Nano Dimension — Strengthening the product portfolio

Nano Dimension (NASDAQ: NNDM)

Last close As at 20/04/2024

USD2.43

−0.03 (−1.22%)

Market capitalisation

USD538m

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Research: TMT

Nano Dimension — Strengthening the product portfolio

Nano Dimension reported Q223 revenue growth of 33% year-on-year and maintained its adjusted EBITDA at a similar level to Q123, reflecting continued investment in R&D. No longer looking to acquire a majority stake in Stratasys, the company is considering its options regarding its 14% holding and continues to seek alternative targets, recently making a small technology acquisition in the design software market.

Katherine Thompson

Written by

Katherine Thompson

Director

TMT

Nano Dimension

Strengthening the product portfolio

Technology

Spotlight – Update

23 August 2023

Price

US$2.83

Market cap

US$725m

Share price graph

Share details

Code

NNDM

Listing

NASDAQ

Shares in issue

256m

Net cash ($m) at end-June 2023 (including US$10.2m lease liability)

943.6

Business description

Nano Dimension offers equipment for additive manufacture of high-performance electronic devices, complex 3D ceramic and metal objects as well as miniature parts requiring a resolution of only one micron. It also offers complementary equipment for automated assembly of electronic devices and PCBs.

Bull

Additive manufacturing enables creation of more complex parts.

Additive manufacturing is more efficient for smaller volume production runs.

Sequence of acquisitions gives Nano Dimension a broad additive manufacturing portfolio.

Bear

Loss-making.

Distraction of hostile behaviour from major shareholder Murchinson.

Difficult to predict market growth for disruptive technologies.

Analyst

Katherine Thompson

+44 (0)20 3077 5700

Nano Dimension is a research client of Edison Investment Research Limited

Nano Dimension reported Q223 revenue growth of 33% year-on-year and maintained its adjusted EBITDA at a similar level to Q123, reflecting continued investment in R&D. No longer looking to acquire a majority stake in Stratasys, the company is considering its options regarding its 14% holding and continues to seek alternative targets, recently making a small technology acquisition in the design software market.

Historical performance

Year
end

Revenue
(US$m)

EBITDA
(US$m)

PBT*
(US$m)

PAT*
(US$m)

DPS
($)

P/E
(x)

12/19

7.1

(11.7)

(7.9)

(7.9)

0.00

N/A

12/20

3.4

(12.6)

(15.0)

(15.0)

0.00

N/A

12/21

10.5

(38.4)

(44.5)

(44.5)

0.00

N/A

12/22

43.6

(88.8)

(96.4)

(96.4)

0.00

N/A

Source: Company data. Note: *PBT and PAT are normalised, excluding amortisation of acquired intangibles, exceptionals and share-based payments.

Q223 results show steady progress

The company reported Q223 revenue of $14.7m, essentially flat q-o-q and 33% higher y-o-y, and an adjusted gross margin of 47.5%. EBITDA of -$19.8m included a revaluation gain from the company’s stake in Stratasys; adjusted EBITDA of $23.5m was similar to Q123 (-$23.7m). At the end of H123, the company had net cash of $944m and its stake in Stratasys was worth $172m.

Positive order momentum; small acquisition

Nano Dimension recently announced its largest-ever purchase order, to be shipped in Q3 and Q423, to a new customer in the aerospace and aviation market. In August, the company acquired the technology and intellectual property of Additive Flow, adding design simulation and optimisation expertise. The core technology will be integrated into Nano Dimension’s proprietary design package suite, FLIGHT.

Focused on upcoming AGM

Nano Dimension’s AGM is scheduled for 7 September. The company’s largest shareholder, Murchinson, has proposed several resolutions calling for the nine board members to be replaced with its proposed candidates. Nano Dimension’s CEO has confirmed he will resign if this happens.

Valuation: Well-funded for M&A strategy

Nano Dimension has $944m net cash on the balance sheet. Now that it is no longer bidding to acquire Stratasys, management has confirmed its intention to seek alternative acquisition opportunities. Consequently, it is not valid to carry out a valuation based on a comparison of market capitalisation/historical sales multiples because Nano Dimension’s revenues are likely to grow much faster than those of its listed peers. The shares are currently trading at a significant discount (c 33%) to Nano Dimension’s net cash balance plus the current value of its stake in Stratasys ($141m as at 22 August).

Review of Q223 results

In the table below, we summarise the performance of Nano Dimension in Q223 and H123.

