A question for those more knowledgeable than I:

Is LBL a proxy for commodity prices?

Are we likely to see an upward movement is SP when commodities rebound?

Insider purchases from two directors. Not big amounts ($22k in all), but good to see, and hope it continues!

I'm a bit short on time today but read through the LBL results briefly. This is from their presentation:

Another interesting segment was from their commentary on the Gateway Acquisition:

Given that there was no further mention of their target of hitting $60m revenue, I think it can be assumed that this won't be hit due to the fact that they are unable to including the revenue from Gateway.

As a result the long term thesis is breaking but I will take a few days to fully digest the results before deciding on what to do next.

Disc: Held IRL and on Strawman.

It’s not a huge purchase but there is generally only one reason for directors to buy shares in a business. On the 26th and 27th February 2024, Non-executive Director Ian Neal bought 25,000 Laserbond shares at $0.75 per share, total value $18,750. Ian is paid a total of $60,000 per year for his role on the board.

Laserbond has updated the market with further details about the gateway purchase -

2A1507123_LBL.pdf

Gateway Group

The reason details were lacking in today’s announcements regarding the purchase of Gateway are now apparent. Laserbond have just released an ASX update.

It looks like a great fit for Laserbond providing a base to further expand the business in WA through increased efficiencies and possible synergies with the hard- chrome plating part of the Gateway’s business. Gateway has some large mining services clients that should help to boost Laserbond’s revenues. While it will add to the capex and dilute shareholdings initially, this looks like a good long-term investment for Laserbond. I like the deal!

About Gateway

Established in 2010 to offer a more affordable and customised approach than original equipment manufacturers, Gateway has quickly established itself as a reliable machinery parts supplier.

Our purpose built workshop in Perth (Western Australia) allows us to provide flexibility in our services and allows our customers an involved and specific approach to their machine and maintenance requirements.

Services

Held IRL

ASX Announcement

Just as I was shutting down for the weekend, this came through.

Consideration is 4.5 x Gateways's FY23 EBITDA of $5.6m

So, 40% = $10.0 m

Paid as:

a) $4,894,433 cash

b) $5,974,729 in LBL shares based on a VWAP of $0.85444 per share.

$LBL has the right to acquire up to 51% in total.

Further shares to 100% at Gateway's shareholder's discretion.

Consideration for additional shares up to 4.5 x EBITDA up to a max. of 3 years average EBITDA. Method of cash and / or scrip to be decided at the time.

I'll not repeat any of the results and commentary today on $LBL, as I think everything is well-captured.

While also irritated at the clarity of the deal communication, we are learning time and again, that our small cap management team's and Boards simply need to develop their investor communication capabilities. While it is something to bear in mind from a governance and risk perspective, if I trust in the integrity of management, I'll cut them some slack.

I was also not unduly disappointed with the operating performance. Gross profit and %GM continue to progress.

The expense increase lacks explanation: $5.04 to $6.60m! But perhaps they felt it goes without saying given the things they are doing as part of the strategy. It is one to watch, and if expenses continue to expand in an outsized fashion, then that will be a flag for me. A more sophisticated management team would have provided more detail here.

The continued slow progress on the technology division is disappointing. However, this is a relatively new area for them, and I'd rather they continue to innovate subject to exercising capital discipline. The commentary indicates that they are managing this and adapting as they go. It will take time to get the business model and the execution around it right. It remains core to the thesis.

I am glad they are expanding the business to WA and I'm not too fussed about the $60m target, or how they get there.

So, while today had more bad news than good, that's the time to buy if the thesis is intact. For me the thesis is intact, so I increased my small RL holding by 25% at $0.75, and will put a corresponding SM order in now.

Disc: Held in RL (2%) and SM

Laserbond announced that has made an acquisition of Gateway Group in order to expand their business into WA.

The details of the acquisition are not very clear...

