AN EXCITING ENTRANT IN THE NEW SPACE RACERATING BUYPRICE TARGET...

AN EXCITING ENTRANT IN THE NEW SPACE RACE

RATING BUY
PRICE TARGET AUD 5.00

Kleos Space SA is an exciting player in the satellite-based Earth Observation Data as a Service (DaaS) segment. The EO market is worth at least €4.1bn with 6% average annual growth driven by falling satellite manufacturing and launch costs along with demand for faster and more precise geolocation data. In November 2020, Kleos launched its first 4- satellite cluster for the provision of radiofrequency data to end-users. A second 4-satellite cluster was launched in June 2021, a third launch is scheduled for January 2022 and contracts have been signed for a fourth launch in mid-2022. Kleos expects to have up to 20 4-satellite clusters. The DaaS model is very scalable, with data collected and processed just once, but resold many times. There are multiple potential revenue streams, including the maritime industry, law enforcement, civil aviation, insurance and others. In our view, Kleos has excellent prospects for a decade or more of strong growth. With commissioning of the first cluster now complete, the company has signed data agreements with 52 clients with an annualized run rate of €4.7m, and a strong pipeline > 220 prospects, of which 100 are in detailed contract discussions. A recent PIPE transaction provides Kleos with sufficient capital into 2023. A dramatic acceleration in revenue means that Kleos will be both profitable and free cash flow positive in 2022. Average EBITDA margins of 70+% and exceptional free cash flow drive our revised DCF valuation of AUD 5.00 (previously: AUD 1.18). We confirm our Buy rating.

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