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Emerging Companies: Quickstep Holdings Ltd (ASX: QHL)


Published 20-JAN-2014 00:00 A.M.


2 minute read

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Overview: Quickstep Holdings Limited ("QHL", the Group") is an Australian advanced materials company focused on carbon-fibre manufacturing. Its primary asset is intellectual property ("IP") surrounding the Quickstep Process – a manufacturing technology that allows for faster and lower-cost production of carbon fibre composites. Commercialisation of the technology has seen QHL establish a manufacturing facility in Sydney, and secure contracts to supply military aerospace programs.

Catalysts: QHL’s strong delivery record for the existing Joint Strike Fighter ("JSF") supply agreement is expected to stimulate its military and aerospace order book which presently stands at over 10x its FY13 revenue. Entry into the auto parts market could drive further growth following successful pilot manufacturing during 2013. Management is targeting revenue of $35m and a cash flow positive operation in FY15. After raising $12.7million in 2013, QHL is well-positioned to achieve these objectives.

Hurdles: Despite recent funding initiatives and revenue growth, QHL has yet to eliminate its reliance on external capital. Margin discipline also needs to be established as manufacturing scales up. Whilst long term supply agreements to the defence industry attract a collective value of $775million, there is no guarantee that firm orders will continue to materialise.

Investment View: Three years after commercialising its technology via the JSF supply agreement, we are attracted to QHL’s reliable manufacturing record and capacity to service $100million orders pa. Whilst scale-up risks remain, QHL’s present valuation near historic investment appears undemanding versus the carbon fibre market opportunity. Expecting ongoing growth potential into military, aerospace, and auto markets, we initiate coverage with a ‘speculative buy’ recommendation.


General Information Only

S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.

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S3 and its associated entities may hold investments in companies featured in its articles, including through being paid in the securities of the companies we provide commentary on. We disclose the securities held in relation to a particular company that we provide commentary on. Refer to our Disclosure Policy for information on our self-imposed trading blackouts, hold conditions and de-risking (sell conditions) which seek to mitigate against any potential conflicts of interest.

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The information contained in this article is current as at the publication date. At the time of publishing, the information contained in this article is based on sources which are available in the public domain that we consider to be reliable, and our own analysis of those sources. The views of the author may not reflect the views of the AFSL holder. Any decision by you to purchase securities in the companies featured in this article should be done so after you have sought your own independent professional advice regarding this information and made your own inquiries as to the validity of any information in this article.

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