• LBL will acquire an initial 40% equity interest in Gateway Group which will reach a minimum of 51% in 3 years from settlement date
• This will be paid in part cash and part scrip
• LBL is valuing Gateway at 4.5x EBITDA although this is the "enterprise value"
• Gateway had EBITDA of $5.6m
• The cash component will be funded from current cash reserves and will leave the business with $4.8m remaining
• LBL had cash reserves of $10.2m as at 31 Dec 2023

So based on what they've provided, the cash component of the transaction will be around $5.4m with the remaining in scrip. I'm hoping management give some further clarification as to the exact details of the transaction given that this is their way of achieving their guidance of achieving $60m in revenue by FY25.

Full announcement here.

Disc: Held IRL and on Strawman.

Half Year Results - FY2024 - Laserbond

Laserbond... the first small cap company I dipped my toe into, and as such, I have a soft point for them. As I type away, the market did not like the results, with the SP dropping almost 14% to $0.75.

A few key financial updates:

• Revenue: Increased by 8.7% to $20.28 million from $18.65 million from the PCP.
• EBITDA: Decreased by 9.1% from the PCP.
• NPAT: Decreased by 15.6% from the PCP.
• Cash: Increased by 21.1% from the PCP.

For those of you (much like myself) who like pretty pictures...

Division updates:

• Services Division: Revenue of $11.19 million, representing a 15.4% increase over $9.69 million in 1H23. EBITDA decreased slightly due to growth costs, from $3.04 million to $2.98 million. The gross profit was consistent, with margins of 55.8% and 55.6% for 1H24 and 1H23, respectively.

• Products Division: Faced challenges due to an unexpected withdrawal from trading by a supplier of raw materials needed for manufacturing products for a large OEM customer. An alternative supplier was sourced, but the delay in manufacturing componentry and testing led to delays in order fulfillment and revenue recognition. Efforts to expedite the process included air freighting components from overseas.

• Technology Division: Generated revenue of $0.42 million, largely from a technology sale to Swinburne University in Victoria, with additional contributions from licensing fees and the sale of consumables to licensees in the United Kingdom and New Zealand. Other technology sales revenue has been dependent on customer timeframes. A revision to the operational scope in response to redefined customer requirements for the North American cell is progressing, with factory and field testing required before revenue recognition can occur. Revenue from the sale of the Curtin University and Indian cells is expected in late 3Q24.

My view:

The market has looked at the pretty picture on the front page outlining EBITDA down 9.1% and NPAT down 15.6% and decided to hit the sell button - this is an overreaction.

Yes, there were supply chain issues in the products division due to an "unexpected withdrawal from trading by a supplier of raw materials componentry needed to manufacture products for a large OEM customer". Admittedly, this isn't a great look, but these things happen... it's about how the company solves the issue, and Laserbond sourced an alternate supplier. They attempted to get the components air freighted from overseas but were unable to get them over in time to enable the shipment of most order before year-end.

I like Laserbond's move to sign an agreement to purchase an initial 40% of Gateway Group, with an option to move to 51% within three (3) years.

I also like Laserbond committing to their prior outlook with Wayne Hooper stating, “With the inclusion of Gateway Group’s revenue, LaserBond will achieve its FY25 $60 million revenue target". The strategic focus for the next period will be leveraging the strengths of Gateway, incorporating our surface engineering capabilities into Western Australia, and completing research into an acquisition for North America".

My thesis on Laserbond is unchanged at this stage - I think this is a blip for a company that has proven over the last few years that it's making the right steps in the right direction.

Disc: I hold at small size IRL and on Strawman... and I'm thinking about adding...

Share price decline on some higher-than-average volume isn't great in the lead up to the results - may be nothing.

DOES ANYONE KNOW WHAT THIS IS REGARDING?

Dear Shareholders

Market Clarification

Investors may have read an online post today presenting misleading information about the

company and its performance and asserting personal opinions about the current

management and board.

LaserBond rejects these unfounded and disingenuous allegations. The individual responsible

for circulating this information has, during the course of 2023, made numerous attempts to

return to LaserBond in a non-executive or executive role, all of which have been unsuccessful

for several reasons. The Board does not believe their return is in the company's and its

shareholders' best interests.

