Momentum building
We think that what really differentiates good from truly great companies is the presence of ‘world beating and highly disruptive’ technology that not only addresses large untapped markets, but also is difficult to copy. We think Kromek has this in spades.Indeed, this morning the company announced that it had secured two more top flight contracts with the US Government. The first is worth $1.5m (over 2 years) with the Department of Homeland Security to create a new CZT detector to enhance passenger baggage screening equipment. Here, Kromek is leveraging its expertise in SPECT (ie healthcare) to design a much more accurate and faster x-ray platform for airport border control purposes, that almost eliminates the incidence of ‘false alarms’.
And secondly an order ($1.05m over 3 years with a possible 2 year $0.7m extension) from the Defense Threat Reduction Agency (DTRA) to develop a new range of sophisticated handheld nuclear radiation detectors. Both agreements will further broaden Kromek’s product portfolio, are cashflow positive, and de-risk our FY19 revenue target (£15.0m) to the tune of circa £600k.
Elsewhere, last week came news that the D3S had been successfully deployed by Belgian Federal Police at the recent NATO Summit in Brussels – ie to protect President Donald Trump and other Heads of State from potential radiological attack (eg hidden in cargo, vehicles, buildings and other equipment).
In terms of the numbers, we maintain our forecasts and 40p/share valuation, but see scope for significant upgrades over the next couple of years – especially if the company can capture the substantial opportunities available within SPECT and D3S.
As International Trade Secretary, Dr Liam Fox MP, says: “Kromek is recognised as one of the country’s most innovative businesses, and its products are making a tangible difference to people’s lives across the world.â€
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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