MST Access | Update Report on XTEK Limited (XTE) | Wins add credibility to pipeline | 4 Oct 23

Oct 4, 2023 | Research 2023

XTEK Limited (XTE.AX) | Senior Analyst: Andrew Johnston

Update Report – Wins and credibility to pipeline

Price: A$0.36; Valuation: A$0.73 (unchanged); Market Cap: A$37m


  • XTEK has announced that it has been awarded a 10-year $110m support contract for the small unmanned aerial systems (SUAS) it has just finished delivering to Australian Defence.
  • It has also announced some small ballistics orders for international customers – important reference sites.
  • These contract awards increase credibility associated with XTEK’s $375m pipeline.


XTEK has announced that it has been awarded the services and spare parts contract for the $27m SUAS order announced in Dec-22. An initial 4-year contract with 3, 2-year extensions includes services and spares and totals ~$110m. We estimate that this contract will generate gross margins of ~30%.

XTEK’s US-based Highcom business (Ballistics division) has announced the completion of one ($2.6m), and award of another ($3.2m) small personnel protection contracts with unnamed international customers.
The $375m weighted pipeline is difficult to reference given the lack of historical pipeline conversion rates. These announcements build credibility around the efficacy of the pipeline.


Our forecasts and valuation remain unchanged from our previously published report in September. 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 with upside to forecasts and valuation will come as the Company proves up pipeline conversion. It is worth noting that cash at bank at 30 June 2023 ($7m) added to the estimated $10m of surplus inventory (that management expect could be released by 31 Dec 2023) approximately equals half the market cap. And adding this to the ~$20m of value from the SUAS support contract ($2m NPAT p.a capitalised at 10x) gives a value similar to the current market cap.


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.



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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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