If anyone would like further information, please email corporate@laserbond.com.au

providing your name and contact number, and the Chairman, CEO and/or CFO will be in

contact directly:

Approved for lodgement by the Board of LaserBond.

Why i own this

https://www.canva.com/design/DAFyzqEgaDA/PrPCusfR4pG8m_tAetzdUg/edit

Wayne Cooper spoke at the AGM today -- I didn't attend, but in the release to the ASX there was an update on the revenue growth so far for FY24.

Before that, it's worth highlighting (as Wayne did) the last 3 year's worth of growth:

So far in FY24, the company has seen revenue increase by 12.6% above the same period last year. (he actually makes the comparison to FY22 but I assume that's a typo)

At any rate, in his words, the company is "well positioned and primed to continue its strong growth". He once again emphasised the investment made in people, skills and equipment.

Importantly, Wayne reiterated the FY25 revenue target of $60m. Obviously, that's great to hear. But it will require an acceleration of the average growth achieved in recent years, and a doubling of the growth seen in the first quarter.

I've lined up a meeting with Wayne for November 21 to see if we can't get a better grip on the reasons behind this expectation. But if they get anywhere near that target, and more or less maintain margins, the current PE of 20 seems rather tame.

Disc. Held

Not covered with glory here. below is my LBL dividend statement! how did this happen? i had a bushranger (low) bid in for a lot more stock, in the end of year volatility i got hit for 76 shares and then i hoped it would pull back and complete the trade or something, no luck, dumb move. should have raised and closed. now my trade has expired! at least its franked! lol

@Wini very interested in your view on $LBL.

It was on my shortlist of "companies I would like to increase if it hits certain criteria". It did. So I added on SM and RL. Unfortunately, I didn't see if there was an investor call today and, in any event, I was spread too thinly and missed it if there was.

Keen to hear what any other StrawPeople observed.

Revenue up 7% on prior half. H2 revenue of $19.9 M. ($38.6 M for FY2023).

Gross margins 54% (53% prior half).

NPAT: $4.76 M

Diluted EPS: 4.34 cents per share for FY 2023.

Final divvy: 0.8 cents per share

Outlook: Laserbond maintain FY2025 $60 million revenue target remains on track.

$2.5M id licencing fees that were guided to be earned in FY2023, have been delayed and will be recognised in FY2024. Flagged recent sales wins in India and another large offshore OEM manufacturer expected to see revenue recognition in FY2024.

DISC: HELD

Big(ish) drop on high volume leading into the results - usually not a great sign.

Interested to see if there is anything to it.

$LBL posted their results today.

After a rollercoaster week of results, I'll post their entire results summary because it is so well written and shows a really well-managed founder-led company. (My thanks for @Wini for putting me on to them).

My Takeaway: Great results on every dimension: both segments, financials, cash, dividend, outlook.

Held: RL (1.2%) SM (2.9%)

20/10/22 LBL 2022 AGM Presentation

Coming back to LBL's AGM after Wayne's meeting the other day where I thought he did a fantastic job of describing the business and the positive outlook. Just a few short years after I attended an AGM where I was the only non-family member or employee present, LBL now has a much wider following with various brokers and funds on board now.

The update on FY23 was strong at the AGM, 36.4% revenue growth in the core Products and Services segments, with the Technology sales yet to be delivered and revenue recognised. No guidance on margins was given but I was extremely impressed at how they were managed in FY22 and there was commentary that inflationary pressures were yet to impact the business with price increases successfully passed on.

I am expecting 50% revenue growth for LBL in FY23, while the 1Q23 36.4% growth rate is below trend, the fact Technology sales haven't been booked yet will make up the difference.

I really don't intend to come across as gushing fan-boy when I speak to some of these management teams...But sometimes our guests say all the right things.

I think Laserbond is very interesting at this juncture, and can see why a lot of people like it.

