AL3: USA “Big Beautiful Bill” vote in a few days to unlock US $1BN in funding… for tech like AL3’s?

Disclosure: S3 Consortium Pty Ltd (the Company) and Associated Entities own 6,685,029 AL3 shares at the time of publishing this article. The Company has been engaged by AL3 to share our commentary on the progress of our Investment in AL3 over time.

The US “Big Beautiful Bill” is set to allocate over a US$1BN to improve US ship building processes and efficiency.

The multi-trillion dollar Big Beautiful Bill is expected to be voted in by July 4th - and will enact Trump’s “make ship building great again” Executive Order.

(Source)

Our Investment AML3D (ASX:AL3)’s metal 3D printing tech quickly and cheaply “3D prints” complex industrial parts for the ship building and defence industry.

AL3 is already in use by US based suppliers to the US Navy.

In preparation accelerating its US growth, over the last 9 months AL3 has:

1. Appointed a US based CEO to go ultra focussed on the US market.
2. Opened a headquarters facility in Ohio, USA (Source)
3. Expanded its US based capacity by opening its “State-of-the-Art Wire-Arc Additive Manufacturing Facility” also in Ohio, USA. (source)
4. Appointed the former head of the US Navy and Marine Corps’ acquisition program to its board who was in charge of US$130BN in annual budgets for the US Navy (Source)
5. Been shown around Washington with the assistance of former Ambassador of Australia to the United States, Joe Hockey’s firm, Bondi Partners, around about the same time Trump came into office... (Source)

Now we just wait 5 more days for the Big Beautiful Bill to be voted on (and hopefully passed) to unlock more US funding for improving US shipbuilding processes.

AL3’s process is called "Wire Arc Additive Manufacturing”...

(basically a robot arm welds layers and layers of metal wires into the shape of the required part - much faster and cheaper than the tradition method of casting in a foundry)

And the Big Beautiful Bill specifically calls out US$450M for “additive manufacturing for wire production and machining capacity for the shipbuilding industrial base”:

(Source: Big Beautiful Bill page 110)

(Source: Big Beautiful Bill page 134)

AL3 just might be in the right place at the right time for Trump's push to reindustrialise the US and “make US shipbuilding great again”.

AL3 is already manufacturing parts for the US Navy and sells them to US Navy suppliers through an organisation called BlueForge Alliance.

This is under a Manufacturing License Agreement that AL3 has signed with BlueForge Alliance.

BlueForge is a US Navy Procurement partner.

Their main goal is strengthening the U.S. Navy's submarine industrial base by increasing its capability, capacity, and resilience.

BlueForge was recently granted a US$951M contract to do this.

We expect this funding may be directed at increasing the velocity of shipbuilding and additive manufacturing companies... like AL3.

(more on that contract later).

In four days we should know if Trump’s multi-trillion dollar “Big Beautiful Bill” is passed in the Senate...

...which might see US$1 billion+ unlocked to improve US shipbuilding processes - where AL3 operates.

Big Beautiful Bill - key points for AL3

Here are the most relevant Big Beautiful Bill funding line items related to AL3 (read the full 1,000+ pages of the proposed Big Beautiful Bill here):

• US Additive manufacturing: US$450M
  
  AL3 is headquartered in the US and does additive manufacturing.
• Next-generation shipbuilding techniques: US$492M
  
  This is AL3’s biggest market. AL3’s Master Licence Agreement with BlueForge grants it access to the blueprint specifications needed to build specific parts for ships.
• Military Additive Manufacturing Capabilities: US$35M
  
  In AL3’s most recent investor presentation the company suggested that it would expand into other military applications.
• Machine Capacity for Naval Propellors: US$50M
  
  AL3 has demonstrated that it can print propellers for Naval Ships. Its process works in a much shorter timeframe, recently printing a tailpiece component for a naval ship in ~5 weeks, a process that would have taken 17 months.

AL3 strengthening its US team and board - decades of US Navy experience

Last week, AL3 appointed Mr. Frederick J Stefany to its board.

Frederick “Jay” Stefany previously led the US Navy and Marine Corps’s research, development, acquisition, and sustainment programs.

