The Speculator: Quickstep’s high hopes in aerospace

Followers of the Speculator made a tidy profit when they bought into Australian technology developer Quicksteps Holdings <QHL.AX> three years ago. I can see a chance to repeat that winner.

In the Bulletin Magazine of July 11, 2006, the Speculator bought into Quicksteps at 21.5 cents a share – and by November of that year the shares has risen to 77 cents as the company attracted world attention to its patents to make composites, such as carbon-fibre mouldings, cheaper, stronger and faster than older batch-production technologies.

Carbon-fibre composites are increasingly used in products ranging from golf club shafts to parts and panels in satellites and aircraft. During the past three decades, lighter, stronger and high-heat resistant composites have replaced traditional materials such as metallic components in many applications.

As an example, when the F-15A fighter aircraft was released in 1973, only 3 percent of its structure involved composite materials. The equivalent figure for the current F-22 Raptor is 25 percent. Now the next generation Airbus 380 and the Boeing 787 passenger aircraft will incorporate around 50 percent composites.

The USA’s development of the F-35 Joint Strike Fighter has Australia as one of ten countries participating in the program, with Quickstep and US-based Vector LLC in a joint venture to secure offset work on the project. The Australian Government is still to commit to a proposed purchase of between 75-100 of the aircraft at around $200 million each.

In recent years, Quickstep has installed demonstration units for its technology at Manchester University (UK), Melbourne’s Deakin University and the National Composites Center in Dayton, Ohio, the heartland of the US composites industry, supported with a grant from that city of $US800,000. The company is also about to complete its Fremantle Aerospace Facility near its headquarters in Western Australia.

Perth broker State One Stockbroking predicted on March 2 that “highly critical global certification (ISO 9001/AS 9100) of the plant was progressing well with approval expected March 2009.”

The broker further predicted that composite manufacturing contracts were imminent for year 2010 and to “expect $50m-$100m annual revenue from Tier 1 component manufacturing at Fremantle alone”.

Quickstep has 162.4 million shares which have traded down in line with the rest of the stockmarket from a 12-month high of 61 cents to a recent low of 12.5 cents and this week traded at 16.5 cents. At the latter price the company carries a market capitalization of $26.8 million with net cash remaining at the end of December of $4.6 million.

The company will no doubt be hopeful of making a string of encouraging announcements in the coming weeks as it must be looking for a new capital raising beyond the current depressed levels.

Original syndicate members when the company floated in 2005 included chemical and mechanical engineers still represented by non-executive director Deryck Graham. They control Decta Holdings Pty Ltd, holder of 23.7 percent of the public company stock.

We’ve bought 20,000 shares at 16.5 cents.

Laserbond wins new contract

We added the engineering services company Laserbond to our portfolio on July 9 last year at 15 cents and since then they have drifted to a recent low of 9 cents. This week, however, they rallied to 11 cents on a bit of good news for the innovative engineering company that specializes in machinery maintenance and surfacing technologies.

We initially bought on news the company had won an Australiawide maintenance contract on rolling mill presses for Alcoa in Australia and was undertaking a test trial on surfacing renovation of cylinders sent out from the American parent.

Nothing has yet emerged from that American venture so far, but this week the company announced a three-year supply contract with Weir Minerals Australia to service its slurry pumps used throughout the Australian mining industry. Weir Minerals is the Australian subsidiary of the Glasgow-headquartered international pump and machinery conglomerate of the same name.

Revenue from this contract for Laserbond’s Ingleburn facility will be $2.8 million based on historic sales, representing a threefold increase in turnover from that key client. Laserbond earlier reported sales for calendar 2008 of $6.8 million and earnings before interest and tax of $1.4 million. The company’s 65.5 million shares at 16.5 cents carry a market cap. of $10.8 million.

More Robust gold assays

Our gold punt Robust Resources <POL.AX> has reported more gold/silver assays from its Romang Island volcanic caldera project in Indonesia, 500km north-west of Darwin.

Results are so encouraging, the company announced this week it would acquire a third NQ core rig and double its planned diamond drilling program from 2500 metres by the end of June this year to 5000 metres a year.

Assays from the most recent two holes reported this week are:

• + LWD-021: 2.45m of 2.46g/t gold and 29g/t silver from surface (3.51g/t gold equivalent), plus 20.6m at 1.07g/t gold and 46g/t silver from 27.35m (1.72g/t gold equivalent), and
• + LWD-022: 7m of 1.01g/t gold and 21g/t silver from 33m (1.3g/t gold equivalent).

  Assays from another three holes are awaited.

  BOUGHT: 20,000 Quicksteps QHL at 16.5c $3320

  How the portfolio stands

  Company	ASX code	Shares	Bought	Purchase price*	Value 17.03.2009
  Viralytics	<VLA.AX>	50,000	31.12.2008	$0.040*	$0.040
  Laserbond	<LBL.AX>	20,000	04.07.2008	$0.100*	$0.120
  EMT Corp	<ETC.AX>	20,000	01.08.2008	$0.240*	$0.200
  Citigold	<CTO.AX>	50,000	16.09.2008	$0.274*	$0.210
  Robust resources	<ROL.AX>	50,000	13.02.2009	$0.130	$0.210
  Quickstep	<QHL.AX>	20,000	16.03.2009	$0.165	$0.160

  
  Total value of portfolio: $32,600
  Cash at bank: $11,200
  Total: $43,800
  Portfolio change since 1.1.2009: +9.5 percent
  All Ordinaries change since 1.1.2009: -7.27 percent

  Portfolio notes

  * The first four shares in this year's portfolio were carried over from the 2008 portfolio, hence the 2008 purchase dates. However, to accurately track the 2009 portfolio, the Speculator has assigned a " beginning of year" value to each carry over share. The current value is based on the last sale price prior to market open 11.2.2009

  Disclosure: The author's family holds shares in Laserbond