MST Access | Update Report on XTEK Limited (XTE) | 20 Sep 23

Sep 20, 2023 | Research 2023

XTEK Limited (XTE.AX) | Senior Analyst: Andrew Johnston, Associate Analyst: Noah Hunt

Update Report – Pipeline drives outlook and upside

Price: A$0.30; Valuation: A$0.73 (previously $0.82); Market Cap: A$31m


  • XTE reported FY23 result that was slightly above the top end of guidance provided in late June.
  • The pipeline of opportunities on which XTEK is working has increased from $200m to more thn $375m since 30 June.
  • FY24 guidance is for continued revenue growth and profitbility.

XTE reported FY23 revenue of $89m (vs guidance of $86 – 89m and MSTe of $87m) and EBITDA of $10.9m (vs guidance of $9.0 – 10.5m and MSTe of $10.1m). Cash of $6.9m vs MSTe of $7.9m with the potential for working capital to release additional cash.

The pipeline has seen a large increase – from $200m at the end of June to more than $375m with most of that increase due to a recent opportunity with the US Department of Defence. Our forecasts and valuation rely on the quality of this pipeline.

Management states that it is, “… positive about maintaining continued revenue growth and profitability in FY24.”


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.


We upgrade our FY24 revenue to reflect the growth highlighted in management guidance but downgrade our margins due to assumed higher  contribution from international orders (and therefore higher sales commission). We estimate a 12-month forward value for XTEK based on  capitalising FY25 EBITDA at a discounted market multiple. Our valuation declines from $0.82 to $0.73 per share. Upside to forecasts and valuation will come as the Company proves up pipeline conversion.


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.



About MST Access

MST Access is our micro-cap division, selecting quality small companies that have little or no coverage in the Australian market, yet have a worthy investment case. MST Access is attracting strong support as an effective way for quality micro-cap companies to have their story told. We have a strong pipeline of companies coming under coverage over the next few months and will continue to bring their stories to you as we initiate.

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