He was in charge of an annual budget of US$130 billion for the US Navy:

Mr Stefany is likely to assist AL3 in accessing the various layers of the US Navy’s Marine Industrial Base, which is key to AL3’s growth strategy in the US.

AL3 already generating revenue in the US - now for scaling it up

AL3 is already generating revenues, and has had over A$19M in orders from big US customers alone, including:

• $117BN capped BAE Systems,
• $248BN Boeing
• the USA’s largest public utility (Tennessee Valley Authority).

A big part of the reason why we Invested in AL3 was because of the shift in its business strategy to try and capture the giant US market...

We think that now the foundations are properly in place for AL3 to secure material US customer contracts.

(especially if the Big Beautiful Bill is passed in a few days and unlocks the ~$1BN funding for US shipbuilding process improvements)

What happens when ASX stocks sign big defence deals?

Giant purchase orders can happen in the defence space, and we have seen it recently with another ASX listed company - DroneShield.

Just last week Droneshield signed its biggest ever deal (bigger than its entire 2024 revenues) at $61.6M for a “European Military" customer.

Now the DroneShield share price is testing its all time highs again, and the company is capped at almost $2.1BN...

The past performance is not and should not be taken as an indication of future performance for this or any stock. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

We think one big order has the potential to trigger a similar re-rate in AL3’s market cap.

At the same time there is always a risk that these bigger deals can be delayed or may never happen, even if US government funding is unlocked. Many factors may determine the success of AL3 in its ability to secure major contracts.

In the rest of today’s note, we will cover where we think AL3’s big orders could come from:

1. From America’s biggest shipbuilders... (made more likely with that upcoming “Big Beautiful Bill”)
2. Through AL3’s existing BlueForge Alliance partnerships.
3. Supporting the AUKUS deal

AL3 to land orders from America’s biggest shipbuilders?

One thing we noticed in AL3’s most recent presentation is the constant expansion of the “remit of the Marine Industrial Base” (MIB) to capture a wider range of target markets...

AL3 was already providing parts to the US Navy which can now have a far broader market thanks to those expansions...

(Source)

AL3 teased potential orders for its systems from the Marine Industrial Base in its last investor presentation, with specific mentions of Huntington Ingalls, Austal and Fastech.

Huntington Ingalls is America’s largest military shipbuilding company...

These three organisations combined have budgets of over ~$40BN to deploy into tech like AL3...

Below is the reference in AL3’s deck which specifically said “MIB endorsed specific efforts that should lead to near-term machine sales with....”

(Source)

AL3 is also supporting the AUKUS deal

AUKUS is a trilateral security partnership between Australia, the United Kingdom, and the United States.

In this agreement the US will support building more ships in exchange for maritime security agreements by Australia and the UK.

AL3 is already supplying parts under the AUKUS deal (including a prototype tailpiece).

AL3 also supplies its ARCEMY units to $2.5BN Austal, who is a major supplier to AUKUS.

IF AUKUS is serious about building the subs it says it wants to, then the speed of manufacturing will become more and more of a priority.

So AL3 is already working with the US Navy (specifically the submarine program) and next it can tackle shipbuilding, tanks and vehicles, aircraft and other military equipment...

(Source)

AL3 partner BlueForge Alliance secures US$951M contract

AL3 has a Master Licensing Agreement (MLA) with the BlueForge Alliance.

BlueForge is an organisation that supports the US Navy's Submarine Industrial Base by coordinating between the US Navy and the massive network of smaller parts contractors that supply it.

MLAs enable the exchange of sensitive technical data between suppliers and expands the suite of products that AL3 can offer its customers.

This is how AL3 can supply to the entire US Navy Submarine Industrial Base.

An MLA is like being given a special recipe book for all the parts, one that only a select few companies can have (it’s highly sensitive information after all).

(MLAs require permission from the Department of State, because of their sensitive nature)

Late last year, BlueForge was awarded a ~US$951M contract which included pushing US Navy supply chains to adopt 3D metal printing tech...

(Read the full announcement here - Source)

Media speculation was that some of that funding would go into “additive manufacturing” (AL3’s tech).

(Source)

Around the time that news from BlueForge dropped, AL3 made the decision to double its production capacity inside the US... and raise A$30M for expansion.

