Nano Dimension Looks Cheap With Cash On Hand And Growing ‘Sum Of Parts’

Summary

Nano Dimension has seen a large pullback this year in stock price despite having nearly $1.4 billion in cash on hand.

The company looks to deliver high ROI products in the rapidly growing 3D manufacturing space.

A fair valuation looks to be closer to $6 when looking at cash on hand along with the current sum of the parts which would hint at potentially 30% upside.

Olemedia/E+ via Getty Images A Unique Investment

Nano Dimension Ltd. ( NNDM ) provides additive electronics in Israel and internationally. Its flagship product is the proprietary DragonFly lights-out digital manufacturing (LDM) system, a precision system that produces professional multilayer circuit boards, radio frequency antennas, sensors, conductive geometries, and molded connected devices for prototyping through custom additive manufacturing. The company also provides nanotechnology-based conductive and dielectric inks; and DragonFly and Switch software to manage the design file and printing process. The stock has struggled of late, down well over 50% from this year’s highs. This opens up an enticing investment opportunity as the company is positioned in a very high growth industry and has over a billion dollars in cash on hand which even eclipses the current market cap. To invest in Nano Dimension one must first understand what it is they are actually investing in. This is not a traditional high-growth play. The company instead looks to make strategic acquisitions (Figure 1) over time to capitalize on synergy in a sector that requires a high level of expertise. Figure 1. Nano Dimension looks to focus its capital on high ROI opportunities rather than rushing to grow revenue and profits with inflated investments

This strategy reduces the risk of investment for long-term shareholders while still maintaining the upside that the additive industry presents. The company is not seeking to rush to be a first to market mover but instead looks to invest in financially stable companies with solid balance sheets with the knowledge that the industry as a whole will likely grow faster than the broader market-making NNDM both a value and growth-driven investment. This presents significant upside in our opinion over the next 2.5-4 years as momentum builds. Asset Driven Valuation

As mentioned NNDM has around $1.4 billion in cash available for future expenditures. This alone hints at a discounted valuation for a company with a market cap of just around $1.1 billion. Due to the unique strategy of the company, revenue growth can be a tough indicator to compare to peers. Revenue is projected to grow at an over 100% clip over the next year but may see ups and downs over the next decade as acquisitions come and go based upon opportunities available. Therefore, valuation will become a “sum of the parts” situation where each company acquired adds to the story. Ideanomics ( IDEX ) is a similar company with this strategy focused in the EV space.

So far Nano Dimension has acquired names such as Essemtec AG, DeepCube, and more focusing in the 3D printing, electronics, and machine learning industries. This has led to big customer brands such as L3Harris ( LHX ) and Hensoldt ( OTC:HAGHY ) as well as government contracts (Figure 2). Figure 2. Nano Dimension’s customer base shows opportunity for considerable growth due to size and scale

Based on the current cash assets and sum of the parts a very conservative fair value price in our opinion would be a market cap of closer to $1.5 billion. This would hint at an approximately $6 price target or over 30% upside at current prices without even factoring potential for growth. Risk

NNDM has no debt currently and plenty of cash on hand hinting at very little risk at current prices. The greatest risk currently is time and cash burn as well as the adoption of the 3D printing manufacturing industry at scale.

It appears additive print manufacturing is being adopted well (Figure 3) in the small scale electronics industry and I do not see this as being a long-term issue, but only time will tell. Figure 3. Nano Dimension is the industry leader in what is projected to be a multibillion dollar industry by 2025

There appears to be some support around the $4.25 mark and therefore it would be surprising if this stock dipped much more than 10% barring any substantial macroeconomic headwinds. Investment Summary

Nano Dimension can be tough to gauge exact valuation with very few competitors in this new up and coming space. The amount of cash on hand positions them very well to be […]

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