I (GrowthGauge) first bought LaserBond (ASX: LBL) on 5 April 2019 at $0.425. The price soon doubled, then sank to $0.28 in the COVID crash. It climbed to almost $1.00 in 2021 and has drifted since. After the 1H FY25 result, I sold at $0.47. Over six years, my total return was about 10 %, or 1.6 % a year, plus dividends.
Why didn’t I sell near $0.90? Hindsight is easy. Back then, the outlook looked firm. From 1H FY24 onward, Laserbond faced challenges I had not foreseen, such as disappointing technology sales, increased competitive pressure, and slow, expensive onboarding of new employees.
LaserBond never seems short of problems: solve one, and two more appear. Zoom out, though, and over the long haul, they have made solid progress. The short-term ride has been rough.
What irks me is management’s habit of offering upbeat guidance that keeps expectations high, then rolling out excuses when results miss. I would rather they sandbag the numbers or skip guidance altogether. State the risks with brutal honesty and let the figures speak for themselves. That approach would attract the right kind of shareholder, avoid the gut punch on result day, and prevent damage to management credibility.
However, even after being burned by this rosy-guidance routine, I still like the core business. As a result of low management credibility, the market sentiment feels very gloomy, which may make this a good time to take another look at LaserBond.
Business background
- LaserBond began in 1992 as a small family business and was listed on the ASX in 2007 with $1.8 m in revenue, $244 k in profit, and a $13m market cap (about 65 m shares).
- By FY24, revenue had risen to $41.9 m (~23x) and profit to $3.5 m (~14x). The market now values the company at about $44 m (roughly 118 m shares).
Now, let’s see how LaserBond makes its money.
Service Division
LaserBond has developed laser-cladding technology, an advanced surface-engineering method used to repair and refurbish the surfaces of worn or damaged machine parts in its factory. The company provides these repair and refurbishing services to clients in capital-intensive industries such as mining, industrial manufacturing, heavy industry, and energy. This business segment (Service division) is the original and main segment. As the picture below shows, it has two key competitive advantages: 1) the quality of its surface engineering and 2) its quick turnaround.
Customers need their machine parts refurbished as quickly as possible and returned to them so production doesn’t shut down. These parts are heavy and costly to transport, so customers prefer a local surface-engineering provider rather than one overseas or even interstate. This dynamic has pushed LaserBond to invest in a presence across five Australian states. The company is now in the early stages of upgrading recently acquired businesses with LaserBond technology (a strategic focus of its investment over the past five years as it added sites in SA, VIC, and WA).
With overseas suppliers out of the picture, LaserBond faces competition only from local surface-engineering firms and from customers who choose to replace parts rather than refurbish them. Customers care more about fast, high-quality repairs that cut downtime than about saving 5% – 10% on price. If LaserBond continues to deliver speed and quality, it should remain competitive in retaining clients.
Product Division
When LaserBond spots a recurring wear problem in a specific component or application, it can invest in R&D to design a stronger alternative. It can then manufacture a high-performance replacement for the product. This Product division began only in 2018 and today earns most of its revenue from two customers. The picture below shows how the division took shape.
Once the technology and factory are in place, LaserBond’s Service and Product divisions depend on raw materials and well-trained employees. Finding operators who can run LaserBond’s proprietary technology is tough, so the company brings in groups of skilled migrants and trains them in-house. Up to FY24 it hired 40 such workers, and only one has left (for personal reasons). The catch is the upfront cost: recruits need training before they add value, which drags on EBITDA, something visible in the 1H FY25 result.
Technology Division
LaserBond now operates in five Australian states, covering the domestic market. Expanding overseas is harder because of logistics and the cost of new sites. To reach those clients, the company created a “Technology” segment. It licenses its technology and process to partners, supplies a laser-cladding cell, and provides training for an upfront fee, followed by recurring license and consumable sales. The idea has promise but, so far, has produced only a handful of deals, and plenty of misleading timelines. The founding Chief Technology Officer, Gregory Hooper, has been critical of the management of this division since leaving the company.
