Emerging Companies 20-Jan-2014 Spec Buy Quickstep Holdings Ltd Overview: Quickstep Holdings Limited (“QHL”, the Group”) is an Australian advanced materials company focused on the Quickstep Process – a manufacturing technology which allows for 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. Start Up Growth Buy Limit $0.25 Stop $0.18 Maturity Target $0.35 CORPORATE SUMMARY carbon-fibre manufacturing. Its primary asset is intellectual property (“IP”) surrounding faster Price $0.23 Ticker Industry Price Diluted Shares Market Cap Net Debt Enterprise Value Issued Capital QHL.ASX Aero-Components $0.23 395.91m $95.02m ~$5.5m $100.52m $87.6m MANAGEMENT Catalysts: QHL’s strong delivery record for the existing Joint Strike Fighter (“JSF”) supply agreement is expected to stimulate its military and Chairman Tony Quick Philippe Odouard Managing Director aerospace order book which presently stands at over 10x its FY13 revenue. Entry into the auto parts market could drive further growth Track Record Value Creation Fair following successful pilot manufacturing during 2013. Management is Operations targeting revenue of $35m and a cash flow positive operation in FY15. Capital Markets Fair Strong After raising $12.7million in 2013, QHL is well positioned to achieve these FINANCIAL OVERVIEW FY13 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 Revenue NPAT EBITDA Historic Growth PE Div Yield $775million, there is no guarantee that firm orders will continue to $2.56m -$17m -$14.9m 69.5% - SHAREHOLDERS materialise. Washington H Soul Pattinson 17.43% Investment View: Three years after commercialising its technology via Decta Holdings Pty Ltd 4.77% the JSF supply agreement, we are attracted to QHL’s reliable WSF Pty Ltd 2.75% manufacturing record and capacity to service $100million orders pa. Whilst scale up risks remain, QHL’s present valuation near historic investment Directors Top 20 STRATEGY 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. Checklist Management Strong operational record Financials Well funded with growing sales Sales growth and entry into auto parts market Catalysts Share Register Stock Price WHSP offers a strong cornerstone Emerging uptrend 0.6% 38.28% Target Entry Limit 0.6 $0.35 $0.25 Stop Sell Limit $0.18 $0.17 Trading History 0.4 0.2 0 2011 2012 2013 2014 20 January 2014 Archives Glossary Buy Increasing value of established business operations is likely to yield share price appreciation Spec Buy Increasing value of a new or developing business operation is likely to yield share price appreciation. Hold There exists an even balance of risks Sell There is elevated risk of share price depreciation. Stop Our recommended, pre determined sell price, to be executed if the share price fails to appreciate JORC Joint Ore Reserves Committee. A body sponsored by the Australian mining industry and its professional organisations, which sets minimum standards for the measurement and reporting and mineral reserves and resources. Exploration A category of companies that have yet to define resources beyond the 'inferred' category according to JORC standards. Resource A category of companies that have defined resources classified as 'measured' and/or 'indicated' according to JORC standards. Reserve Natural Resources - Gold Jan-13 Sector Review Nov-12 Sector Review Sovereign Gold (ASX:SOC) Mar-13 Update Feb-13 Update Jan-13 Speculative Buy Analysts Sven Restel Imran Valibhoy Tim Morris A category of companies that have defined mineral reserves according to JORC standards. [email protected] [email protected] [email protected] About Us Contact Us Wise owl is a global supplier of intelligence, strategic solutions, and expansion capital for emerging companies and investors. Established in 2001, wise owl drives efficient capital allocation towards developing assets. Domain House, Level 4 139 Macquarie Street Sydney, NSW 2000 Media Partners: Phone Australia International 1300 306 308 +61 2 8031 9700 Intelligence Centre www.wise-owl.com Disclaimer This report was produced by wise-owl.com Pty Ltd (ACN 097 446 369), which is an Australian financial services licensee (Licence no. 246670). Wiseowl.com received payment for the compilation of this report. Wise-owl.com Pty Ltd has made every effort to ensure that the information and material contained in this report is accurate and correct and has been obtained from reliable sources. However, no representation is made about the accuracy or completeness of the information and material and it should not be relied upon as a substitute for the exercise of independent judgment. 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