Buoyant demand with over $30m of orders won
​Kromek is pioneering digital colour imaging for x- and gamma rays, using cadmium zinc telluride crystals.
This morning the firm reported that >$30m of new orders were secured for the 12 months ending April 2016, equivalent to an approx. book to bill ratio of 2.5x. This growth was helped by multiple landmark deals with new and existing blue chip customers, particularly in Nuclear Detection and Medical Imaging - thus providing excellent revenue cover for this year and next.
Indeed we reckon that the 12,000 unit DARPA D3S contract alone could generate $6m of sales in FY17, equating to around 50% of our £8.9m target. Better still, there are several other multi-$m orders in medical imaging (Re SPECT and BDM) set for fulfilment this year, on top of normal repeat business, development work for Canberra Industries and likely rising demand for bottle-scanners.
With regards to Kromek's competitive moat, 44 new patents were granted and another 16 filed in FY16, thus taking the total to over 290. In fact, we believe Kromek's proprietary technology is becoming more and more sought after, as evidenced by the quality of its new business wins.
In terms of FY16 figures, turnover at £8.3m was in line with our estimates of £8.4m - driven largely by product sales up 41% YoY, representing 65% of the total. Going forward, we have prudently held our FY17 turnover and EBITDA targets at £8.9m and -£1.85m respectively, with closing net funds of £2.1m.
Based on the burgeoning backlog, our price target has been lifted to 45p/share (from 42p), offering considerable upside from current levels upon good execution.
Kromek Group is a developer of radiation detectors based on cadmium zinc telluride, providing detection and characterization capabilities within the medical imaging, nuclear detection and security screening markets. Co. designs, develops and produces x-ray and gamma-ray imaging and radiation detection products.
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