Kromek Share Discussion Threads

[culford] 22/12/2016 11:04

Bapodra,
Valuation of loss making companies is difficult. You suggest £20m maximum and I would be interested in why? Is that a suitable discount to the net assets of £24m? Or is it 2.5x historic sales?

The market is always right on any day and my interest is whether its worth buying or selling on a longer term view. My thought process is as follows. With KMK, there is enough evidence to show that sales will grow substantially, probably to >$100m per annum in due course. A company trades at a multiple of sales according to its margin and growth rate. A mature company with 10% margin will trade at c1x sales. KMK is fast growing and has high margins and I believe should trade on c5x sales - this would be 5x £9m this year and 5x £12m next year taking the consensus forecasts. That would be market cap of £45m rising to £60m or 29p share price rising to 38p. At any stage in this next 18 months it could get an order worth >£12m per annum, which would at least double that 38p to 76p. Thus in my view, buying KMK is at a 45% discount to next year's fundamental value on basis of no big contracts coming in. If and when they come in, I will at least triple my money.

[culford] 22/12/2016 10:39

QP,
Only firm orders are those announced of $30m, spread over up to 5 years as Bapodra notes. Darpa issued a sole supplier notice a year ago and we know that KMK are only supplier capable of producing the D3S portable nuclear detectors for $400 each, which is why it got 100% of that order. We know that 8 tests by Darpa went well in 2016 and that larger scale tests are scheduled for 2017 before roll out in 2018. We know that this roll out will be worth c$150m for KMK if it happens. We know military orders are following this. The scale of the business and thus the valuation could be at a much higher level in two years. However, The stock market is a weighing machine of opinion and in the small cap space there is very little credence given to hope for the future. For Warren Buffet that would be an opportunity to keep buying. KMK has technology that is world leading in that the the US, UK and Japanese governments have all used it. It is world leading in huge global markets; nuclear, medical and security. Global medical OEMs are also using it increasingly. The treat of dirty bombs is not reducing and I would be very surprised if their D3S technology was not be sold around the world in 3 years time.

[quepassa] 22/12/2016 10:20

Hi Culford,

I can open the link now and read it very carefully. Thanks

I note that the link about the October equipment evaluation test related not just to Kromek but to multiple suppliers.

Do you have a link to any third party sources referencing firm future orders for Kromek please - not just potential sales.

Many thanks.

ALL IMO. DYOR.
QP

[trotterstrading] 22/12/2016 10:10

Even if they need further finance, which is questionable, with their orderbook and sales pipeline it would be very straightforward and on good terms for KMK.

[culford] 22/12/2016 09:56

QP,
You have every reason for caution after their profit warning. They had to bring in a new Chairman, Sir Peter Williams who has a very good reputation spanning science and business. He said said this in the last annual report:

"Visibility of Revenues
In 2014 our full year revenues were £5.9m, so this year’s reported gure of £8.3m represents a growth of over 40% in two years. Over the past three years, dealing with government agencies and major international OEMs had made it dif cult to predict the exact timing and magnitude of some contracts. However, this year we are pleased that our revenues were in line with market expectations. Recent contract wins and a strong pipeline provide improved visibility going forward, with signi cant order cover already in hand for projected revenues in 2016/2017."

My take on it all is that the management were guilty of over optimism on the likely timing of revenues but that the underlying progress has been very good indeed. The shares can be driven down as there is no short term catalyst, but if you can take a two year view they should perform v well. The key downside risk remains the balance sheet and whether the company will need further finance.

[quepassa] 22/12/2016 09:27

Hi Culford,
Our posts crossed.

Unfortunately your link won't open.

I am wary about announcements as the performance of the $159million 4/4/14 RNS contract remains wholly unclear.

ALL IMO. DYOR.
QP

[quepassa] 22/12/2016 09:22

I am not challenging their technology. You misunderstand.

I am just wondering to myself why, with such technology, their sales are just £3.8million for the last half year.

Can anyone kindly update on the status and sales of Kromek security scanners in airports please?

As I said before, I keep many small companies on my watch-list for potential investment.

Thanks and Merry Christmas.

ALL IMO. DYOR.
QP

[culford] 22/12/2016 09:19

QP
KMK has disappointed the markets and its share price is languishing accordingly. In year to April 13 its revenues were £2.7m and in year to April 16 its revenues were £8.3m - a growth of threefold over three years. In the last year, when it attracted Sir Peter Williams to become its Chairman, its orders received were $30m, or c£24m, but these will be received over multiple years. In the current year, sales will be marginally higher at c£9m.

In the past year it has become sole supplier to Darpa, the US agency to which it has supplied >$6m of sales. Darpa has said that it will increase the size of its nuclear detection tests (which need KMK's devices) in 2017 before rolling this out to c15 US cities in 2018. See last news:
KMK will receive orders of c$10m for each city so that is orders of c$150m to be received from end of 2017 for 2018 and beyond. In October it received orders for a military solution for the US and UK military, which will be of similar scale and slightly later timing.

Thus whilst i share your disappointment on the share performance, you cannot say that there is a diminutive growth in sales and the potential growth can be checked from third party sources.

[trotterstrading] 22/12/2016 08:55

QP, not sure why you hang around this BB? How on earth can you challenge KMK's tech when arguably , the worlds most advanced defence technology team - DARPA - have made KMK SOLE source provider? Perhaps you know more they do about radiation detention?

