Leading supplier of automotive superchargers, reducing emissions and fuel consumption

OnMarket Bidding Closed Sprintex Ltd ASX: SIX

OnMarket | Sprintex Ltd | ASX: SIX

Fixed Priced Public OfferType of Offer
06 Nov 20Offer Open
04 Dec 20Pay By
$0.086Price
$6.5 millionSize of Offer
$2,000 Minimum Investment
Indian Ocean CorporateLead Manager

Payment for applications must be made by 5pm, Friday 4 December (AEDT)

Sprintex Limited is raising $6.5 million under the Offer at a price of $0.086 per share, a 10% discount to the last traded price.

The offer may close early and the 'Pay By' dates may change. Applications may be scaled back and duplicate bids under the same investment profile, investor name or residential address may be cancelled.

Key Investment Highlights

Introduction

Sprintex Ltd (ASX: SIX) is an automotive engineering, research, product development and manufacturing company, incorporated in Australia in 2003 and admitted to the Official List in 2008. Sprintex designs and manufactures superchargers for use in a wide variety of combustion engines and is currently focused on the development and commercialisation of the Sprintex® twin screw supercharger, and supercharger systems incorporating the Sprintex® twin screw supercharger, in the automotive aftermarket and original equipment manufacturer (OEM) market in Australia, Asia, Africa, the Middle East, Europe and the United States of America.

The Sprintex superchargers deliver greater fuel efficiency, increased performance and reduced emissions at a time of global engine downsizing.

Terms of Offer

Sprintex Ltd is looking to undertake a recapitalisation offer on ASX to raise A$6.5 million via the issue of 75.58 million shares at an offer price of A$0.086 per share.  The company will have an indicative market capitalisation (post re-listing) of A$18.4 million on an undiluted basis. 

On 28 September 2018, the Company’s securities were suspended from trading on the Official List of the ASX. In February 2020, the Company entered into a proposal for the recapitalisation of the Company (Recapitalisation). As part of the Recapitalisation, the Company is seeking to:

  • undertake a capital raising to raise $6,500,000;
  • convert existing loans from third parties to Shares;
  • convert part of the existing loans from Shareholders to Shares, repay $600,000 of the Shareholder loans in cash and forgive the balance of the Shareholder loans;
  • complete the acquisition of the remaining 50% interest in the Malaysian joint venture that the Company does not already own;
  • facilitate the reinstatement of the Company’s securities to trading on the Official List of the ASX; and
  • undertake Board changes.

Assuming completion of the Recapitalisation, Sprintex will become effectively debt free with reduced operating costs.

What is a supercharger?

“Supercharger" is the generic term for an air compressor or pump used to increase the pressure or density of air entering an engine, providing more oxygen with which to burn fuel. Superchargers compress air, which in turn boosts power by increasing the amount of fuel laden air entering the engine. This improves the ignition burn, reducing fuel use and the emission of pollutants such as carbon monoxide, carbon dioxide, hydrocarbons and oxides of nitrogen (NOx).

Traditionally, a product for automotive enthusiasts, the application of superchargers is evolving from performance engines to becoming a solution for everyday vehicles. The application of supercharger technology also plays an increasingly important role in allowing vehicle manufacturers to meet their emissions targets and improve fuel efficiency while maintaining power.

The global automotive industry is facing significant regulatory pressure to reduce fuel consumption and C02 emissions, including Corporate Average Fuel Economy (CAFÉ) legislation in USA, Euro 6 and China Stage 5 exhaust emission standards.

Sprintex specialises in twin screw superchargers, a form of compressor that compresses air internally, and can be used in applications other than internal combustion engines, such as oil-free industrial air or vacuum supply, waste water reclamation and the like.

Company Overview

Incorporated in Australia in 2003, Sprintex designs and manufactures superchargers for use in a wide variety of combustion engines and is currently focused on the Sprintex® twin screw supercharger, and supercharger systems incorporating the Sprintex® twin screw supercharger in the automotive aftermarket and original equipment manufacturer (OEM) market in Australia, Asia, Africa, the Middle East, Europe and the United States of America.

The Sprintex products are designed, prototyped and tested in Perth, Western Australia and are manufactured in the Company’s manufacturing facility located in Malaysia. Following manufacture in Malaysia, the products are sent to the Company’s facility in the United States for final assembly and distribution in the North American and Canadian markets, if not already distributed to global markets direct from the Malaysian facility.

Sprintex sells its products to both distributors and dealers primarily on a purchase order basis. Typically, distributors would be larger organisations that enjoy a larger discount, based on minimum purchase volume per order or minimum volume per year.

Sprintex Australasia Pty Ltd holds the intellectual property of the Company.

Malaysian Production Facility

Competitors

The Company’s main competitors for the aftermarket, are Edelbrock LLC, and Magnuson Superchargers LLC both Californian based manufacturers and Ripp Superchargers, based in New York. Each of these competitors use supercharger units manufactured by third parties, whereas Sprintex manufactures its own superchargers in the low cost Proreka Sprintex facility located in Malaysia, offering the Company a cost advantage over its main competitors.

There are few competitors to Sprintex in the OEM twin screw supercharger and compressor market. Eaton Corporation (Eaton) is the main competitor and is focused on large scale OEM projects, historically declining smaller programs. IHI America is a significant competitor in the OEM market, particularly in USA.

