Moving on to Nano Dimension (NNDM)
Another fallen angel that I am interested in investing would be Nano Dimension (NNDM).
Ark Invest which Cathie Wood founded to invest in the innovation model is in Nano Dimensions and holds about 0.24% of the entire company as part of one of their portfolio as of October 2020.
Much more now as they hold up to 5.9 million shares of Nano Dimension.
So this gives us the hype to really look at this company and look for evidence where we can base our trade on.
What is Nano Dimension?
Founded in Israel and Headquartered there, Nano Dimension essentially does what they cal additive manufacturing but basically it’s also Called 3D printing. Additive manufacturing is just used to differentiate from subtractive manufacturing.
Just think of it as a layman term vs. the other one the technical term.
As I was researching amidst the hype, it’s really hard to find the competitive edge of Nano Dimension vs. SSYS, 3D Systems and other competitiors. Youtubers and some article authors just don’t really cover much about that.
I will therefore, try to.
Competitive Edge
What better place to look into than the company itself. So the market that they are targeting is more on circuit boards rather than dental like 3D system does.
So according to “Jobs to be done” type of analysis — They are trying to make electronic devices and machineries prototyping and manufacturing easier.
A typical disruptive play on manufacturing trying to replace the factory that does prototyping, manufacturing and piecing it together all in a machine rather than different steps.
This will lead to:
Prevention of Intellectual Property getting stolen
Before 3D printing, designers of circuit board send their CAD designs to APAC to get it manufactured and sent back to them as the fabs are too expensive to own in-house.
Now, with their 3D printer, these companies could own the capability to prototype with just $350,000 vs. $3 billion — $4billion to build a fab.
Short Product Life Cycle
Toyota coin the term Rapid Prototyping (if I am not wrong) and software industry made hell lots of money with that. Shortening product life cycle from yearly to per cycle with newly added feedback from customers.
Think about it, iPhone to iPhone product lifecycle is a year.
Rapid ‘fail proof’ transition
Before this, the prototype fabrication would need minimum order quantities of dozens-to-hundreds thousands to justify the investments in design and prototyping, manufacturing infrastructure.
With this 3D printers, low batch order can be made available from batch to batch, lowering the minimum number of units to be produced and thus lowering the amount of monies needed to be invested to prototype and manufacture.
All-in-all
Their competitive advantage would be of the below 6 points:
Reality
Like Microvision, the products and competitive edge can be very tempting but as an investor (or trader), sometimes we love the reality more than what’s possible.
So what makes Nano Dimension’s success more probable than it seemed for the 3D printing industry 10–20 years ago?
To me, the revenue is the proof I need to see to really be comfortable that they are able to sell the products. That customer need their products.
As of their last annual report. 81% of their revenue still comes from their printer but I am perfectly alright with that.
Cashflow
As for cashflow, as they are a young company in a fast growing but small market, they are expected to make losses and would need new monies to fund their R&D to strengthen their competitive edge against incumbents and competition.
This company has done more than 5 secondary offering of shares and this had made their balance sheet looks strong.
As of 12 December 2020, they have $430m cash but on 28th December 2020, they sold approximately $250m worth of shares and just yesterday selling another $332.5m worth of shares which brings their balance sheet of cash to $1.01 Billion of cash.
Given their current valuation of $1.7 Billion market cap, their cash makes up about 58% of their entire company.
Now, this is reality and reality is that this company is buff with cash. At a cash burn rate of $14–15m, this company has a runway of 66 years. Of course this excludes if there would be any acquisition that they will partake in.
Which is expected to be very likely.
Additional ‘X’ Factors
There is something else that I would like to point out that I love about this company.
They have the “Razor-Razor Blade” & “Printer & Ink Cartridge” type of business model where companies that uses their printer would need to buy their proprietary ink from them. Which is a revenue that belongs to them.
Good management
I am definitely not very keen to know the background of the management but what they wrote for 2021 plan is very enticing.
It makes me comfortable to know that management is managing cost like an eagle, looking for revenues to grow and meanwhile trying to keep themselves competitive against other startups.
3D printing is in a very active phase in the startup investing space right now and we don’t want the company to open up the market just to let their new competitors reap the benefits.
Price Action
Right. Now to the price action part.
Prices have crossed up EMA 200 and on a steady uptrend with high volume and will be expected to meet some resistance on the $12.55–13.33 range.
They just announced a secondary offering at $9.50 yesterday and so price dropped 9% yesterday to $10.37.
Summary
I think I am feeling alright to buy in at this price since I am buying at a 42% premium of it’s cash holdings.
The management has shown me that they are capable of using their free cash flow to create a good returns on monies they hold so I think 42% premium would be a small price to pay.
Price action is good as well, since it’s clean uptrend with healthy retracement (whenever they issue more shares) and Ark continues to add volume into Nano Dimension and I assume is to prevent dilution on their investments.
So yeah. I hope this is helpful for those that doesn’t just want to jump into the hype.
Let me know if there is anything to improve on the way I am writing and would love to hear more from everyone.
Disclaimer: This post is not a recommendation for buy and sell and should only be taken as an entertainment purpose. Do your own due dilligence. You may lose more than your principal amount depending on what type of investment vehicle you choose to use.