[quepassa] 22/12/2016 08:09

Loss-making companies are not always as sought after as all that.

Certainly their " world leading tech" doesn't yet appear to have gained much traction judging by the diminutive growth in their sales.

Good luck to all but when you cut it down to the cold figures, after two and a half years since flotation, the figures tell their own story.

ALL IMO. DYOR.
QP

[escapetohome] 22/12/2016 08:00

Some one surely will snap them up if the price keeps going down?

World leading tech with sales to follow.

Yummie.

[quepassa] 22/12/2016 06:15

Personally, I do not think this has huge potential.

When you say "the big contracts" - could you kindly give precise amounts and exact dates please. Thanks.

ALL IMO. DYOR.
QP

[culford] 21/12/2016 21:44

Isa

This one has huge potential but may be 12 months from take off. The big contracts are scheduled for back end of 2017.

[isaready] 21/12/2016 19:10

culford, just looking at this but looking at the current downtrend

[trotterstrading] 21/12/2016 16:33

Took some more in the drop. I think AMP are the seller, raising funds for their endless litigation proceedings

[quepassa] 12/12/2016 17:55

it would seem that the Company are not keen to reply to direct questions about this contract. one can but wonder to oneself why they are so coy about it.

In terms of what the company can or can't say - i disagree with that.

In the 4/4/14 RNS , Kromek gave very precise figures , dates and numbers.

It seems a very easy thing to say whether those specific numbers and dates have or have not been met or indeed have any likelihood of being met.

ALL IMO> DYOR.
QP

[culford] 12/12/2016 15:31

QP
I am not an insider and can't put any more meat on the bone. I agree with your sentiments, but my take is that it is v difficult for small companies that come to market, as they are overseen by Nomads who advise what they can and can't publish. They signed that contract with the Chinese and thus had clearly to announce it. The contract has been slow to develop and the company has kept brokers and market updated as to overall forecasts - i.e. revenues of £8.9m to April 2017 and £12.5m for following year. When there is something tangible to update the market on I am sure they will. Dealing with the Chinese is notoriously difficult and the market has given the above contract no value. The company cannot say anything sensible until it starts delivering on it, which may happen next year. Stock market is also not giving them much value for the progress made with Darpa etc etc. The flip side of all that is you find much better value on the public markets for small companies than you do in the private markets :)

[ali47fish] 12/12/2016 15:10

que passa- why dont you ascertain this from the company by directly asking the question?

[quepassa] 12/12/2016 14:20

Culford,

Thank you.

But can you kindly put any real meat on the bone (ie hard figures) about the RNS 4/4/14 $159m RNS contract?

They seem to indicate they know the DARPA contracts down to the last unit.

1.So why is there zero detail about the big contract for $159million after two and a half years?

2.What troubles me is that if they got their sales forecasts badly wrong just after flotation,and now the $159million contract seems totally unclear and without any meaningful detail or updates, why should investors be expected to have faith in their latest forecasts?

3.Why do you think that Kromek won't update on the mega $159million contract which they announced by RNS on the 4/4/14? - They seem prepared to mention other contracts.


I guess that certain investors may or may not be drawing their own conclusions by now about Kromek's 4/4/14 RNS announcement where they announced the $159million contract to the market by formal RNS.

I like to invest in companies where I personally feel that I can rely on company announcements.

ALL IMO. DYOR.
QP

[culford] 12/12/2016 11:32

QuePassa,
The last time I spoke with the company they said that the Chinese contract has been slow to take off but is still developing. The market there is huge and healthcare a government priority but there have been lots of issues to resolve. The impression I got was that product shipments would start next year.

Kromek is making really good progress and is now a matter of time before the sales move up to another level. In addition to above contract there is the civilian nuclear detection which will be 15-20 cities at 5$m per city starting in 2018 and the military contract for D3S which is likely to start at 20,000 units at $5000, or $100m. This is likely to be similar timescale now......

[srichardson8] 12/12/2016 11:16

The Group continued to make progress under its contract signed in 2014 for the development and delivery of CZT-based SPECT modules for an established manufacturer of x-ray diagnostics and analysis equipment in China.

[quepassa] 09/12/2016 18:49

Thanks for the help in trying to sort out this question.

Until Kromek give a statement about the $159million contract mentioned in the 4/4/14 RNS, it will continue in my opinion to muddy the waters and may or may not make investors extremely circumspect about the reliability or otherwise of company forecasts and earnings visibility.

Kromek are now two and a half years into the seven year $159million contract and it does not cut the mustard with me that they cannot give chapter-and-verse on the status of this mega-contract.


ALL IMO. DYOR.
QP

[gnnmartin] 09/12/2016 13:14

I listened to the webinar, but other pressures meant I did not give full attention. With that warning, I think the $159m contract was raised in the questions, and answered by saying that the customer was growing. I infer that although KMK are entitled to remove exclusivity, they haven't because they still see the relationship as valuable.

I must listen to the recording of the webinar with more attention. It can be accessed at (assuming ADVFN don't remove this link!)

PS. Just listened to the recording, and I'm sorry to find that the recording does not include the questions asked at the end, so does not confirm my hesitant comments on the $159m contract.