Personally, I really like CEOs with an engineering background. They may not have the polish of a career executive, but they tend to have a relentless focus on the product and are usually pretty straight shooters when it comes to investor communication. And with Wayne, you also have someone who has immense experience and a huge alignment to shareholders.

Despite being a $100m listed company, it very much has a family business vibe, and Wayne really managed to underscore the kind of things you tend to get with those operations -- a longer term focus and an adversity to undue risk.

As was made clear during the chat, the Technology division is the one to watch. Licensing the tech and supplying the equipment and consumables seems like a great way to scale into other markets in a way that is very capital efficient. Plus, you have to love the 'razor & blade' model, with them taking a 15% clip on all consumables.

The target of $60m in revenue by FY25 -- which Matt and Wayne were careful to stress is NOT a forecast -- represents a double from current levels. Moreover, Matt said he thought *NET* margins could expand to as much as 20%. That gives you an EPS of 11cps, compared to 3.5cps in FY22. In that context, the current PE of 25 does not seem excessive -- although, as always, only on the proviso they get close to this target.

As I mentioned in the chat, I personally don't get too hung up on the specifics of these targets, but if it's directionally accurate then there's likely a good degree of upside for shareholders from the current level.

One of the more important structural/macro trends I continue to think is important in the coming decade or so is the domestic capex boom we will see as a result of a reduced dependence of China and Government stimulus (pretty much the thesis people like Russel Napier are pushing). If there's any legitimacy to that, it seems it'd be a good tailwind for a business like Laserbond.

Another factor that is a positive for me is that more than a few smart investors I know really like the company -- including Wini (who has held on Strawman since 2018) and Steve McCarthy from DMX. Not to outsource any thinking or responsibility, but that is something i tend to notice. I'm more than happy to ride coat tails!

Shares are pretty thinly traded, but for a long term hold I think it looks very interesting and plan to add a small position.

Oh, and I definitely plan to take up Wayne on his offer and arrange a site visit. Once I have details i'll share them here.

Ahead of our meeting with Wayne Hooper CEO of $LBL later this month, I recently came across Owen Rask’s (aka @Owen ) interview and site visit. It’s a really good discussion of the history of the company, the family-owner-manager mindset, economic drivers, customers, and the technology licensing strategy.

Thoroughly recommend to those interested.

edited to add the link: https://youtu.be/geRLAorTM5E

Disc: Held in RL and SM. (Small position)

1. Owen Rask talking to Wayne hooper from laserbond. Fascinating listen

https://podcasts.apple.com/au/podcast/australian-investors-podcast/id1414707038?i=1000583913077

25/8/22 LaserBond 2022 Annual Report

A very strong set of numbers from LBL to finish the year. After downgrading revenue guidance from $35m to $30-31m a couple of months ago I had fear the numbers could look ugly but it appears the revenue miss was largely from delayed Technology sales with the core Services and Products segments doing well and remaining very profitable.

Arguably the numbers look even better than the headlines suggest, with the company failing to normalise out the effects of Covid grants and a lower tax rate from asset write offs in the prior period. Despite missing their revenue targets gross margins improved from 51% to 54%, a fantastic result considering I expected GM's to weaken after revenue contributions from new acquisitions running lower GM's before LBL's technology could be implemented and scaled.

Adjust for the Covid benefits last year and PBT margins grew from 11% to 17% with the total number of $5.3m nearly doubling on last year.

Like a lot of other businesses the balance sheet has some interesting movements with receivables spiking (watch this in the next period) and higher inventories as well. Digging into the notes (7), nearly all of the inventory build is work in progress which would be the Tech sales that fell into FY23. I'd expect that to unwind relatively quickly given management were originally hoping to recognise those sales in FY22.

Overall commentary was very positive with management believing international growth momentum can recover as Covid restrictions ease, they are targeting an acquisition in WA to bolster their national footprint and re-iterated a $60m FY26 revenue aspiration.

