Date : 11/09/2020

Fast Brick Robotics

ASX :

FBR

Market Cap : $122.64 Million

Buy

52 Week Range : $0.01 - $0.105

Share Price : $0.059

FBR is an early stage healthy firm that is in an industry that is forecasted to grow. We expect the rewards to be high in the long term and hence give it a “Buy” recommendation.

Company Analysis

FBR Limited (FBR) is a Western Australian Robotics company that designs, develops, and builds robots to address global needs. FBR primarily builds these robots for the construction sector and other industries using its Dynamic Stabilisation Technology (DST). The first application of the DST technology is the Hadrian X. Hadrian X is a construction robot that can build walks of a structure from a 3D Computer Aided Design (CAD) model.

Hadrian X is a robot that can measure any movement caused by wind, vibration and inertia and counteract it in real-time by using advanced logarithms for precise construction. The walls are built using Fastbrick Wall System – using blocks and adhesive that are designed for continuous construction. Hadrian X also comes with easy transportability for on-site applications. DST was in the ideation stage in the mid 90’s. Since then, FBR has developed at least 100 prototypes, collaborated with 150+ engineers, and raised funds to bring it and Hadrian X to life.

FBR has a very promising future in the construction industry, with its Hadrian X – demonstrating a great engineering achievement, and a turning point in global construction capabilities and practices. The benefits of their technology and Hadrian X can be seen in the below image as reported by FBR.

Company Updates


Source: TradingView.com

The stock has been volatile in recent months. The surge in June was a result of FBR’s announcement – Hadrian X had reached a new top laying rate of 200 blocks in an hour. The share price shot up 32% as mood and momentum swayed investors. It also brought about increased media attention and ASX reported higher trading volumes. With higher trading volumes, the stick gained 173% by the end of the week.

In August, FBR announced plans to raise $16m via the issue of 280.70m shares at 5.7cents.

Recently, Mark Pivac, Chief Technology Officer, presented at the World’s Top 50 Innovators event hosted by Codex in London.
FBR entered into another Building Pilot Program agreement following this. The program was then completed successfully with the construction of 11 house structures. These structures were certified by independent structural engineers.

During the next 12 month, FBR is looking to progress with building pilot programs with Archistruct, Summit Homes and GP Vivienda and build display homes in Western Australia.
It is also looking to form joint ventures to enter strategic markets, expand IP portfolios with new technologies, build more Hadrian X robots and promote Hadrian X to the world at Expo2020 Dubai.

Industry Analysis

The use of robotics in the construction industry is still in the infant stage. Construction Robots are now slowly realizing commercial potential as automation procedures are becoming easier with better technologies.

In light of the expected disruption that seems to be coming to the construction industry, we believe robotics will have the following advantages:

  • Lower Operating Costs
  • Higher Efficiency
  • Development Flexibility
  • Decreased Human Error

We believe this disruption of the industry will happen in due course as more companies develop and enable technologies in this space.

Investment Thesis

FBR reported cash flows of -$2.23m for Q4 of FY20. Operating cash flow for the period was -$2.46m. FBR ended the year with $5.8m cash in the bank.

Currently, FBR is a money losing business. It may continue to do so for a couple of more years. This is a common trend we see in young firms that are investing a lot to build and develop of technology for the future. The disruptor will start making money once the industry has been disrupted. FBR will be rightly positioned at that moment by being one of the earliest firms to disrupt the industry.

Its financial health is immensely strong for a money losing company, and it has enough cash ($5.08m) in the bank to meet any short-term obligations. Its current assets and current liabilities stand at $10.24m and $4.36m, respectively.
The total assets are 12x more than its total liabilities. This is due to the deferred charges that is due to receive.

The capital structure of FBR is a sign of strength as well, with just 3.24% being financed by debt, and 97% by equity shareholders.
The firm has received $366,250 from Government grants for FY20, and it has also reported marketing expenses of $23,005. We expect the marketing expense to go back to high levels given the current strategy the firm has in mind following the successful completion of multiple projects.

We do not expect FBR to start generating positive free cash flows in the next couple of years. However, the stock has reacted to every positive news the firm has announced. The trading volumes were significantly higher as well. This goes to show that FBR comes with a lot of potential for the future and it has key interest developing around it. It is a financially sound company with a very passionate and capable management team and sound strategy.

Given how young this company is in its corporate life-cycle, an in-depth look into its financials will not do it or any investor any good as past performance is not a good indicator in a high-growth robotics company of the future that is still in its very early stages of development and enablement.

Recommendation

Given our analysis of such a company in such an early stage, we give this stock a “Buy” recommendation for investors who are looking to invest with a long-term horizon. The firm looks to have nailed its technology and comes with a good balance-sheet, and with a potential for a bright future.

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