The doubling of capacity came with guidance “to expect significant growth in US demand”...

So BlueForge has an additional US$951M of cash to push down into its network of suppliers....

(Like AL3)

And AL3 opened its new facilities in Ohio 10 days ago:

What’s clear to us is that there is a big push by the US Department of Defence to re-shore defence supply chains and adopt 3D printing.

And AL3 is at the heart of it.

We think the US expansion will be central to AL3 delivering our Big Bet which is as follows:

Our AL3 ‘Big Bet’:

“AL3 re-rates to a $500M market cap on achieving significant sales growth across an expanding range of industries and jurisdictions”

NOTE: our “Big Bet” is what we HOPE the ultimate success scenario looks like for this particular Investment over the long term (3+ years). There is a lot of work to be done, many risks involved like sales risk and technology risk - just some of which we list in our AL3 Investment Memo. Success will require a significant amount of luck. There is no guarantee that our Big Bet will ever come true and past performance is not a indicator of future performance.

How does AL3’s tech work? What we learned from our site visit...

AL3’s technology combines robotics, welding, automation and software.

AL3 tech “3D prints” complex industrial parts for the defence, oil & gas and aerospace industries, and sells these 3D printers to industries looking for on-site custom solutions.

We have been to AL3’s Australian facility in Adelaide to check the systems out and it's genuinely amazing to see these things in motion.

We saw the largest ever custom AL3 ARCEMY 3D printing system ever built, before it was to be shipped off to the USA:

As well as some of what the product software looks like:

To see our full site visit write up read: Our AL3 site visit and what we learnt.

What’s next for AL3?

🔄 More sales out of the US

Now for AL3 it’s all about the US scale up.

AL3 has previously mentioned it will be doubling the capacity of its US facility.

In the US trip presentation, AL3 mentions several times that it would use its facility as a base to market its tech from.

We are hoping that the US facility coming online brings with it big new contracts to fulfil (and hopefully big revenue dollar amounts attached to those deals).

🔄 UK/European expansion

AL3 has also flagged the opportunity of expanding into the UK.

AL3 set aside ~$5M from last year’s $30M capital raise to push into the UK...

The company has already commenced alloy testing for UK-based BAE Systems.

In its most recent quarterly, AL3 said that the focus in the UK was to “appoint a distributor” with any orders received being fulfilled from AL3’s Australian’s manufacturing facilities.

(Source)

The majority of AL3’s sales are out of the US, so expansion into a new market is completely new upside from a revenues perspective.

We are looking forward to newsflow from the company’s push into the UK/European market.

What are the risks?

The key short term risk for AL3 is a risk that there are no sales made OR delays to sales contracts.

If AL3 fails to deliver more sales and its financial performance suffers, the market may start to price in lower growth potential for the future and re-rate AL3’s share price lower.

At the same time, any delays to big sales contracts could lead to protracted periods of no newsflow which would decrease market interest in AL3.

Sales risk

There is always the possibility that AL3 does not close more sales, and its financial performance suffers as a result.

Source: “What could go wrong” section - AL3 Investment Memo 27 June 2024

There are also a number of other risks worth keeping in mind. These include regulatory risk – with AL3 operating in highly sensitive defense and industrial sectors, changes in US or Australian policy, licensing, or procurement processes could impact operations.

There’s also tech and execution risk – AL3’s advanced manufacturing process is impressive but scaling it successfully to meet future US demand involves complex logistics.

And finally, customer and funding concentration risk – any delays in securing or fulfilling major US orders, or needing additional capital, could affect financial performance.

As always, these risks are part of early-stage industrial tech investments.

For the full set of risks we have identified and accepted in making our Investment in AL3, see our AL3 Investment Memo below.

Our AL3 Investment Memo

You can read our AL3 Investment Memo in the link below. We use this memo to track the progress of all our Investments over time.

In our AL3 Investment Memo, you can find the following:

• What does AL3 do?
• The macro theme for AL3
• Our AL3 Big Bet
• What we want to see AL3 achieve
• Why we are Invested in AL3
• The key risks to our Investment Thesis
• Our Investment Plan