significant additional income is targeted from after sale servicing of the units, flight training, and promotional events. 

In aggregate, these ancillary activities alongside the technology’s novelty and development costs may enable the Company to realise operating margins above averages witnessed by peers in the aerospace industry. However if demand is primarily driven by military and Government sources, we understand that margins in the order of 10-15 per cent are sustainable over the longer term.

Valuation

Martin Aircraft’s investment appeal rests in the IP supporting its technology and near term commercialization potential.. Do you want to view our valuation and investment view for Martin Aircraft?

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Tim Morris Author: Tim Morris Apr 21, 2016

Having studied Commerce and Science at the University of New South Wales, Tim began his career in an analytical capacity with Wise-owl. Tim has conducted over 500 corporate valuations and appraisals, specialising in pre revenue assets and emerging markets. For the last five years, his Equity Capital Market insights have been featured as part of a weekly column in The Australian and regularly features on Sky News, CNBC, ABC and Bloomberg TV.


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