Disclaimer: All information on this section is of a general nature.
Before making any investment decision, you should consult your adviser.
Fastbrick Robotics Ltd (FBR) Building on technology for exciting growth
Fastbrick Robotics Limited (ASX: FBR) has made significant progress over the past
half-year towards commercialising the group’s 3D robotic bricklaying system – the
Hadrian X. In July 2017, FBR signed a Memorandum of Understanding (MoU) with
global construction and mining equipment manufacturer Caterpillar (NYSE: CAT)
to explore opportunities regarding manufacturing and sales. In August 2017, FBR
signed a non-binding MoU with the Kingdom of Saudi Arabia’s Ministry of Housing
for a potential 50,000 houses (equivalent to 100 Hadrian X robots).
FBR is targeting to have the first Hadrian X commercial prototype ready by mid-
2018 and the first trial house built by the end of November 2018 (meeting the
first Performance Milestone – construction of a 180m2 house). We forecast first
technology royalties from sales of the Hadrian X - most likely
manufactured by CAT - in late 2020 (meeting the third Performance Milestone
– sales of +A$10m by November 2020). With some 500m Performance Shares at
stake (worth A$97.5m at current share price levels), we suggest that
management is well incentivised to keep the development programme on track
over the next three years. Predicated on our forecast sales price of US$5m per
Hadrian X robot, sales ramping up from 25 units in FY21E to 300 units in FY24E,
and a 20% technology royalty, we forecast FBR’s (pre-tax) royalties at
A$34m in FY21E, increasing to A$433m in FY24E.
SOTP target price: A$0.53
Our estimated SOTP equity value for FBR is A$860m (A$0.53 per fully diluted
share). Our risk-weighted NPV10 of A$782m for Hadrian X royalties accounts for
86% of this valuation, with technology upside (i.e., applications outside of
residential house construction) accounting for 9%, with net cash of A$49m in
FY18E accounting for the balance.
Following a A$35m equity placement in November 2017, FBR has effectively derisked
the balance sheet for the next 3-4 years i.e., until first sales in FY21E. At
current share price levels of A$0.195, we calculate that FBR offers significant
upside potential to our A$0.53ps target price. We initiate coverage with a
Speculative Buy (Higher Risk) recommendation