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XTEK Ltd: THE INVESTMENT CASE
INVESTMENT OVERVIEW

XTEK to continue growth through commercialising proprietary products

Patersons' price target of 95 cents implies significant upside to the share price.
growth concept with stairs going upwards
INVESTMENT OVERVIEW: XTE The Big Picture
The company's standing with the Australian Defence Force and key international customers positions it for continued growth

XTEK Ltd (ASX:XTE) is focused on commercialising proprietary products globally and becoming an integral part of the global supply chain within the Australian defence industry.

The company supplies a range of products and support services to the defence, law enforcement and government sectors globally.

The main contributor to its core business revenue is supplying small unmanned aerial systems (hand-launched drones) to the Australian and New Zealand defence forces.

While the core business continues to grow, the commercialisation of its in-house XTclave™ and XTatlas™ products present a blue sky opportunity.

XTEK’s managing director Philippe Odouard said: “We have built a profitable and sustainable core business with multiple growth opportunities in the pipeline.

“In addition, our two proprietary products, XTclave™ and XTatlas™, represent significant upside potential in the near term with the commercialisation of these products underway and gaining momentum.”

XTclave™ is a unique body armour

XTclave™ is a patented manufacturing technology that can produce the world’s lightest and strongest body armour.

XTEK is commercialising its XTclave™ technology through the production of armour products including ballistic plates and helmets that incorporate the technology.

READ: XTEK makes progress with potential customers for XTclave™ technology

In late October 2018, XTEK revealed it was making significant progress with various potential customers in the US, Europe and Australia for its XTclave™ armour technology.

XTEK has made a proposal to the US Department of Defence (DOD) through a request for information (RFI) process to develop new ballistic plates for the US Marine Corps.

It is also moving closer towards securing production orders in Australia and Europe with testing and assessment on ballistic plates taking place.

XTatlas™ is video software used by drones

XTatlas™ is an application that allows for real-time, accurate geo-referenced mapping from a full motion video taken from small drones.

The application provides real-time intelligence to a warfighter at a fraction of the cost provided by similar data from large UAVs.

XTatlas outperforms its competitor’s products which cannot provide geo-referenced mapping in real-time, with data outputs often taking several hours to compute and analyse.

READ: XTEK wins first purchase order for its drone-based technology from Australian Defence Force

XTEK recently received its first purchase order from the Australian defence force for its XTatlas™ proprietary technology.

XTEK grew revenue by 91% in FY2018

XTEK achieved revenue of $17.2 million in FY18, up 91% on the prior year and notably in the upper end of its guided range of $11 to $18 million.

READ: XTEK confirms strong growth outlook for FY2019 following another profitable year

The operational progress achieved in FY2018 has placed the company in a strong position to build on its momentum in FY2019, with $38 million of contracted revenue already in place.

XTEK has provided FY2019 revenue guidance of $17 million to $26 million signalling another financial year of growth.

Price target implies substantial upside

Patersons analyst Jon Scholtz has a Speculative Buy recommendation and price target of 95 cents per share.

He noted the FY18 results delivered revenue at the upper end of guidance, a cash flow positive financial period and a reiteration of FY19 guidance.

Scholtz also believes XTEK has significant upside from in-house products and thus maintained his Spec Buy rating.

Strong relationship with Australian Defence Force

XTEK has made significant ground in terms of forging relationships with high profile clients such as the ADF, as well as State police.

There is also  demand for the company’s products from overseas.

While the end markets are often confidential, the sale of equipment to FY Composites is important as it is known to supply the Finnish Defence Force, as well as other European clients.

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XTEK Ltd Timeline

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