Newly-listed Adelaide company K-TIG (ASX: KTG) has signed a licencing agreement with Steel-Ti Precision Welding Pte Ltd in Singapore for the supply of welding technology and support services to a purpose-built manufacturing facility due for start-up next year.
The eight-year agreement is the first of its kind to be signed with a south-east Asian customer for the use of K-TIG’s patented technology and includes long term licencing fees, fees calculated by usage and utilisation, minimum monthly charges and an advance payment.
Under the terms, K-TIG will also provide consultative services to Steel-Ti in relation to materials handling, cutting and automation equipment to facilitate quality and output standards from the new facility, due for completion in 2020.
The company will record and monitor Steel-Ti’s welding activities in order to provide a transparent reporting and billing system based on actual production and utilisation of its equipment.
Using its cloud-based system, K-TIG will also digitally store Steel-Ti’s welding data, providing updates to software and firmware in the background, and uploading new weld routines as required.
WaaS business model
Steel-Ti is part of a large industrials conglomerate owned by Singapore’s Teo family, who also operate shipping company Pacific International Lines and container manufacturer Singamas.
Steel-Ti produces high-value tanks and vessels for the oil and gas, aviation, and shipping industries, and piping for the liquified natural gas industry in the south-east Asian and Japanese markets.
It will be one of the first companies in the world to adopt K-TIG’s Welding-as-a-Service (WaaS) business model, whereby clients approach K-TIG on a job-by-job basis as opposed to being sold a piece of equipment for a one-off fee.
The model is aimed at promoting long-term recurring revenue and ongoing client relationships.
K-TIG chief executive officer David Williams said the agreement would allow for the promotion of K-TIG technology in “one of the world’s highest-growth regions”.
“Signing an eight-year agreement demonstrates how transformative our technology is for the industry and the market’s willingness to adopt [it],” he said.
“[It] is illustrative of our strategic growth priority of a strong focus on long-term recurring revenue generation and growth.”
K-TIG’s welding technology provides a next-generation speed of output which removes welding as a bottleneck in the fabrication process.
“Our customers are in the enviable position of being able to re-think their production from end- to-end in order to leverage levels of automation, productivity gains and cost savings that our technology provides,” he said.
At mid-afternoon, shares in K-TIG were up 5.17% to $0.305.