Five weeks ago, KTEK Aerosystems (ASX: KTK) lodged an application with the Dutch office that decides what’s allowed to leave the Netherlands.
This morning it was approved.
For anyone new to the story, KTK is not a complete drone builder, instead it builds composite airframes and electromechanical assemblies for military and commercial drone makers, with production run through its European base.
The new licence lets components made in Europe ship out of KTK’s Netherlands facility and into the US, landing at the company’s Los Angeles site for assembly before going to KTK’s US customers from a US address.
It listed at 20 cents in May. It now trades at 23c, and we believe the approval of this application will be the starting point for value appreciation through the exporting of drone parts from the Netherlands to the US.
The Corridor is Now Real
This marks a third route for KTK, whose Netherlands facility keeps its established shipments running into Israel and Europe.
Separately, KTK is also working with the Dutch authorities on extending its previous export licence to Israel, and building up manufacturing and assembly capacity in Israel.
Deliveries Restart in September
With the licence, KTK now coordinates the shipment and receipt of components from the Netherlands, mobilises the assembly workforce, and gets the quality and traceability systems running that tier-1 customers demand before real volume flows.
Deliveries are set to restart in September with existing and new purchase orders, as soon as the LA site clears its final readiness checks and customer sign-offs. Volume will build month by month after that.
Managing director Dekel Keisar is clear on what comes next:
“With our first facility secured and the export pathway from the Netherlands now approved, we can move forward with assembling products in the United States and delivering locally under the specified US customer program and we now have the building blocks in place to target new US customers.”
– Dekel Keisar, KTEK Aerosystems
The Prospectus Scorecard
Around 30% of the funds raised from the IPO will be put towards US expansion, as per the prospectus they put out back in May.
The money will cover both the regulatory and export approvals needed, plus local assembly setup.
The company gave a two-year window from listing to tick this box but has now secured a facility, licence application and approval within four months.
As we said in July, management is treating its prospectus commitments as a to-do list and is speed-running its way through them as they continue to build ahead of the September restart of shipments.
What We’re Watching Next for KTK
- First components into LA. Shipments from the Netherlands can start from now. The fit-out and operational readiness work runs alongside them.
- September deliveries. The restart under existing and new purchase orders is when the US program starts producing revenue.
- Shipping cadence. Once deliveries restart, watch how quickly volume builds through the December quarter. This also drives revenue, which means KTK could be in for decently sized cash injection to end the year
- The Israel licence. This is the parallel route. KTK says it’s making progress with the Dutch authorities on extending its previous licence, and any movement there opens up the original delivery pathway again.
Our View
KTK has been listed for a little under four months. In that time it’s shipped a first container, opened a fifth product line, moved into satellite comms, secured an LA facility, lodged the licence application and now it’s been granted.
In July we wrote that KTK keeps opening important doors. It’s beginning to look like they’re kicking down doors instead, such is the speed.
September is now the next date to circle in the calendar as it again walks through one.