LaserBond Limited (ASX: LBL) is pleased to announce a 28.1% increase in profit after tax to $1.52 million from 1.19 million in the previous corresponding period. The revenue performance was also strong with a 13.4% increase to $13.4 million from $11.8 million in 1H21. These results were achieved with the ongoing backdrop of Covid, which prevented sales teams from travelling and resulted in delayed customer maintenance schedules for repair of worn componentry.

Chief Executive Officer, Wayne Hooper, said, “We always believed we had a strong business, but the past two years have proved just how secure and durable the foundations of LaserBond are. We have weathered the substantial disruption precipitated by the pandemic and been tested well beyond any expectation for an extended period of time, and we have produced the sorts of earnings increases that are commendable in a normal trading environment.”

During the half, the business also retained its focus on growth with negotiations and an $11,127 million capital raising resulting in the acquisition of QSP Engineering in January this year to continue expanding its geographic footprint, build capacity and operate closer to customer sites down the east coast of Australia. Investment in innovation also continued with a number of projects underway to further develop and test proprietary products and technologies and preserve LaserBond’s market leading position in advanced surface engineering. LaserBond’s excellent health and safety record also remains intact, with no major incidents between 1 July and 31 December.

Strategy and Outlook

LaserBond has also sustained its focus on growth over the past two years, as well as balancing the demands and challenges of the changed trading environment. On 1 February this year, the acquisition of a Queensland presence for the business was settled for $9 million, consistent with the strategic objective to secure sites closer to customers while building capacity across the business divisions. QSP Engineering is a specialist surface engineering business with a full suite of thermal spraying equipment laser systems that LaserBond can immediately upgrade with LaserBond IP and technology. The operations are expected to contribute revenue in the vicinity of $2 - $2.5 million between 1 February and 30 June 2022.

LaserBond has a strong track record for integrating bolt-on acquisitions to augment capacity and expand its geographic footprint in Australia. In FY 21, the Victorian operations were acquired, and while the LaserBond® cladding cell that was planned for installation soon after the acquisition in 1H20 could not proceed due to the restrictions, it is now operational and expected to add capacity and thus revenue in 2H22.

LaserBond remains strong, committed and on the cusp of realising some material gains from a decades-long innovation program. It has a rock-solid operating platform with a blue-chip client base in essential services sectors, a suite of proprietary products and technologies that are more effective and cost-efficient than the alternatives, and sizeable markets for these products and technologies in North America, Asia and in Australia.

At our Annual General Meeting last November, we revised our long-term revenue target of $40 million by the end of financial year 2022 to approximately $35 million based on the impact of Covid on our operations. Having extended our strategic plan to 2025 year-end, we expect to be able to achieve a revenue target in excess of $60 million. This target, however, is underpinned by a number of assumptions, including the presumption that the constraints to our business and our customers’ operations will have eased to the point that normal economic conditions can prevail.

Mr Hooper also said, “Over the last five full years, we have invested almost $3 million in our targeted research and development program, working closely with customers to identify solutions to problems and expanding those solutions to our broader customer base. And over that time, we have gained a significant market lead in our areas of expertise, developing products and technologies that are well ahead of the competition. As restrictions around the globe ease, we are in a position to profit from our R&D investment by selling these products and technologies into specific, valuable markets both here in Australia and offshore.”

Disc: Held

LaserBond Limited is pleased to offer you the opportunity to subscribe for fully paid ordinary shares in the Company (New Shares) under a Share Purchase Plan (SPP).  

Under the SPP, Eligible Shareholders have the opportunity to subscribe for up to $30,000 of New Shares at an issue price of $0.87 per New Share (Issue Price). The Issue Price represents a 5.4% discount to the closing price of Shares on 14 December 2021 and a 7.7% discount to the volume weighted average market price of Shares over the last five days on which sales of Shares were recorded on the Australian Securities Exchange (ASX) immediately prior to the Company undertaking its recent placement.

