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Kromek "dirty bomb" detector milestone bodes well

All it will take for the group to make cash break-even is a single city deployment by DARPA of Kromek's handheld devices, according to house broker Cenkos.
Its unique x- and gamma ray detectors have been quietly gaining traction in the market

Radiation technology company Kromek Group PLC (LON:KMK) has completed the delivery of an initial 10,000 personal D3S radiation detectors to a US Department of Defense agency.

The D3S devices were delivered in support of the Defense Advanced Research Projects Agency’s (DARPA’s) SIGMA programme, which is aimed at preventing attacks using so-called radiological dirty bombs, and other nuclear threats across the globe.

Having completed the initial delivery, as per the company’s announcement of the contract win back in February, Kromek said the next steps are for DARPA to demonstrate SIGMA's full city and regional-scale, continuous wide-area monitoring capability in 2017, and to make the transition of the operational system to local, state and federal entities in 2018.

"We are proud to be part of the successful SIGMA programme, which has sought to increase radiation detection capabilities while lowering the costs, in order to network an unprecedented number of advanced detectors and provide a comprehensive, dynamic and automated overview of the radiological environment,” said Dr Arnab Basu, chief executive officer of Kromek.

“We look forward to participating in the roll-out of the programme in Washington DC and elsewhere to make the cities of the US able to detect and counter the threat of dirty-bomb attacks from international as well as domestic terrorists,” he added.

It has been a good week for Kromek; on Monday it unveiled six new contracts wins worth, in aggregate, around US$3.1mln, and last night it received a business innovation award from the prestigious Institute of Physics for its wireless hand-held radiation detectors.

The award was dished out at the Palace of Westminster – commonly known as the Houses of Parliament – where the company demonstrated the detectors to members of parliament, peers of the realm, policy-makers, business leaders and acclaimed physicians.

“Physics and physicists have vital roles to play in solving many of the challenges that the UK faces today,” said Professor Roy Sambles, president of the Institute of Physics.

"Together they lead to the development of innovative technologies that boost productivity and drive economic growth, provide advances in security and communications, improvements in energy production and use, and underpin healthcare technology," he added.

House broker Cenkos, alluding to the recent spate of contract wins, said revenue visibility is increasing sharply and all it will take for the group to make cash break-even is a single city deployment of the devices by DARPA.

“2017 will see full city and regional scale continuous wide area testing and transition the operational system to local, state and federal entities in 2018. We surmise that moving into larger scale deployments will inevitably mean follow-on orders and Kromek has capacity in place for the production of 30,000 units annually,” Cenkos said.

“We see scope for positive surprise,” it concluded.

Research house Progressive Research issued a bullish note on the company, saying the trick to identifying undervalued small cap stocks is not only choosing companies that are winning repeat orders, but also selecting ones operating in addressable markets that are expanding, which it says are “exactly the conditions” Kromek is experiencing.

“Indeed over the past two years, seemingly ignored by investors, its unique x- and gamma ray detectors have been quietly gaining traction in their $billion verticals of medical imaging, homeland security and nuclear detection,” Progressive said.

The research firm reckons that Kromek will break even at the underlying earnings, or EBITDA, level by fiscal 2017/18 (end of April), and can become self-funding by fiscal 2018/19.

Share in Kromek were up 1% at 24.25p in lunchtime trading.

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