See ASX Announcement below my commentary.

Man…What a ride! In my last straw on Quickstep 11 months ago (now stale) titled “Falling dagger or Tripple Bagger” Quickstep was trading at 50 cps (adjusted for a 1:10 consolidation). In the end both scenarios could turn out to be true!

Quickstep continued to be a falling knife eventually hitting the floor at 37 cps after news of a cancelled contract by Boeing.

Then came the tail winds! New contacts, a partnership with a drone company, and today announced a 3 year maintenance contract with Jetstar. Quickstep has learnt to Kite Surf! :)

I gave up on Quickstep on Strawman and sold as the business seemed to be deteriorating. Fortunately, I continued to hold most of my shares IRL and today they are trading at 64 cps following the Jetstar announcement. I’m still in the red on these shares, but getting closer to break even. Aren’t small caps fun! :)

QUICKSTEP AWARDED JETSTAR V2500 ENGINE NACELLE MAINTENANCE CONTRACT

05 April 2022: Quickstep Holdings Limited (ASX: QHL) (Quickstep or the Company) is pleased to announce the award of a significant long-term maintenance contract of the V2500 Engine Nacelle by Jetstar Airways Pty Limited (Jetstar), part of the Qantas Group (ASX: QAN).

The award of this contract to Quickstep demonstrates a high level of trust in the Company and our market leading MRO capability. The contract aligns with the Company strategy of offering innovative aerospace aftermarket solutions in the airlines market.

Quickstep led the tender response in partnership with Triumph Aviation Services Asia (Triumph). Quickstep and Triumph were awarded the contract following a competitive international tendering process. Key terms of the long-term maintenance contract include:

• 3-year term

• Covers scheduled and unscheduled maintenance of the V2500 Engine Nacelle, operated on the

Jetstar Airbus A320 fleet across Asia Pacific

• Contract value (based on Jetstar forecasts set out in the tender package) attributable to Quickstep’s

work scope is anticipated to be in the range of $30-35 million revenue

• Standard extension and termination provisions for a contract of this nature.

Quickstep’s work scope includes maintenance services on the engine inlet cowl, fan cowls, thrust reversers and exhaust nozzle of the V2500 Engine Nacelle. This type of work has not previously been undertaken in Australia by an independent maintenance, repair and overhaul provider.

The work will be completed at the Quickstep Aerospace Services (QAS) facility in Tullamarine, Victoria. Quickstep will incur capital expenditure of approximately $1.3 million to support the contract. This will be funded through existing cash reserves and facilities.

Tim Gent, Executive General Manager of QAS, said: “Jetstar is a world leading low-cost airline operating in the Australian, New Zealand and Asia Pacific aviation markets. We are delighted to support the airline’s growing fleet and augment their operations from an Australian maintenance base and in partnership with Triumph across Asia.”

Mark Burgess, Chief Executive Officer of Quickstep, added: “In our opinion the Australian aviation sector should see a strong rebound from the pandemic during 2022. Our Tullamarine facility is well placed to offer highly competitive aftermarket solutions both domestically and across the Asia-Pacific region. The maintenance contract with Jetstar is an early demonstration of the capacity, capability and long-term opportunity this new line of business offers to the Quickstep Group.”

Engine maintenance services under the Jetstar contract are expected to commence in April 2022.

Disc: Held IRL

QHL shares were on sale last week finishing on a mere 5c per share! Is the coming week an opportunity to double down on an undervalued business, or does the share price actually reflect the risks that lay ahead for the company.

I'd really appreciate some thoughts from other followers, both bulls and bears, before I end up one of the top 10 shareholders in the business alongside Washington H. Soul Pattinson! :) 

Disc: Hold shares

Over 1 million shares have been bought up by the Quickstep Board over the last 6 months. The Chairman, Patrick Largier, bought 400,000 shares @ 6.5c on the 26 March following the bad news on the 22 March when Quickstep advised that Chemring had not accepted Quickstep's proposal to supply MJU-68B flair housings for the F-35.

Maybe the board knows more than we do about the probable outcome of Quickstep's protest over the Chemring deal, or they think investors are overreacting to the news?

Quickstep traded wildly today after Scott Morrison announced the Australian Goverment would spend $270 Billion on defence projects over the next 10 years. QHL jumped quickly to 6.5c on the news before falling nearly 5% to 6.2c ending in negative territory. 

Quickstep was trading at 11c in May 2020 and since then has been on a bumpy ride landing 42% lower 10 months later.

Is this manufacturer of advanced aero-space grade composites now a buy? It looks good value to me given the prospect of over 20% growth per year over the next few years. Although It might be better to wait until the price finds a level bottom before buying in?

What was the Update?

Yesterday Quickstep announced it had been informed by Chemring Australia (Chemring) that Quickstep’s recent proposal for the supply of MJU-68B flare housings in the FY21/FY22 period from Quickstep’s custom-built flare housing manufacturing facility has not been successful.

Quickstep said the grounds for this decision are contestable and Quickstep has initiated a formal protest to the United States and Australian Departments of Defence in respect of Chemring’s decision. Quickstep will update the market if there are any further developments as a result of Quickstep’s protest.

No impact to FY2021 guidance says Quickstep
Quickstep also said that recent FY21 guidance in relation to revenue and underlying base business profit before tax (as set out in the ASX announcement dated 23 February 2021) did not contain any allowance for the proposed supply of MJU-68B flare housings, so there is no change to Quickstep’s previous outlook statement or FY21 guidance.

This didn't prevent almost 10% being wiped off the market value of Quickstep!

Investors kept in the dark!

What investors haven't been told is, why was Quickstep's proposal not accepted, and on what grounds does Quickstep believe Chemring's decision is contestable. I believe this information would help investors make better informed decisions about the probable outcomes of Quickstep's protest. Why have investors been kept in the dark?

I've emailed the CEO asking if there is a good reason why more detail was not disclosed in the update. I'll let you know if I get a response!

Prompt response from CEO

I appreciated the very prompt (within 20 minutes) and plausible response from Mark Burgess, CEO of Quickstep, as follows:

We are bound by customer confidentiality on this program and, as you would expect, a formal protest involving components for a key F-35 operational capability involving both the US and Australian governments is a sensitive process.

We have balanced our disclosure obligations with customer confidentiality. The ASX release is factual and as comprehensive as possible at this stage. We will provide further updates as appropriate.

ENDS