To view the Share Purchase Plan Offer Booklet, please click here

Not a lot of detail as to what the funds will be used for - in the SPP booklet it just says "The Board presently intends that the funds raised from the SPP will be applied towards working capital"

13-Sep-2021:  CCZ Equities Research report:  LaserBond (LBL):  Laser focused on global growth opportunities

Analyst:  Thomas Chapman, email: tchapman@ccz.com.au, Ph: 61 2 9238 8222

Company Overview

LaserBond (LBL) is an Australian heavy industrial surface engineering company that specialises in the advanced cladding of worn machine components using their proprietary laser technology. Founded in 1992, LBL’s technological leadership hasfostered engrained relationships with global blue-chip clients and is now well poised for accelerated US & European market growth.

Proprietary technology pivotal to LBL’s sustainable growth

LBL’s technology has been proven over 30 years to restore worn component surfaces to last 5-10x longer at <2x the cost of new parts. Key catalysts ahead are (1) accelerating the licensing of this technology to global OEMs, and (2) increasing sales of LBL branded high wear-resistant products, e.g. steel mill rolls. We are forecasting +14.6% sales and +34.8% EPS CAGR over the next 4 years.

Strong ROFE accretion ahead, and turbo-charged with an acquisition

With a new VIC cladding cell just installed and 2-3 tech sales expected for FY22, LBL looks fully invested and poised for strong top-line growth which we expect to drive ROFE accretion from 14.9% FY21 to 29.7% FY25. LBL is also seeking an acquisition (2H-FY22+ guidance), and if history is a guide, its balance sheet could fund +17.5% FY21 pro-forma EPS accretion via a <2x EBITDA transaction.

Key markets are increasingly ripe for disruption

Rising cost and ESG concerns are driving heavy industries to adopt sustainable solutions to their machinery wear & tear problem (~3.5%+ of GDP and ~3.0% of energy consumption globally). While LBL is in a microcosm here due to size, sector focus and geographic reach, a generational opportunity is emerging for LBL to outperform the +6.5% 5yr laser cladding global sector CAGR.

Valuation summary

We have valued LBL using a mix of DCF and peer EV/EBITDA methods. Our analysis suggests an interim fair valuation of $1.10-$1.20 per share. Given our baseline forecasts do not factor in any acquisitions, there is clear valuation upside risk should LBL deliver on an accretive 2H-FY22 acquisition.

Company Details

• Stock Code: LBL
• Last Close: 79.0cps (84 cps on 17-Sep-2021)
• Market Cap: $75.9m (now $81.6m on 17-Sep-2021)
• Enterprise Value: $75.2m
• Shares on Issue: 96.1m
• Sector: Capital Goods
• Index: None

Top 5 Shareholders

1. Wayne Hooper 11.52%
2. Diane Hooper 10.17%
3. Rex Hooper 7.17%
4. Lillian Hooper 5.79%
5. Lornat Pty Ltd. 5.15%

--- end of excerpt - click on link at the top for the full CCZ report on LBL ---

Disclosure:  I do not hold LBL shares, but I do like the company and I'm happy that they have paid off big time for @Wini and others who jumped onboard early on.

Other companies that the ASX sent out free broker reports on today included Cogstate, Silex Systems, Calix, Predictive Discovery, Playside Studios and Toys"R"Us, and @laoshi has posted links to all of those reports here.

24-Feb-2021:  CCZ Equities Research: Laserbond (LBL): Stronger second half expected, Products division performing well