LaserBond as a whole
That completes the overview of LaserBond’s business. The company reports revenue across three segments i.e Service, Product, and Technology. The picture below shows those, and R&D supports these segments.
Revenue Trends
The graph shows how the three segments are tracking. The core Service division is performing well. The Product segment grew until 1H 2023 but has been in steady decline since. The Technology division remains small and erratic. The main concern right now is the Product division.
The Product segment carries a key risk: almost all its revenue comes from just two OEM customers, and it has been in steady decline recently
Margin Trends
The graph below plots gross profit, EBITDA, and net profit margin trends.
Gross margin has held close to 50%. Management links the recent dip to its training program for operators and apprentices.
The company says EBITDA and net margin have been hit by recent growth investments such as training, hiring senior executives, and adding new infrastructure and equipment.
A higher tax rate has further squeezed net margin.
Guidance for 2HFY25 ( YES! Again)
Once again management is setting high expectations. In the 1H FY25 release, they guided for 2H FY25 revenue of $22.2–25.2 m and NPBT of $2.4–3.1 m. Using mid-points and a 30 % tax rate, that implies after-tax profit of roughly $1.9 m. The chart below illustrates the mid-point guidance.
Gateway Acquisition
To expand its national footprint, LaserBond bought a 40% stake in Gateway Group, a Perth-based firm. Gateway’s location, management, and industry profile make it a solid strategic fit. The upgrade takes time: LaserBond must install a laser-cladding cell and train technicians, and both steps are moving ahead. [As an aside: Original talks with Gateway started with them potentially becoming a Technology customer, but LaserBond opted for an acquisition after due diligence because they wanted a footprint themselves in WA rather than compete with a Technology customer.]
The agreement lets LaserBond lift its stake to at least 51 % three years after settlement. Until then Gateway remains an associate, so LaserBond records only its 40 % share of profit under “share of profit of associate.” Gateway’s revenue stays off LaserBond’s income statement until consolidation kicks in at the 51% mark.
Because the combined group will likely reach $50m in revenue, LaserBond moves from the 25% to the full 30 % company tax bracket, further squeezing net margin.
Valuation
With about 11 m shares on issue and a share price of $0.37, LaserBond’s market cap sits near $43.7m.
If management hits the mid-point of its 2H FY25 guidance, net profit would be around $2.9 m, implying a forward P/E of roughly 15.
Compare that with FY23, when NPAT was about $4.1 m. If we assume that the company can return to record profitability in the future, then the P/E drops to less than 10.
The biggest risk is customer concentration. Two OEMs, my guesses being Weir Group and Steel Dynamics, account for almost all Product-segment revenue.
Key questions:
- Can the Product division add more OEM customers?
- Will revenue from the current two OEMs keep growing?
- Can the Technology division gain real traction?
- Will the Service division lift margins after the recent investment cycle?
Your answers to these questions will be extremely consequential regarding whether you think LaserBond is worth a spot in your portfolio.
Why am I interested now?
So this is what has happened so far with LaserBond Share Price and respective triggers
The latest move feels like a pivot to me: US expansion on hold. That pause says, “We’re in a hole, stop digging.” By cutting optional spend and focusing on the core, they admit recent missteps and conserve cash. If management now stays laser-focused on consistent delivery with steady execution, this could become the inflection point that restores both management’s credibility and the share price. With that thesis, I opened a small, cautious position at $0.36 not long ago, and I don’t plan to trade (sell) the stock until after the full-year result in August 2025. (I’m bracing for another gut punch!!).
Credit : Thanks to Luke Winchester from Merewether Capital for helping me understand the business better – I think no one knows this business better than him. I note Merewether has invested in Laserbond in the past and may still hold shares today, for all I know.
Disclosure: The author of this article owns shares in LBL. The editor Claude Walker does not own shares in LBL. Neither will trade LBL shares for at least 2 days following the publication of this article. This article is not intended to form the basis of an investment decision and is not a recommendation. Any statements that are advice under the law are general advice only. The author has not considered your investment objectives or personal situation. Any advice is authorised by Claude Walker (AR 1297632), Authorised Representative of Ethical Investment Advisers Pty Ltd (ABN 26108175819) (AFSL 276544).