£11m fund raise after 36% revenue surge
​Kromek is pioneering digital colour imaging for x- and gamma rays, using cadmium zinc telluride crystals. Key markets include: medical imaging, security screening, homeland security and nuclear detection. Today it announced an intention to raise up to £11m at 25p via an over-subscribed £9m placing and a £2m open offer - the latter being predicated on 2 new shares for every 27 held. Kromek also released its prelims for the y/e April 2015, which were both in line with our forecasts, and showed strong underlying momentum. Like-for-like turnover climbed 36% to £8.10m, with H2 sales coming in at £4.94m - sequentially +56% up on H1 (£3.16m) - driven by new commercial/government deployments across all three target markets and in multiple geographies. These types of major wins tend to be lumpy, and therefore by their very nature difficult to forecast. As such, despite a bulging £20m pipeline, we have prudently resized our projections, such that they now only include either signed orders from the backlog (£5m flow-through in FY16) or visible short-term opportunities. Consequently our FY16-17 sales forecasts of £8.5m and £9.0m respectively should be treated as ultra-cautious. We adjust our fair value share price target down to 35p / share, mostly due to the higher share-count, but think that Kromek offers risk-tolerant investors considerable upside at current levels. Indeed at 27p / share the stock trades on an undemanding 4.0x FY16 EV/sales multiple, which appears cheap for such an IP-rich business compared to many high potential 'disruptive technology' companies trading on Nasdaq that are valued at in excess of 10x revenues.
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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