ASX:XTE - Xtek Ltd Research
High growth potential via proprietary tech commercialisation and a reduced risk profile from contracted revenues.
We believe that XTEK warrants further investigation by investors with a high tolerance for risk that are seeking growth opportunities. XTEK has viable growth potential via the commercialisation of their 100% owned proprietary products XTCLAVE and XTATLAS. However, we note that the Company has also reported two years of net profit after tax for FY2016/2017 and FY2017/20188. Consequently, we believe that XTEK also has a relatively reduced risk profile in comparison to other listed small growth companies of similar market capitalisations that have a history of negative earnings.
We believe that the recent spare parts contract win on the 22nd November 2018 is validation that XTEK is also likely performing to the ADF’s expectations. This contract win combined with their existing repair facilities situated in Canberra means XTEK is likely to maintain the repair component of the $101m SUAS budget that was announced by the Department of Defence on the 1st June 2017. Consequently, these revenue streams will likely continue to underpin XTEK’s relatively stronger earnings position. XTEK have also flagged the possibility of acquiring domestic small, profitable and innovative technology companies, which we also view a positive to XTEK’s longer-term earnings potential if done prudently.