Another data point confirming that the Arcam is entering a new phase is that the company in 2015 is planning a move to larger premises that takes production capacity from 50 systems per year to around 150 systems per year.
Forecasts
Substantially all of Arcam's customers are billed in dollars or euros, so revenues and profits should benefit clearly a weaker crown. Because the uncertainties of modeling Arcam is already large, I have chosen to model at constant exchange rates below.
Fourth quarter of this year is expected to be a new record on all counts. Sales should be around SEK 110 million, of which about half comes from hardware sales (10 machines supplied). Aftermarket revenues (powder, service, parts) should come in higher than Q3, ie a piece of over 30 million. The acquisition of DiSanto the full impact in Q4, which adds just over 20 million. I expect a gross margin of 38% and significantly higher operating expenses of SEK 28 million (vs. 21-22 million in recent quarters) due to costs related to DiSanto. It provides an operating profit of SEK 15 million for Q4, which represents more than 100% increase y / y and an operating margin reached a high of 14%.
This also gives a total turnover in 2014 of approximately SEK 310 million, based on 30 pieces of machines supplied with an ASP of 5.6 million. EBIT (ex eo) for the year end of 30 million.
For 2015, I expect 42-45 machines installed with an ASP of 5.2 million. Arcam has thus already 24 machines in the order book for 2015. During the first half of 2014 took orders for 16 machines. To Arcam would deliver fewer than 40 machines in 2015, I see why the question. If you manage to take a number of volume orders during the year my forecast to be conservative but at the moment I'm counting on 44 machines, which gives machine revenues of approximately SEK 230 million. Aftermarket sales should be able to get a real boost to many of the machines supplied goes into production and thus consume greater amount of metal powders. I expect SEK 165 million in aftermarket revenues, compared with SEK 112 million in 2014. For reasons of caution, I expect slightly increasing revenue for DiSanto to 90 million. This gives SEK 485 million in revenue for 2015. The cost is very difficult to predict because Arcam both plan to change premises, and continuously invests in the organization to allow for strong growth for a long time. I expect that operating expenses increased to SEK 130 million (SEK 32.5 million per quarter vs. 28 million in Q4). Overall, this gives an EBIT of 54 million for the 2015th
For 2016, I expect 60 machines installed with an ASP at 5 million. Aftermarket sales rise to 208 million and DiSantos revenues grow to 100 million. With operating expenses of SEK 150 million will be debited SEK 93 million.
For the sake of modeling, I was also a year when Arcam sell 100 machines with an ASP at 5 million. Adopted an aftermarket sales of 300 million, net sales for DiSanto about SEK 120 million and 42% gross margin will be debited SEK 237 million. My main scenario is that this only occurs until 2018.
Appraisal
Arcam has gone from being grotesquely overvalued in early 2014 to now finally start to look appetizing. For 2014, 2015, 2016 and 2017/2018 sees the key figures as follows on my estimate;
2014:
Installed machines: 30 pieces
EV / sales: 7,6x
EV / EBIT: 79x
PE ratio: 75x (adjusted for eo)
2015
Installed machines: 44 pieces
EV / sales: 4.8X
EV / EBIT: 43x
PE ratio: 52x
2016
Installed machines: 60
EV / sales: 3,9x
EV / EBIT: 25x
PE ratio: 32x
2017 or 2018
Installed machines: 100
EV / sales: 2.6x
EV / EBIT: 10x
PE ratio: 14x
Conclusion:
Then I put myself into the Arcam in the Spring of 2013, I have had a strong belief that this will be big. One of the many data points I lean on in this belief, the statements from General Electric CEO Jeff Immelt said that 3D printing is the Holy Grail of the world's largest manufacturing companies, see interview below.
However, there are limits to what I pay to be a part of this future technology and in August 2013 when the share price has risen to 520 SEK (130 after the split), I sold my Arcam because valuations were getting too high for my taste, at that time 2 2 billion, or 11x the 2013 sales forecast. Guess if I gritted teeth when the stock went 150% up next six months.
Now they've got a second chance at Arcam. The Company has taken big steps forward while shares are back in the district where I was selling. Sure there is the risk that the stock will fall further, but with the strong news flow as company and sector peers in metal printing now performs so chances are at least equal to the share rushes to 200 on a volume orders from, for example, GE's subsidiary Avio. I want to emphasize that my predictions are highly uncertain and more to be seen as examples. In particular, the cost is very difficult to forecast and deviations have a large effect on profit forecasts. As a counterbalance to this is the positive effect of a weaker krona, which I then opted not to model.