Exhibit 1: Nano Dimension Q223 and H123 results highlights

Q223

Q222

H123

H122

Revenue

$m

14.7

11.1

29.7

21.5

Gross profit

$m

6.5

3.6

13.1

4.6

Adj. gross profit

$m

7.0

4.0

14.1

8.1

EBITDA

$m

(19.8)

(41.4)

(7.9)

(73.0)

Adjusted EBITDA

$m

(23.5)

(21.3)

(47.2)

(40.5)

Operating loss

$m

(30.4)

(32.1)

(61.6)

(65.0)

Profit/(loss) before tax

$m

(9.3)

(40.3)

12.7

(74.1)

Profit/(loss) after tax

$m

(9.4)

(40.0)

12.6

(73.3)

Net income after minority interest

$m

(9.1)

(39.7)

13.1

(72.8)

Net cash including lease liabilities

$m

943.6

1274.1

943.6

1274.1

Revenue growth y-o-y

32.8%

1268.8%

37.9%

1227.4%

Revenue growth q-o-q/h-o-h

-1.5%

6.4%

34.4%

142.7%

Gross margin

44.1%

32.2%

44.0%

21.3%

Adjusted gross margin*

47.5%

35.6%

47.3%

37.8%

Source: Nano Dimension. Note: *Excludes amortisation and share-based payments.

Q223 revenue was essentially flat q-o-q and 33% higher y-o-y. H123 revenue was 38% higher y-o-y and 34% higher h-o-h. Adjusted gross margin improved by 11.9pp y-o-y and 0.4pp q-o-q to 47.5% in Q223. Q223 EBITDA of -$19.8m included the gain on the company’s stake in Stratasys of $11.9m (see below). Adjusted EBITDA, which excludes FX gains/losses, share-based payments and revaluation of assets and liabilities, was -$23.5m compared to -$23.7m in Q123 and -$21.3m in Q222. The company noted that it spent $1.9m on legal and proxy-related costs in Q223; we would expect further costs of this nature to be incurred in Q323 as the company prepares for its AGM in September.

Net cash at the end of Q223 was $943.6m, down $30.3m from Q123. The company used $28.2m cash in operating activities, received $6.7m in interest, spent $3.2m on capex, $5.3m on contingent consideration and $1.3m buying back shares.

Investment in Stratasys under consideration

The value of the company’s 14.1% stake in Stratasys increased from $160.3m at the end of Q123 to $172.2m by the end of Q223 as its share price increased from $16.53 to $17.76. The Stratasys share is currently trading at $14.55, valuing Nano Dimension’s stake at $140.6m. After the withdrawal of the company’s partial tender offer for Stratasys, management is considering options for its stake in Stratasys, including selling on the open market.

Share buyback plan announced

On 7 August, the company announced that its board had authorised a share buyback programme totalling up to $227.5m. The plan is subject to the approval of the Israeli court which we expect to happen in the next couple of months.

Business update

Adding design simulation and optimisation capabilities

On 14 August, the company announced it had acquired the technology and intellectual property of Additive Flow, a UK-based supplier of 3D design simulation and optimisation software. The software specialises in mechanical, thermal and thermo-mechanical properties as well as frequency and fatigue across a range of materials and processes. The product addresses design, production and quality decisions while optimising for cost, weight, manufacturing productivity and manufacturing yield. The company has customers in advanced optics and optoelectronics, aerospace and defence, semiconductors, advanced energy and electronics. Additive Flow’s core technology will be integrated into Nano Dimension’s proprietary design package suite, FLIGHT. The company did not disclose any financial details due to commercial sensitivity.

Contract wins include largest-ever order

In Q223, the company made sales to a space exploration equipment company, a satellite equipment innovator, a national defence agency, a world-leading nuclear research group and one of the world’s largest computer manufacturers.

Having previously noted customer interest in its DeepCube technology, in July the company signed an agreement with a large multinational electronics company to leverage DeepCube’s deep learning-based AI technology. It also entered into a memorandum of understanding with an industrial company and is in discussions with other potential customers.

In August, the company announced it had received its largest-ever purchase order, in terms of number of systems (six) and by value. It noted that this was for a new customer who is active in the aerospace and aviation industry. The company expects to deliver the systems in Q3 and Q423.

Upcoming AGM

Nano Dimension has scheduled its AGM for 7 September. Murchinson and related parties, holding a combined 11.9% stake in Nano Dimension, have proposed several resolutions:

1)

To replace the three Class III directors who are up for re-election with directors proposed by Murchinson (requires a simple majority of votes in person or by proxy at the meeting).

2)

To replace the six other Nano Dimension directors (ie those not up for re-election) with a slate selected by Murchinson (requires a special majority of votes in person or by proxy, ie 70%).

3)

To amend the Articles of Association to declassify the board, ie to change directors from serving staggered terms to being up for re-election each year (requires a special majority).

The company’s CEO has confirmed he will resign if the board is replaced with Murchinson’s candidates.

