Last week was a very exciting one for Sweden based CybAero, which develops and manufactures unmanned helicopters known as UAVs (Unmanned Aerial Vehicles) for an international market. The helicopters are adapted to the unique requirements of each individual client, and cost effectively and safely reduce the risks to people in hazardous environments. We believe that an interesting future might lie ahead of CybAero and its shareholders.
Last Wednesday, CybAero received a milestone order from China, worth SEK 700-800m over an eight year period. This was the largest order ever in the UAV industry. Says CybAero CEO Mikael Hult in an interview with a Swedish news agency: “This is an outstanding breakthrough and a confirmation for both CybAero’s possibilities and Sweden as center for this kind of technology. We have had discussions with Avic over the last 2-2.5 years and the fact that they now make the order is of course a big sign of trust.” Importantly, he highlights the fact that the actual order volume of 70 UAVs with equipment is a minimum level.
Already in January, CybAero received an UAV order from Chinese customs authorities worth EUR 5.5m. “I think that order was an eye-opener for many who started to notice us back then“, continues Mr Hult. Asked how many UAVs he expects Avic to buy in total, Mr Hult replies: “I do not dare to guess. But there are industry experts who expect the market, which is in its infancy today, will grow to around SEK 4bn p.a. for our kind of product by 2020. Our goal is to take 30% of the global market and our revenue target for 2020 is SEK 1bn.” (In 2013, CybAero had revenues of around SEK 25m.) Furthermore, Mr Hult believes that the market experts such as Frost & Sullivan and Thiel Group underestimate the big potential in Asia and focus too much on the Western world only.
According to Mr Hult, the challenge now will be to handle CybAero’s expansion which is needed in order to be able to deliver the order UAVs to Avic. This year, the company doubled its staff to 40 and the total workforce will need further additions of qualified engineers, technicians etc to around 100 over the coming years. At least the first units will be manufactured and delivered from Sweden. Further capital to finance the production is not needed says Mr Hult: “Payments will come in time to finance the necessary expansion.”
CybAero will establish a joint venture with Avic and Avic’s ambitions is, similar to Brazil’s aerospace industry when Saab’s Gripen plane was chosen last Christmas, to take part of CybAero’s know-how. Avic has around 400.000 employees, i.e. 10.000 times more than CybAero.
Asked about the risks of IP infringement by their Chinese partners Mr Hult says: “That is why we started a joint venture so that we have control of this risk, which is not exclusive to the Chinese but also existing in the Western world.”
One of CybAero’s UAV costs around EUR 1m including equipment. It has a reach of 200km and can be in the air up to six hours, reach top speed of 100 km/h. The UAVs are perfectly suited to lift lighter products, like e.g. mail and medicine. At the end of 2013, Amazon’s CEO Jeff Bezos talked about plans to deliver his products with the help of UAVs.
In April 2014, CybAero secured SEK 50m in a directed share issue to four international investors, amongst others German Allianz, which normally does not invest in companies as small as CybAero. Says CEO Hult: “We have seen a drastic increase in interest from international investors. On Tuesday (i.e. today – Nordic Investor) we will be in New York for a roadshow organised by Carnegie.” Be certain that he will tell an optimistic story to investors.
With a current market capitalization of around SEK 530m, the opportunities seem far from priced in, despite the positive share price development in 2014 so far.