Differentiation

The key drivers for adoption of the Sprintex’s patented twin screw supercharger technology are as follows:

  • the Sprintex supercharger has better engine performance than standard normally aspirated engines – a Sprintex powered engine allows original equipment manufacturers (OEMs) to successfully reduce the engine capacity while producing lower emissions and fuel consumption for the same power output of a larger engine;
  • the Sprintex supercharger operates at a lower temperature due to its unique design, reducing the need for an intercooler and therefore reduces installation costs;
  • the Sprintex supercharger assists in reducing CO2, lower emissions assist OEMs to meet increasingly stringent environmental standards;
  • the Sprintex supercharger has no turbo lag – Sprintex is driven from the crankshaft providing additional power from idle;
  • the reduced technology risk - since incorporation, Sprintex has invested approximately $56.4 million over 16 years of commercialisation and testing its supercharger technology; and
  • the Sprintex supercharger is patented technology

The Sprintex range of superchargers can also be attached to any combustion engine and will operate with any type of fuel such as petrol (2 and 4 stroke), diesel, natural gas (LNG), LPG, fuel cell, hydrogen and biofuels.

Channels to market

Sprintex operates in the automotive industry, specifically, in two key markets:

  • the automotive aftermarket, where it is focused on the design, manufacture and sale of retrofit complete supercharger systems for on and off-road vehicles, primarily offering performance increases for lifestyle vehicles such as the Jeep range manufactured by Fiat Chrysler Automobiles (FCA); and
  • the manufacture of superchargers and compressors for OEMs for on and off-road vehicles, marine, aviation and other specialty engines and for industrial applications. OEMs are under increasing pressure to build smaller capacity, more emission-friendly engines that use less fuel. Consumers expect these smaller engines to deliver the same performance as larger capacity engines.

Both the aftermarket and OEM market present opportunities for the Company’s supercharger technology to meet emission standards while providing a desired level of engine performance.

The Company is also actively engaging on a number of new market opportunities, including:

  • Working with Mopar, that provides factory approved performance upgrades for Fiat Chrysler Automobiles (FCA), to evaluate the new Sprintex JL supercharger system for suitability as a product offering under the Mopar performance brand;
  • Developing a “drop in” direct replacement system for Eaton supercharger systems.  Eaton is the world’s largest supercharger manufacturer used by many prestige brands including Audi, GM, Jaguar, Land Rover and Mercedes;
  • Working with Weslake Engine, Design and Manufacture (a company incorporated in the United Kingdom) to develop a dedicated supercharger for Weslake’s lightweight advanced diesel engines for marine and aviation use;
  • Developing a hybrid super-turbocharger system with electric drive option for commercial diesel engines, that improves engine performance (transient response) with no detriment to noxious tailpipe emissions.

Key Offer Statistics

Use of Funds

Funds Raised from the Offer will be applied as follows:

Board and Management

Upon reinstatement of the Company’s Shares to trading on the Official List of the ASX, the existing board will be replaced by the following new directors:

Mr Wayne Knight – Proposed Non-Executive Chairman

Mr Knight has over 30 years’ experience working as a financial adviser in the financial services industry. He provides advice on creating financial security through personal and business risk protection and provides services in the areas of personal superannuation planning, managed investments, rollover and redundancy planning, wealth creation and insurances.

Mr Jude (Jay) Upton – Proposed Managing Director

Mr Upton has a broad range of business managerial and technical engineering experience gained over a 20-year period working in the international automotive industry where he has amassed a network of international industry contacts. Prior to this, Mr Upton gained a further 20 years’ experience in engineering management in the heavy mobile equipment sector and in both industrial and automotive high-performance engine engineering.

Mr Li Chen – Proposed Non-Executive Director

Mr Chen has over 6 years’ experience from an engineer to a managing director in mechatronics research and development, business development, project management, scheduling, budget control and resource planning. With a degree in Mechanical Engineering from University College London, Mr Chen also qualified as a Senior New-energy Engineer (Ministry of Industry and information Technology, China).

Mr Steven Apedaile – Proposed Non-Executive Director

Mr Apedaile has worked in the accounting profession for nearly 30 years, 25 years of which were spent in Hong Kong with the first 7 years with KPMG HK and then 18 years with Horwath HK. In his position as Senior Audit Partner, Mr Apedaile’s experience included management advice, risk analysis, strategic planning, public listings, forensic accounting, M&A and general business advice. Mr Apedaile served on the Member Review Committee of Horwath International for 3 years performing quality control and risk assessments on a number of Asian based member firms.

Risks

You are encouraged to read the Prospectus carefully as it contains detailed information about the Company and the Offer. Like all investments, an investment in Sprintex Ltd carries risk. As set out in Section 7 of the prospectus, Sprintex Ltd is subject to a range of risks, including but not limited to reinstatement risk, going concern, research and development, manufacturers, manufacturing processes, techniques and materials, premises and final assembly risk, distribution arrangements with third parties.

 

Section 734(6) disclosure: The issuer of the securities is Sprintex Limited ACN 106 337 599. The securities to be issued are ordinary shares. The disclosure document for the offer can be obtained by clicking on the link above. The offers of the securities are made in, or accompanied by, a copy of the disclosure document. Investors should consider the disclosure document in deciding whether to acquire the securities. Anyone who wants to acquire the securities will need to complete the application form that will be in or will accompany the disclosure document (which can be done via the electronic application form which will become available by clicking the invest now button above)

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