Analyst:  Daniel Ireland, direland@ccz.com.au, +61 2 9238 8239

Stronger second half expected, Products division performing well

• Recommendation: BUY
• Target Price: 83cps (previous 108cps)
• Market Capitalization: $54m
• Index: None
• Share Price: 56cps (26-Feb-2021:  59.5cps)
• Sector: Industrials
• First half update: LBL declared 1H21 revenue and EBITDA of $11.8 M and $3.1M respectively (vs $11.3M and $2.7M pcp up +4.8% and +13.4%). The result was lower than expectations, largely due to COVID-19 restrictions causing delays in interstate transportation of parts to LBL’s facilities in NSW, SA and Victoria. Most notably, LBL’s softer services revenue that experienced delayed sales from new customers and reduced maintenance servicing for large mining and manufacturing businesses. However, the company is expecting a stronger second-half contribution from the services division (46% of group revenues 1H21) with the company declaring a ‘record volume of open quotes for active opportunities that currently exceeds $10M, with much of this work expected to proceed’.
• Services softer, Product sales strong: LBL displayed strong product sales during the first half ($6.3M up from $4.36M, +45% vs pcp), due to a product reconfiguration from a material OEM customer, combined with strong general demand. Management also highlighted several new products will add to the current sales momentum, including NanoClad© and EClad© which are close to commercialisation and promise to disrupt significant addressable markets. With lockdowns interrupting business conditions in 1H21, United Surfacing Technologies (UST), which was acquired in June 20, is expected to rebound in the second half, regaining the lost momentum caused by lockdowns in Victoria.
• Technology Division: LBL have ‘two promising local opportunities and one international opportunity under negotiation’, and we expect more opportunities will open as border restrictions ease. This will enable LBL’s sales force to meet customers face to face, further increasing tech sales and licensing revenues. The company noted that a technology sale in the US was imminent, subject to final testing, however we have not included these in our numbers given the uncertainty in timing (tech sales have traditionally added between $1.2M-$1.7M revenue for a core laser cladding cell, $200K in licensing revenue and $1M in consumables pa).
• Valuation: We reduced our valuation to $0.83 per share (previously $1.08) taking into account a weaker services contribution. We have reduced our estimates for FY21 Revenue to $27M and NPAT to $3.3M (CCZ prior forecast Rev $32.3M and NPAT $4.2M) excluding technology sales in the second half in our assumptions. We have also reduced the company’s Fy22 $40M revenue target and only included organic revenue growth as it remains unclear as to the timing of an acquisition which is required to reach the company’s stated target.

--- click on the link at the top for the full CCZ report on LBL ---

11-Nov-2020:  CCZ Equities Research: Laserbond Limited (LBL): Australian industrial company going global

Analyst:  Daniel Ireland, direland@ccz.com.au, +61 2 9238 8239

• Initiating Coverage - Laserbond (LBL): LBL’s products and services reduce the maintenance costs for critical machinery, with maintenance largely determined by corrosion and abrasion as key determinants in the useful life of machinery parts. The process known as laser cladding, enables parts and machinery to be protected from harsh conditions thus improving wear life. These services/products maintain mission critical parts used in manufacturing and minerals extraction, with life improvements ranging between 2x-20x a standard part. The cost to buy and maintain such machinery is a considerable cost, whilst downtime experienced during replacement compounds this expense. LBL’s laser cladded products and services protect machinery from this wear.
• Significant Industry Potential: Abrasion wear is estimated to cost up to 4% of GDP, with estimates of circa $30B pa across Australian industry alone. Industry research have found that even a modest improvement in wear life of critical components is crucial to improve the efficiency of capital-intensive industries. The applications for LBL’s technology are far reaching, across multiple industries and applications, with many avenues yet to be explored. LBL’s products have proven to significantly increase wear life, offering a cost-effective alternative to discarding parts once worn.
• High Barriers to Entry and Strong Growth: LBL’s heat diffusion process reduces the temperature required when laser cladding, resulting in a harder and longer lasting surface finish compared to traditional cladding methods. The company’s IP, a ‘methodology around surface application’ has been built over two decades of experience. Combination of expanding sales in the US and imminent R&D technology commercialisation could see LBL increase sales 2x within 5-7 years.
• Significant profit growth forecast in Fy21: Strong organic revenue for Services and Products (CCZ forecasts 11% & 20% vs ˜10% & 20% from LBL) in Fy21, combined with the 12-month integration of United Surface Technologies will accelerate revenue growth (CCZ forecast $32.3M Fy21, up 45% on Fy20). CCZ estimates the company will execute 1 Technology sale per annum (vs ˜LBL 1 in Fy21 & 2 thereafter), aided by the recurring support and services.

--- click on the link at the top for the full CCZ report on LBL ---