Oversubscribed £13m fund raise to drive growth

Kromek yesterday confirmed that it had raised £13m gross at 15p/share from existing and new shareholders. The proceeds being earmarked to further develop the new groundbreaking biothreat/Covid airborne detector (see below), alongside optimising its CZT medical/nuclear imaging & D3S ‘dirty bomb’ commercialisation strategy. Whilst also bolstering the balance sheet.

In particular, there are four key reasons why we’re excited about the Covid/Biothreat detectors: this is a large and untapped global market, there are significant aftermarket opportunities, demand led growth as a valuable USP &/or revenue generator for clients, and substantial barriers to entry because  of the technology.

Development and field trials will take some months, but assuming Kromek can ultimately acquire say a 20% market share, then this would translate into an approx. £100m pa opportunity, generating c.25% drop through rates. Which using 3x sales &/or 12x EBIT multiples – might lift the market cap by £300m (or 69p/share) vs £73.4m today.

None of this potential upside has been included in our re-instated forecasts or 24p/share valuation either. Where FY21 turnover & adjusted EBITDA (pre SBPs) of £10m & -£1.9m respectively has been pencilled in, climbing to £15m & -£0.1m for FY22. Augmented by an estimated £8m of net funds as at April ’21 (split cash +£15.6m, debt £7.6m), excluding the possibility of receiving some of last year’s £13m in written-off Asian debt (AROC).