Given the S&P500 is within a whisker of all-time highs, it is virtually impossible to find undervalued, high quality, growth stocks - especially those possessing ‘disruptive’ technology and addressing $bn end-markets. However we think Kromek, a leading next generation radiation detection business, is one. Today it posted FY19 turnover up 22.6% LFL to £14.5m (vs £11.8m LY), alongside a 4-fold increase in EBITDA (pre SBPs) to £2.0m (£0.5m). Better still momentum accelerated throughout the period, with H2’19 EBITDA coming in at £2.5m (margin 23.3%) on sales of £10.8m (£7.0m LY).
In fact big picture, the company is not only signing contracts hand over fist – almost $80m in FY19 alone, representing a Book:Bill of >4x. But also building a treasure trove of patents, coveted IPR and customer relationships that provide robust forward visibility and powerful barriers to entry. We believe these embedded design wins, will generate high margin income for decades ahead, particularly where $m+ scanners tend to be in use for years.
Other notable FY19 highlights include, landing a: flagship $58.1m 7-year medical imaging order to provide CZT detectors and associated advanced electronics. ground breaking $2.0m contract with DARPA to develop, a vehiclemounted biological-threat detector. 5-year $7.8m deal to supply baggage screening detectors. On top KMK’s bottle scanners are installed in 55 airports across 12 countries. $2.7m expansion order under an existing 5 year security screening agreement (now worth a minimum of $5.8m).
But that’s not all. 11 patents were filed and a further 16 granted. Likewise US manufacturing capacity has more than trebled. Whilst the D3S family of handheld ‘dirty bomb’ detectors is being extended into additional application areas (eg US DoD), and is today deployed in c.18 countries across North America, Europe and Asia. Ok, but how much is all this costing?