Exhibit 2: Financial summary

$m

2019

2020

2021

2022

Year-end 31 December

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

 

 

 

 

Revenue

 

7.1

3.4

10.5

43.6

Cost of Sales (including amortisation of capitalised IP)

(5.1)

(2.3)

(9.4)

(29.6)

Gross Profit

2.0

1.1

1.1

14.1

EBITDA

 

(11.7)

(12.6)

(38.4)

(88.8)

Operating profit (before amort. and excepts.)

 

(14.4)

(15.2)

(48.3)

(98.5)

Intangible Amortisation

0.0

0.0

0.0

0.0

Exceptionals

0.0

0.0

(145.2)

(40.4)

Share-based payments

(0.4)

(20.5)

(29.8)

(32.6)

Operating Profit

(14.8)

(35.7)

(223.2)

(171.5)

Net Interest

6.5

0.2

3.8

2.2

Exceptionals

0.0

(13.0)

13.7

(58.7)

Profit Before Tax (norm)

 

(7.9)

(15.0)

(44.5)

(96.4)

Profit Before Tax (FRS 3)

 

(8.4)

(48.5)

(205.7)

(228.0)

Tax

0.0

0.0

4.9

(0.3)

Profit After Tax (norm)

(7.9)

(15.0)

(44.5)

(96.4)

Profit After Tax (FRS 3)

(8.4)

(48.5)

(200.8)

(228.3)

Average Number of Shares Outstanding (m)

3.5*

42.9*

247.3

257.8

EPS - normalised ($)

 

(2.25)

(0.35)

(0.18)

(0.37)

EPS - (IFRS) ($)

 

(2.38)

(1.13)

(0.81)

(0.88)

Dividend per share ($)

0.00

0.00

0.00

0.00

Gross margin (%)

28.1%

31.3%

10.7%

32.2%

EBITDA margin (%)

N/A

N/A

N/A

N/A

 

 

 

 

BALANCE SHEET

 

 

 

 

Fixed Assets

 

13.0

13.1

78.1

139.1

Intangible Assets

5.2

4.4

0.0

0.0

Tangible Assets

7.4

8.3

12.2

22.4

Deferred tax and other

0.0

0.0

1.0

0.9

Bank deposits/securities

0.0

0.0

64.4

115.0

Restricted deposits

0.4

0.4

0.5

0.9

Current Assets

 

9.9

676.1

1,311.9

1,064.3

Stocks

3.5

3.3

11.2

19.4

Debtors

2.4

1.8

9.3

12.8

Cash

3.9

585.3

853.6

685.4

Bank deposits

0.0

85.6

437.6

346.7

Restricted deposits

0.0

0.1

0.1

0.1

Current Liabilities

 

(4.4)

(6.7)

(32.0)

(37.0)

Creditors

(4.4)

(6.7)

(16.7)

(27.9)

Short-term borrowings

0.0

0.0

0.0

0.0

Other

0.0

0.0

(15.3)

(9.2)

Long-Term Liabilities

 

(6.8)

(15.5)

(13.7)

(16.1)

Long-term borrowings

(2.1)

(2.6)

(4.4)

(13.1)

Other liabilities

(4.7)

(12.8)

(9.3)

(3.0)

Net Assets

 

11.6

667.1

1,344.2

1,150.3

 

 

 

 

CASH FLOW

 

 

 

 

Operating Cash Flow

(11.7)

(12.6)

(38.4)

(88.8)

Working capital

(0.8)

2.9

2.7

(1.2)

Exceptionals and other

(0.2)

(0.0)

(7.0)

(2.1)

Tax

0.0

0.0

0.0

0.0

Net Operating Cash Flow

 

(12.7)

(9.6)

(42.6)

(92.1)

Net Interest

0.0

0.2

3.7

17.5

Investment in intangible & tangible assets

(0.6)

(1.4)

(9.8)

(9.4)

Acquisitions/disposals

0.0

0.0

(74.6)

(219.5)

Equity financing

14.6

679.0

805.7

0.0

Dividends

0.0

0.0

0.0

0.0

Other

0.0

0.0

0.0

(0.0)

Net Cash Flow

1.4

668.1

682.4

(303.5)

Opening net debt/(cash)

 

(3.8)

(1.8)

(668.3)

(1,351.2)

HP finance leases initiated

0.0

0.0

0.0

0.0

Other

(3.3)

(1.6)

0.4

(28.7)

Closing net debt/(cash)

 

(1.8)

(668.3)

(1,351.2)

(1,018.9)

Source: Company data. Note: *Adjusted for 1:50 reverse split effective June 2020.


General disclaimer and copyright

This report has been commissioned by Nano Dimension and prepared and issued by Edison, in consideration of a fee payable by Nano Dimension. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

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This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

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Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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United Kingdom

General disclaimer and copyright

This report has been commissioned by Nano Dimension and prepared and issued by Edison, in consideration of a fee payable by Nano Dimension. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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