HCL HighCom Limited (Prev XTEK Ltd (XTE)

[Rawz]

Price has rebounded, presumably as Regal have finished selling - but surprised over recent times how it kept heading south, and to the levels it got to, despite the annual result and the positive developments. I was starting to second guess that there was something didn't know or had missed......

But would be interesting to know Regal's thought process around their holding and selling out. It must have been well signaled that they were selling down, and expect not that easy to sell a decent chunk of a reasonably small/illiquid company on market.

I'd be interested in where they are putting their funds out of XTE, and what is a more compelling investment when they were seemingly driving the price lower to get out.

This last week I've been asking myself why I didn't load up sub 30cent after my initial investment at 38 cents. There was a day when 2million shares changed hands and I said to myself that's Regal done and it will only be up from here. But yet I didn't load up. Strange how emotions work.

Anyways I'm up 30% in 2 months so beggars can't be choosers.

[Sideshow Bob]

This last week I've been asking myself why I didn't load up sub 30cent after my initial investment at 38 cents. There was a day when 2million shares changed hands and I said to myself that's Regal done and it will only be up from here. But yet I didn't load up. Strange how emotions work.

Anyways I'm up 30% in 2 months so beggars can't be choosers.

Hindsight is a wonderful thing.....or not. It is interesting to look back and take lessons from it though.

I'd never sneeze at 30% in 2 months. Nice.

[percy]

This last week I've been asking myself why I didn't load up sub 30cent after my initial investment at 38 cents. There was a day when 2million shares changed hands and I said to myself that's Regal done and it will only be up from here. But yet I didn't load up. Strange how emotions work.

Anyways I'm up 30% in 2 months so beggars can't be choosers.

I remember reading years ago Warren Buffett said he achieved 6 out 10 investments correctly.
I have got used to making mistakes..!!!!....lol.

[NZSilver]

This is one I have had on my watchlist for many years, I watched it run up last time and let it go and have been keenly interested since it fell back down recently - but wasn't sure how low it will go. The recent spate of announcements has given me more confidence that we are in a upward cycle for xtes products and the next several years will be very good for the company, I also like managements slight change in tack. My order got filled this morning so I'm finally a shareholder.

[Rawz]

This is one I have had on my watchlist for many years, I watched it run up last time and let it go and have been keenly interested since it fell back down recently - but wasn't sure how low it will go. The recent spate of announcements has given me more confidence that we are in a upward cycle for xtes products and the next several years will be very good for the company, I also like managements slight change in tack. My order got filled this morning so I'm finally a shareholder.

Yes next few years will be exciting to watch. The good thing is when the growth continues we will see multiple expansion as well.

Currently trading on a P/E of 8.25 but with the growth we are seeing should be high teens!!

[Rawz]

There is an article in the NZ Herald today talking about how National/ACT and NZ First all agree that defence spending needs to increase to combat China.

ACT wanting to increase our spending to 2% of GDP which is the NATO benchmark.

Drones are clearly a big part of the battlefield now and XTEK are the agents for one make of them in ANZ. Recently a sale and then follow up huge service contract was done with the Australian defence force. If the NZ defence force gets into drones one would think they would follow Australias choice of drone which could be very good for XTEK.

[percy]

https://urldefense.com/v3/__https:/www.xtek.net/wp-content/uploads/2023/10/MST-Access-XTE-Update-19-Oct-23.pdf__;!!PUVePWy_yMB-Yi4!GGYzV2f31lrPyhVmEYiSItTZvXfWZj_XT5FV-SCZORCKWAsu37cUnJ9YLrz4eSFaCehF72aN-T188RAwiu_anz57Evw$

Move to Ohio targets US contracts
NEED TO KNOW
− XTEK is targeting US Defence contracts with the moving
of its XTclave manufacturing plant from Adelaide to the
US, as well as cost savings.
− The Company has also recorded its third small Ballistics
protection equipment order in FY24 – all building
XTEK’s credibility for potentially larger contracts.
− Numbers for the full year starting to come together with
revenue, working capital and cost savings
XTEK’s XTclave-based lightweight helmets and body armour is well positioned
for a US Special Ops contract, but products needs to be manufactured in the US.
Moving XTclave to the US will help as well as save $2m pa.
XTEK now has nearly $10m of Ballistics sales to international customers so far
in FY24 following the recent $1.6m order. Management is confident of further
near-term orders which should help with winning some of the larger supply orders
in its $300m pipeline in Ballistics.
These announcements support our FY24 forecasts with the XTclave move to the
US saving ~$2m p.a. (costing $0.8m in FY24), and the consistent international
orders supporting our revenue and working capital forecasts as well as
probability of winning larger international ballistics orders.
Investment Thesis
Geopolitical instability is driving strong growth in defence budgets
Countries are adding defence personnel and refreshing personal ballistics
protection. High levels of gun violence in the US create ongoing demand from a
wide range of enforcement agencies.
XTEK has proven capability in delivering quality products and service to
Australian Defence, US agencies and more recently international customers.
XTclave is XTEK’s proprietary technology that provides lightweight armour
and helmets. We expect it will be a significant contributor to value in coming years.
Valuation
Our earnings forecasts increase slightly with revenue growth offset by lower
margins in the Technology segment. We estimate a 12-month forward value for
XTEK based on capitalising FY25 EBITDA at a discounted market multiple. Our
valuation is $0.73 per share is unchanged with slightly higher earnings offset by
a slightly lower market multiple.
Risks
Key risks include an inability to replicate the large international orders that it
recorded in 2022, reduction in the contracts it wins with Australian Defence,
failure to be able to ramp up cost-effective production of its XTclave based
helmets and body armour, increased competition in the US law enforcement
market and loss of share and being unable to shift the US sales channel away
from white-label sales.
Equities Research Australia
Industrial Sector
Andrew Johnston, Senior Analyst
andrew.johnston@mstaccess.com.au
Noah Hunt, Associate Analyst
noah.hunt@mstaccess.com.au
XTEK provides front-line equipment for defence and law
enforcement personnel. It manufactures body armour and
helmets and has exclusive agency agreements for
distribution of unmanned aerial and ground vehicles from
which it has also built a service and support business.
XTEK has also developed an innovative technology
(XTclave) for use in body armour and helmets that it is now
commercialising. It has operations in Australia and the US,
but also has an international sales presence.
https://www.xtek.net/
Valuation $0.73 (unchanged)
Current price $0.48
Market cap $49m
Cash on hand $7m
Additional resources
Video Link - Interview with CEO (13 October 2023)

[NZSilver]

thanks percy

[NZSilver]

Good volumes today ����

[Rawz]

Good volumes today ����

Cracked 50cents as well. Good trend starting to form