Kraken Robotics V.PNG

Sean Bouwers - also from Epic Capital 3 weeks ago

[Possibleidiot01]

Sean Bouwers, CFA, MFinSean Bouwers, CFA, MFin • 3rd+ • 3rd+ Associate Portfolio ManagerAssociate Portfolio Manager

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40% revenue CAGR, positive growing EBITDA, and tied into multiple global defense companies experiencing major industry tailwinds, all for 8x 2024's EBITDA, the majority of which is already contracted. Very impressive execution at Kraken Robotics [PNG-TSXV] so far, and another investment with a multi-bagger potential still ahead of it.

Johnnybrotten posted this the link for the next story  3 weeks , here's the article




 

David Fawcett, MA, CFADavid Fawcett, MA, CFA • 2nd • 2nd Founder of Epic Capital ManagementFounder of Epic Capital Management

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Kraken Robotics is capitalizing on a significant growth trajectory, which we believe should command a much higher valuation than currently reflected.
 
Four months ago, we spotlighted Kraken in a post, ‘Growth at an Unreasonable Price: The market appears not to believe Kraken Robotics’ 40% CAGR in revenue growth – We do!’ At the time the stock traded at $0.56 per share. Fast forward to yesterday, and the stock closed at $0.78, marking over a 39% increase. Back then, Kraken had realized $20 mln in revenue for 1H23. Now, management is confident they are on track to approach $70 mln for 2023, surging from $40 mln the previous year. The projected revenue for this year is an ambitious $90 mln, the majority of which is already contracted.
 
Our optimism for Kraken's sustained high organic growth is bolstered by the burgeoning trends in the underwater vehicle sector. Kraken boasts 2 industry-leading technologies, their battery technology and sonar which are both used in underwater vehicles.
 
The demand for such technologies is amplified by a global naval trend, spearheaded by the US, to integrate more robotic systems into warfare, especially autonomous underwater vehicles. Last summer, Deputy Secretary of Defense Kathleen Hicks outlined a strategic vision to advance state-of-the-art, cost-effective autonomous systems, highlighting a significant shift towards naval innovation. She highlighted the advantages of autonomous vehicles, noting their cost-effectiveness and reduced risk to human life.
 
Supporting the Secretary’s comments and our bullish stance are recent contract wins by Kraken's customers. Just last week it was announced that Anduril has won a contract to deliver its large underwater drone to the Navy starting this year. Back in October, the Navy awarded HII a contract worth up to $347 mln to purchase up to 200 unmanned undersea vehicles. Kraken's technologies are supplied to both companies. During a due diligence conversation, we engaged with Bill Lebo, the General Manager at Anduril Maritime, who expressed confidence that a significant surge in the adoption of underwater vehicles is anticipated to occur for them around 2025. Based on this insight, we are convinced that this trend is in its nascent stage and poised for substantial growth.
 
As for valuation, Kraken's estimated $90 mln revenue this year, coupled with CEO Greg Reid's future target of $500 mln in revenue and $100 mln EBITDA, reflects a trajectory of rapid organic growth. Yet, Kraken trades at just 8X EV/EBITDA on a $20 mln EBITDA estimate for 2024 – a figure that seems exceedingly conservative given the company's growth curve.
 
In contrast, industry peer Anduril is currently seeking a 16X EV/Revenue multiple in a private funding round, bolstered by a similar 40% revenue growth forecast. Applying this multiple to Kraken suggests a potential valuation exceeding $6.00 per share. While certainly not a price target, it underscores the substantial undervaluation of Kraken's shares.