ACE Investors

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By Team Ace Investors

Company Overview

Orbital Corporation (“OEC” or “Orbital UAV”) specializes in the design, development, and manufacture of industry-leading propulsion systems for unmanned aerial vehicles (UAVs). Orbital UAV is a world leader in the design and manufacture of integrated engine systems for military drones and is uniquely placed to meet the performance requirements of unmanned aerial vehicles (UAVs) through its revolutionary technology and proven operational experience. Its world-leading propulsion solutions exceed the competition benchmark for reliability, power and system durability and scalability and its patented fuel injection system enables advanced spark ignition using heavy fuel – a requirement for military applications due to fuel, logistics, defense policy, and site safety. With over 30 years of proven experience dedicated to engine design experience, OEC has built a superior supply chain network with the ability to source the highest precision components for its propulsion systems. Orbital UAV’s in-house manufacturing capability includes (i) Rapid in-house manufacture for prototyping and production of engines and engine components, including air compressors and other machine parts (ii) Additive manufacturing (3D printing) (iii) Manual, NC, and computer numerically controlled (CNC) mills/lathes/drills, high precision grinding & honing, to facilitate the machining and fabrication of engine parts and ancillary components (iv) Electrical and electronics prototyping and manufacture (v) Metrology laboratory for quality control covering all incoming and machined parts (vi) Developed, world-wide, quality approved, supply base. Orbital UAV’s customers are typically Government agencies or Tier 1 suppliers to the global defense industry. Orbital UAV is now producing integrated engine packages for 4 major clients utilizing core 75cc and 150cc engines and continues in-house development of an expanded product range to meet the needs of future UAV programs.

Investment Rationale

Orbital UAV’s Modular Propulsion Solution (MPS) addresses a growing need within the tactical UAV market

Orbital UAV is uniquely placed to meet the performance requirements of unmanned aerial vehicles (UAVs) through its revolutionary technology and proven operational experience. Orbital UAV’s Modular Propulsion Solution (MPS) addresses a growing need within the tactical UAV market for aircraft and has the flexibility and versatility to adapt to varying end customer requirements and for the rapid deployment of those aircraft. This revolutionary approach offers customers a modular range of propulsion systems, capable of being integrated across multiple UAV platforms with varying payloads and capability. This technology and know-how, whether together or individually as required, can be integrated across a range of engine types (including piston, rotary, and hybrid engines), and all engine/vehicle size classes. Using design thinking, patented technology, and a global supply line, the MPS approach provides (i) Rapid volume flexibility across the entire Solution (ii) Reduced product lead times; and (iii) Unsurpassed quality. Orbital UAV’s expertise and continued success in the small tactical UAV class can be leveraged to seamlessly and rapidly deliver propulsion systems for other UAV classes.

ORBITAL UAV to integrate 150cc heavy fuel engine into a new military platform

On 27^th Aug'2024, OEC announced the establishment of a new collaborative agreement with Dynamatic Technology Limited ('Dynamatic Technology') to integrate an Orbital 150cc Heavy Fuel Engine (HFE) into a Dynamatic Technology designed UAV for potential supply to defense force users. Dynamatic Technology is an India-based manufacturer of highly engineered, mission-critical products for the Aerospace, Automotive, and Hydraulic industries. The collaborative agreement has been outlined in a Memorandum of Understanding (‘MoU’), with an initial order for test engines expected by Nov’2024. The MoU represents an opportunity to integrate Orbital UAV's superior heavy-fuel engine capability with Dynamatic Technology’s UAV platform and provides a critical first step toward a long-term partnership in a developing region of the world.

Delivered against its programs with existing customers, and achieved several important milestones to grow its topline

For the half year ended on 31 Dec’2024, Orbital UAV delivered against its programs with existing customers, and also achieved several important milestones to grow its topline.

During 1H25, OEC delivered pre-production engine packages to Textron Systems for the upcoming FTUAS program, with final flight testing now underway. FTUAS is the US Army Future Tactical Unmanned Aircraft System program for the deployment of unmanned drones into military operations. A decision on the FTUAS program is now expected in Q3 of CY25. In 2021, Orbital Corporation (‘Orbital UAV’) signed an engine development and supply agreement with Textron subsidiary, Lycoming Engines. Under the agreement, OEC was tasked with the integration of its core engines, including proprietary fuel and engine control systems, into Textron Systems' Aerosonde program. In Dec'2023, OEC received its first order worth A$2.1 million for production-ready engines from Textron Systems Corporation for integration into the Aerosonde® unmanned aircraft system (‘UAS’) program.
OEC signed a $3.5 million contract extension with DSO National Laboratories (the center of R&D for the Singapore Armed Forces) for additional engine packages. The order book currently runs to mid-2026 and DSO has also placed initial orders for the delivery of larger prototype engine systems in support of their next-generation UAV platform. On 26 Jul 2022, OEC signed a contract worth A$3.5 million with its major Singapore customer to deliver three additional prototype engine systems.
Signed a new contract with Dynamatic Technologies Limited to integrate an Orbital 150 Heavy Fuel Engine (HFE) into a new UAV platform for the Indian military.

During 1H25, OEC completed a fully underwritten $2 million renounceable rights issue in December 2024. Funds raised will be directed towards customer engine development programs, Orbital UAV engine development programs, plant & equipment, and general working capital. During the period, the company also completed the required project milestones to offset the full value of the WA Government loan and as a result, OEC is now debt-free. To facilitate further growth, a $2 million standby working capital facility was established in February 2025 with the Company’s two major shareholders. The repayment of the Company's WA Government loan, the completion of the capital raising, and the establishment of the standby working capital facility have strengthened Orbital UAV's balance sheet and provided the financial capacity to progress the Company's growth aspirations and new product development programs. Textron Aerosonde® drones containing the Company’s 150HFE system are currently undergoing trials and field testing by the United States Department of Defence as part of the FTUAS program, and a final contract decision is expected in Q3 of 2025.

ACE’s Recommendation

Orbital UAV is a world leader in the design and manufacture of integrated engine systems for military drones and is uniquely placed to meet the performance requirements of unmanned aerial vehicles (UAVs) through its revolutionary technology and proven operational experience. For the half year that ended on 31 Dec'2024, Orbital UAV delivered against its programs with existing customers, and also achieved several important milestones to grow its topline. During 1H25, OEC signed a $3.5 million contract extension with DSO National Laboratories (the center of R&D for the Singapore Armed Forces) for additional engine packages and also signed a new contract with Dynamatic Technologies Limited to integrate an Orbital 150 Heavy Fuel Engine (HFE) into a new UAV platform for the Indian military. On 27^th Aug’2024, OEC announced the establishment of a new collaborative agreement with Dynamatic Technology to integrate Orbital’s 150cc Heavy Fuel Engine (HFE) into a Dynamatic Technology-designed UAV for the Indian military. During the period, the company also delivered pre-production engine packages to Textron Systems for the upcoming FTUAS program, with final flight testing now underway. A decision on the FTUAS program is now expected in Q3 of CY25. During 1H25, OEC completed a fully underwritten $2 million renounceable rights issue in Dec’2024 and also completed the required project milestones to offset the full value of the WA Government loan and as a result, OEC is now debt-free. The repayment of its WA Government loan and the completion of the capital raising have strengthened Orbital UAV's balance sheet and provided the financial capacity to progress its growth aspirations and new product development programs. We believe that the company is well-positioned to pursue its existing and new product development programs with a strong balance sheet and capital available for growth. The stock closed the day at A$ 0.093/sh and presents an investment case from a long-term perspective. So, we would like to recommend a SPECULATIVE BUY rating on the stock.

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